On January 31, 2020, Great Britain officially withdrew from the European Union, which led to many questions and doubts. In particular, will UK citizens be able to continue to purchase real estate in the EU countries, including Spain? What will happen to the pound? Let's talk about this in our article.
The expectation of Brexit and the Weakening of the Pound (on the example of buying a real estate in Spain)
According to the College of Registrars, in 2017 the number of transactions for the purchase of a real estate in Spain by the British fell by 9.4%. In 2018, it increased, but in the 3rd quarter of 2019, a fall was again recorded. Official data for the entire 2019 is still unknown.
The weakening of the pound sterling, which led to a decrease in the purchasing power of British families, had a significant impact on the decline in activity of British property buyers. The fall of the pound occurred in 2016 after a referendum on Britain's secession from the EU.
The British currency fell 13.6% against the euro and continued to fall, although not so rapidly, from 2017 to 2019. In 2019, the pound reached the bottom (€ 1,073), but then it began to grow and closed the year with a growth rate of 6.26%. Further, the pound continued to strengthen as the chances of holding a “Brexit” with the agreement increased.
British currency exchange outlook
Analysts are considering two scenarios. At the same time, we can confidently say that the national currency of Great Britain is most likely waiting for the worst of times. Brexit will, in any case, have an impact on the Pound. This applies even to the possibility of depositing with GBP on gambling site, you just have to wait.
The Bank of England has published its forecast for Brexit. If a country leaves the EU without a deal, its economic performance will deteriorate significantly. The UK is guaranteed to receive a record drop in the GBP rate, lower production, and high inflation.
The British financial regulator lowered its forecast for economic growth for 2019 and next year from 1.5% and 1.6%, respectively, to 1.3%. This indicator is the lowest since 2012. The regulator did not change the discount rate and other monetary policy instruments. At the same time, the Bank of England said that if necessary, they are ready to moderate the rate to achieve the inflation target of 2%.
Brexit without agreement will cause the introduction of duties on British products. This will hit almost all areas of the country's economy. The implementation of this scenario is capable of dropping the pound sterling to the lowest value. Brexit without a deal is also dangerous for the Euro. The economies of the European Union and Great Britain are strongly interconnected.
After Boris Johnson took the prime minister's place, the British national currency rate weakened amid fears of a “hard” Brexit. He repeatedly said that the will of citizens, expressed in a referendum, will be fulfilled.
Even if the EU and the UK fail to reach an agreement, the country will leave the union. This position of the prime minister forced the British parliament to ban Brexit without a deal at the legislative level.
All this significantly reduced the risk of implementing a “hard” scenario. The chances that the parties will be able to come to an agreement have recently grown substantially. Brexit with the deal will also have a negative impact on the British economy, but its consequences will not be so tragic for the Pound Sterling.