How will Brexit impact owners of Bulgarian property?

The impending referendum for the UK’s future within the EU is stirring the Bulgarian marketplace. Foreign owners and buyers alike are wondering what the implications will be for them and if they should act now or hold on. Like most markets this property market likes certainty, a plethora of unknowns only feeds doubt and pushes owners to sell, which results in stock levels rising and achievable prices falling. Since Mr Cameron’s announcement to confirm a referendum, vendor enquiries have increased and many have stated the immediate desire to sell up and get out ahead of imminent Brexit.

But why? What are the real implications?

Thanks to the history of empire and the subsequent legacy of English as the default international language, the British are amongst the most dispersed nationalities with 4.5 million living abroad (6.8% of native-born population), 1.3 million of whom live in Europe (according to the United Nations). Some 319,000 reside in Spain, 249,000 in Ireland and 171,000 in France, all of which operate on the same legal parameters for British nationals as Bulgaria, as set by the EU.

Trips to the EU from Britain have increased 4x since joining the common market in 1973. Higher income and easier more affordable travel options have encouraged the trend, but so have border free movement and equal rights to property ownership. If Britain leaves the EU and thus its legal umbrella, technically UK citizens abroad would become 'illegal immigrants overnight' (Dominic Grieve QC). Everything we currently take for granted relating to our unquestioned right to access Europe both as tourists and as residents is up for discussion. Host governments could ask Britons to pay for healthcare and access to their public services, apply for visas and work permits, or make application to be considered to achieve a ‘right to reside’.

Is that really likely, probably not, but once no longer subscribed to EU regulation a new agreement will have to be negotiated and its terms met by anyone still living abroad. No country has ever left the European Union (only Greenland left its predecessor, the EEC, in 1985) as such we are entering uncharted territory and in reality no one knows exactly how this is going to work.

On the flipside, there are 2.7 million EU nationals living in the UK, should the EU become hostile towards Britain for exiting then rules impacting Brits abroad will be reflected against those already living within British borders, of whom there are more than twice as many. It is unimaginable to need a visa to visit France, however the EU has declared that should Britain exit and implement any visa restrictions on newer EU member states such as Romania or Bulgaria, then what effects one EU member will apply to all, thus the British would indeed visas for France. Naturally, it is more likely that no visas will be required at all and such ideas will only be thrown around Belgian diplomatic corridors and not voted on in the Houses of Parliament.

It is commonly accepted that legally, the Vienna Convention 1969, provides expats who have already settled abroad to remain regardless of changes to treaties afterwards. However, for those who have perhaps never officially registered, are in the process of doing so or who are considering it after June 2016, new laws could apply to them and prevent them from settling down anywhere within the EU without further thought, cost or greater concern.

If Britain exits, could my Bulgarian property be repossessed by the state?

As far as property is concerned, international laws of Human rights supersede EU rules and certainly any legal change that Brexit could trigger, as such in the highly unlikely scenario of the Bulgarian state wishing to seize assets owned by Brits, they could simply not do so. Having said that, for those currently owning or considering to buy property, the conveyancing processes for either buying and selling will likely become more similar to those nationalities such as Russians who are actively buying and selling today and are of course non-EU nationals. Taxes might be set differently for non-EU buyers and potentially visas could be necessary to use your property for more than 6 months in any one year.

Stamp duty changes in the UK

It is a little known fact that furnished habitable property abroad is considered by HMRC in order to qualify you for the lower rate of stamp duty at 3%, or the new higher rate at 5% effective from today. If for example you own only one property and it happens to be a Sunny Beach apartment, then you decide to purchase a second property which happens to be in the UK, technically as it is a second purchase within the EU you can now be liable for the higher rate of stamp duty tax at 5% of the purchase price of your UK property. With London values averaging £530,000 this month, that 2% difference alone would likely be more than the entire value of the Sunny Beach property.

For some property owners and particularly landlords, such changes in domestic law whilst still within the EU will tweak greater desire to sell or perhaps present blatant efficiencies that will force their necessity to sell to avoid excessive taxation.