If brokers haven’t yet considered the overseas mortgage market as a source of additional income, now may be a good time.
Despite the UK property slump, overseas mortgage providers have a healthy appetite for lending to foreign investors. Falling property prices, in some cases by up to 50%, and historically low interest rates are also making it much more affordable to buy overseas property.
On top of this, the falling value of the euro has made property in the eurozone around 10% cheaper to British buyers over recent months.
According to recent figures from property website Primelocation, internet searches in Britain for property abroad are at a record high, up by 138% in June compared with the same time last year.
With an eye on making the most from a new revenue stream, more intermediaries are realising the benefits of the overseas mortgage market. Conti has signed up more than 1600 brokers in the last six months alone.
Paul Smulovitch, of James Antoniou, a financial planning firm based in Bounds Green, London was recently approached by a client who needed an overseas mortgage.
“I’d always been aware of the overseas market, but I wasn’t very sure about how to tap into it,” he says.
“Besides the very different mortgage processes involved, there are all the associated legal issues, foreign exchange requirements and potential language barriers too. It helped enormously to have an expert involved as they’ve great knowledge of the overseas markets and are able to source the best possible deal.”
Linda Murray, of Voyager Financial Services, based in the Vale of Glamorgan, has also recently been involved with overseas mortgages for the first time.
“Previously, I would have been very tempted to refer overseas mortgage cases and not get involved myself at all, but that’s not the case now,” she says.
“It’s clear that confidence in the overseas property market is growing again, so the mortgage opportunities are definitely there. It’s an area which can appear a bit intimidating, not least because of the associated tax issues and fluctuating exchange rates, and is a field which IFAs can keep avoiding. I won’t be reluctant to get involved in this field in the future, especially as I have a number of high-net-worth clients who own property abroad.”
The most popular overseas destinations are still France and Spain, both of which come with easy access and good rental opportunities.
Enquiries for both locations have increased considerably over the last 18 months, as investors continue to stick to locations they know and trust.
France continues to enjoy a very stable market, and has become an increasingly attractive investment option, not least because of very low interest rates (as low as 2.20% at present), but also due to lower property prices, with many sellers dropping their prices to levels we’ve not seen for several years.
Buyers of Spanish property are also in a strong position due to the number of homes available, low interest rates, and the opportunity to negotiate price reductions from some very motivated vendors.
Prices in some areas, such as the Costa del Sol, have plummeted by 40% since the peak in 2006/7. Spain is still willing to lend to non-residents and you can still generally borrow up to 70% of the value of a property.
Turkey, often referred to as the ‘new Spain’, is the third most popular location and offers some great property prices and all the benefits of its Mediterranean location. Tourism has risen dramatically over the last few years, which will ensure that demand for quality rental properties in the popular tourist areas will continue to outstrip supply, making rental yields very lucrative.
The USA is also attracting lots of interest. In Florida, where property prices have plummeted over the last couple of years, many homes are being sold for less than it cost to build them. We know of one recent example where a two-bed property in Orlando was sold for $65,000, when in 2006 it sold for $210,000.
Clare Nessling is operations director at overseas mortgage specialist Conti
