How to pick a Brexit bolthole

A ramble through Europe's housing markets

12th June 2018

I've been scouring Europe's housing markets looking for a safe haven if disaster strikes. Where would you choose?

The heavyweights: UK vs. Spain

Vast numbers of Brits live in Spain, so when kicking off a theoretical "stay or leave" debate, it makes sense to start with a choice that's obvious in many British minds.

Last week saw the release of Spain's quarterly house price index, which gives us a rare chance in the year to directly compare my two favourite housing markets. I rebased at 2015 and the result - from an investment perspective at least - says Spanish house prices are now totally outpacing the UK market, with annual growth of 6.2%:

UK vs Spanish house prices since 2012

While the UK market seems to have hit an affordability ceiling, there don't appear to be any such constraints on the Spanish market. Spain is firmly in recovery.

But is it so simple?

Look at the chart above for more than 4 seconds, and you quickly realise everything is about timing: If you'd bought in the UK in 2012, you'd be sitting on a 31% profit. If you'd done the same in Spain in 2012 you'd only have made a 5% profit.

Meanwhile in Europe...

This got me to thinking more long term and more broadly across Europe.

Eurostat publish an average annual house price index across Europe, allowing us to compare all possible Brexit boltholes. If you were looking to base your decision on money alone (this is just for fun after all) then Iceland, the Czech Republic and Ireland should be at the top of your list right now, with annual house price growth of 20%, 12% and 11% respectively.

Nice. But let's inject some sense.

We know some markets are bouncier than others, and timing is key. Volatility is something we can measure pretty easily by measuring the movement of the inter-annual return for each country.

House price volatility in Europe

If you were planning on fleeing to Dublin with your cash, you may want to pause for thought.

And the winner is...

I'm a fairly dull chap, so I'm plumping for Luxembourg.

It's had the calmest housing market, and most ridiculously boring growth since 2012. We'd all now be sitting on a 29% profit if we'd jumped on the right Eurostar back then.

Here's a handy guide for balancing returns since 2012:

I think this chart shows housing is much like any other commodity: If you want high growth, you need to deal with higher risk and time your choices to perfection.

I prefer my house prices calm and magnolia, like my home.

I suspect Spain's position on this chart will move dramatically by 2020, because it's over the crisis and on straight line growth. Ireland looks worrisome though, while 2018 looks set to be a stagnant year in the UK.

So for now at least, the Lux tortoise is winning the race.

This article absolutely does not represent investment advice, and you'd be mad to base a big decision on it. However if I made you want to research harder and ensure you get professional advice before moving overseas, then you read it right. R.x