On 31st December 2020 everything changed for the United Kingdom and its economic ties with the European Union. Brexit has left a series of drawbacks for the British and their ties with Spain, and among them is residential investment. There are areas in Spain where the acquisition of real estate or land requires permission from the Ministry of Defence. These areas are called military protection zones, and from now on, Britons who want to buy a property in a location affected by this classification will have to go through a series of procedures that will lengthen the whole process. We have spoken to experts on this issue to find out how it could affect the real estate business when it comes to buying property in Spain after Brexit.
According to Eduardo Crisenti, director of Barnes Madrid, "in certain areas of Spain, due to the special importance of national defence, authorisation from the Ministry of Defence is required to buy a house or property, provided that the buyer is a non-EU citizen or even a Spanish company whose majority share capital (over 50%) is owned by non-EU companies or individuals".
Among the areas affected, and with a strategic interest, would be Cartagena, the Strait of Gibraltar, the Bay of Cadiz, the border with Portugal, some areas of Torrevieja and Orihuela, part of the Galician coast, insular territories and territories in North Africa (such as Ceuta and Melilla). This is regulated in Law 8/1975 and its implementing regulation 689/1978, which, despite its age, is still in force today.
"The problem of the additional requirements that the British will have for purchases in military zones is very serious. Specifically, where it will have the greatest impact is in the area of Torrevieja and Orihuela Costa, where British buyers have always been the largest volume, even given the uncertainty at this time," explains Alfredo Millá, CEO of Sonneil, a Spanish 'PropTech' specialising in the marketing of second homes for national and foreign clients.
According to Millá, "the documentation has to be sent to Barcelona. Until Brexit, the response to the presentation of purchase applications took a couple of months, mainly from Russians, who are non-EU nationals. But Russians account for only 3% of purchases in Spain, according to statistics from the Association of Registrars. Now with the incorporation of the British, who account for 14% of purchases in Spain (at their lowest figure ever), there is going to be a very significant increase in delays. This is going to affect the incentive to buy (and sell), therefore, the liquidity of the market, and the time taken to close a property deed. In other words, time and money", says Millá, who adds that he does not believe that "it makes sense to maintain this law, which dates back to 1978", as "nobody is going to buy a home for work that could endanger national security".
The luxury real estate company Engel&Völkers, for its part, is already warning its non-EU clients about the permit. "We tell them that they need to spend enough time planning so that they can start the application process as soon as possible. The most prudent thing to do is to do it with a lawyer specialised in urban planning issues to ensure that they have all the correct information when they start the permit procedure," explains Hans Lenz, managing director of E&V Mallorca Suroeste and director of ABINI (Balearic National and International Real Estate Association).
As for the forecasts on the negative impact of this procedure on Spanish residential property, Lenz believes that "it is too early to say if there will be a negative impact. We believe that if a British investor wants to buy his or her dream home in the countryside, this permit would be a part of the overall process and something to be taken into account before making a final decision. This issue will probably be regulated in bilateral agreements between Spain and the UK shortly as it must have been left pending in the last minute Brexit deal. The UK is too important a market for this aspect to be ignored".
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