According to Clare Nessling, director at overseas mortgage specialist Conti, excellent buying conditions have lured Britons back into the overseas property market this year, with bargain property prices and historically low mortgage rates making it more affordable than ever.
She pointed out that the biggest boost to buyers’ budgets, however, has been the steadily increasing value of the pound against the euro, which is effectively shedding tens of thousands of pounds off property prices in the euro zone. And buyers, full of fresh optimism, are returning in their droves.
‘It’s perhaps no surprise, therefore, that our enquiries have increased by 24% this year, compared with 2013. The first half of the year was particularly busy, with enquiries up by 58%, levelling out again in the third quarter, largely due to the uncertainty surrounding the Scottish referendum result. Overall, however, interest is much stronger than last year and there’s definitely more optimism amongst potential buyers,’ she explained.
‘When you compare the cost of a place in the sun with overheated parts of the UK market, there are plenty of British buyers who are more willing to explore overseas opportunities in their search for better investment potential. Confidence is back,’ she added.
She also pointed out that with Goldman Sachs predicting that sterling will continue to climb against the euro over the next three years, British buyers will simply have more buying power, making a bolt hole in the sun even more tempting.’ The relaxation of pension rules, which come into effect in April 2015, could also lead to more people releasing pent up funds and investing them in a foreign property purchase,’ she said.
The firm believes that Spain is well and truly back on the map. It accounted for 49% of enquiries received at Conti this year, and the volume of Spanish mortgage enquiries has increased by 54% over the last 12 months. After a turbulent few years in the eye of the euro zone storm, the country appears to be making a turnaround at last.
Conti’s report says that the economy is showing signs of recovery, tourist numbers are up, and after years of plummeting house prices, experts are predicting increases in 2015, with prices in some areas rising already. ‘I expect Spain to maintain this momentum next year as prices recover but remain very affordable,’ said Nessling.
France remains a firm favourite too, accounting for 32% of enquiries this year, and continues to offer a safe haven for British buyers. ‘A slower property market has been pushing prices down, and under current market conditions, people are keener to sell and therefore more likely to be receptive to offers lower than the asking price,’ explained Nessling.
‘With mortgage rates at their lowest in more than 60 years, it’s a buyer’s market. But it could be wise to make a move sooner rather than later, as despite previous predictions of a fall in house prices this year, the FNAIM now believes when all figures are collated, there will actually be an increase of 2% to 3%. I expect mortgage rates to remain at historic lows, however,’ she added.
The firm expects these two favourites to remain top of the list in 2015 as they are regarded as safe, familiar and easily accessible as well as offering good rental opportunities and capital appreciation over the long term.
But there are countries to watch, such as Portugal. ‘Its property market was one of the worst hit by the financial crisis, but with its economy on a much sounder footing, the country has waved goodbye to its worst recession since the 1970s and this has provided a boost to investors’ confidence, with an increasing number of buyers coming back to the market in search of opportunistic bargains. It’s currently third on our list of hot spots, and I expect it to perform well next year as lending conditions continue to improve,’ said Nessling.
Turkey is also steadily rising in popularity. Often referred to as the ‘new Spain’, it boasts a very strong tourism industry, excellent property values, and rising demand for rental properties. ‘It’s also growing in popularity as a retirement destination, with living costs around 50% to 60% lower than the UK. For many buyers, it’s simply a more cost effective location at the moment, and it certainly seems to be on an upward trajectory, especially now that the Turkish government is easing property ownership rules. And although it’s not in the euro zone, it’s still possible to obtain euro denominated mortgages and reap the benefits of the strong pound,’ Nessling pointed out.
As always, Conti says that it’s vitally important for buyers to seek the right advice. Bitter experience has taught many overseas property buyers that scrimping on independent legal advice can effectively cost them their holiday home.
‘Buyers should always go through the same process that they would follow if they were buying a property in the UK. There’s nothing to be gained, and everything to lose by cutting corners and failing to carry out due diligence,’ concluded Nessling.
