As a result of the plumes of volcanic ash originating in Iceland, many hundreds of thousands of people were stranded in various parts of the world.
A number of travel firms have been attacked in response to this crisis and it has been estimated that the turmoil has cost airlines more than £1bn, as over 100,000 flights were said to have been axed worldwide. Of course, this does not take into account the millions of extra pounds that it has cost those trapped overseas, whether it be on business or pleasure.
This is an incident that has really brought home just how reliant we have become on aviation travel. The rise of budget airlines has made overseas travel simple and cheaper than many other modes of transport. Increased air travel has certainly made the world a smaller place and enabled people to broaden their horizons in terms of where they can live, while still remaining in relatively close contact with friends and family.
Brits abroad
Brits have a long history of owning property abroad, with the Costas in Spain particularly brimming with ex-pat communities. However, as with many non-essential purchases or investments, the buying of overseas property slowed as a result of the recent worldwide economic turmoil.
While many UK households have been tightening their belts and previous levels of interest may have waned somewhat in the last two years, there is now evidence from a raft of new statistics that it appears to be climbing once again.
The latest figures from Worldwide Property Group reveal a significant rise in interest for overseas property. In the company’s March Confidence Tracker Survey, a huge 75% of those surveyed said that they believe now to be a great time to buy a foreign property.
Of these, almost all are currently considering buying a property in a foreign country, with the USA and Spain topping the list of most desired locations. Interestingly these are some of the very regions where property prices have been worst hit by the global economic downturn, possibly indicating that purchasers believe these markets to have bottomed out with a return to capital growth now a very real possibility.
The survey results also show that confidence in the UK property market continues to remain high. An overwhelming 81% of respondents are of the opinion that house prices will not fall further over the coming year, indicating that right now offers a good opportunity to purchase at relatively low levels. On the question of investment potential, 78% of people surveyed feel that property generally offers better safety and returns than any other major medium- to long-term investment.
Not just browsing
In addition to these growing levels of interest, there is also some evidence of more prospective buyers taking their mortgage quotes to the application stage. This is according to overseas property specialist Conti, which recently experienced its busiest month for almost a year in terms of mortgage go-aheads.
It stated that mortgage applications increased by 48% in March compared to February, suggesting that potential buyers are becoming more serious about making a purchase.
Despite the turbulence unleashed on the UK mortgage market by the global banking crisis, Conti says that overseas mortgage providers have a healthy appetite for lending to foreign investors and a combination of factors, not just mortgage availability, are contributing to the attractiveness of this market.
Falling property prices, in some cases by up to 50%, and historically low interest rates have made some areas much more affordable, despite the current strength of the euro.
According to Conti, an increasing number of British investors buying second homes in Europe are taking out euro-denominated mortgages in order to beat the poor exchange rate. This not only allows them to take advantage of cheap interest rates, but could potentially save them significant sums of money. If, as experts predict, the pound appreciates against the euro over the next few years, it will reduce the real cost of the overseas property purchase.
In yet another report, it has been stated that returning interest in overseas property investment is fuelling recovery in a number of European destinations. Overseas Property Professional (OPP) also claims that many markets which were negatively affected by the global financial crisis are recording a revival as confidence begins to return. OPP suggests that among the destinations to see a spike in investor activity is the hard-hit country of Cyprus which, last year, experienced a large fall-out after it entered recession.
Tax exiles
The news that overseas property interest is rising may come as a surprise to some working in the intermediary market, but with high earners set to pay the new 50% income tax rate, higher National Insurance contributions and predicted hikes in Capital Gains Tax, perhaps it is not as surprising as may have been thought.
Having said this, there are the current considerations of the General Election to take into account to see if this increased interest really translates into completions. It may be the case that many people who consider large financial borrowing and investments may look to temporarily hang fire until after the election dust has settled, though some serious buyers could capitalise on this uncertainty.
Investors of all budgets remain rightly cautious, and when looking to get the most for their money at the lowest risk, growing numbers of property seekers are turning to the expertise of investment firms for guidance.
Such firms have reported a steady climb in investment interest from the start of the year, as Brits grow increasingly hungry for warmer weather after suffering through another brutal winter. Indeed, it appears that it is these more serious potential buyers that have remained on the periphery of the market but are now more likely to convert their interest into a property purchase.
Enter with caution
With demand increasing for properties all over the world this is becoming an increasingly attractive market once again. There is a great deal of opportunity opening up but, as with any specialist market, it is not to be entered into lightly.
It is important to build a strong relationship with a market specialist especially as foreign property purchases still present some unusual challenges, so it is worth finding a company that can help guide clients through the process.
For brokers trying to get into the overseas market, we urge them to work closely with a suitable and trustworthy financial institution. Using a well-respected mortgage club with links to trusted strategic partners eliminates a great deal of the apprehension that people buying a property abroad might have.
It is evident that this is not the right market for every client but it is one that could be right for those unable to find suitable UK investment vehicles or simply for those looking for an overseas property to call home for some or all of the year.
So don’t let the sun go down on the opportunities in the overseas property market, as the evidence is there that demand remains for the serious buyer.
Phil Whitehouse is head of The Mortgage Alliance (TMA)
