This article was originally published on Your Money
Growing numbers of people are turning their thoughts to buying a place abroad, as evidenced by the fact that overseas mortgage specialist Conti has just undergone its two busiest months of the year in terms of enquiries.
Traditional favourites France and Spain are still topping the popularity stakes. And confidence is picking up, with many buyers who have been putting their plans on hold deciding to take advantage of the favourable conditions open to them.
Clare Nessling, Conti’s director, provides ten reasons why the time is right to buy a place in the sun:
1) Historically low mortgage rates. In France, for example, mortgage rates are at their lowest in more than 60 years, starting at just 2.1%, and in Spain mortgage rates currently start from 3.23%.
2) Bargain property prices. Prices in some of the most desirable areas of Spain have fallen by up to 50% since 2007 and bargain properties are turning heads, particularly those of the British. A slower property market in France has been pushing prices down there too.
3) The stronger pound. The value of sterling has risen to €1.18, up from just €1.14 two months ago, and this difference is quite significant when you translate it into property prices – it means that for someone considering a home worth €200,000, the property now costs £169,492 compared with £175,439 at the start of August. A saving of £5,947, which is pretty good.
4) Growing tourism. Tourism is booming in France and Spain for many reasons: easy access, familiar cultures and fantastic diversity. Tourism is really growing in Turkey and Portugal too, and this is positive news for prospective property buyers as it means that rental opportunities are good.
5) Taxation. The word tax doesn’t necessarily mean bad news. For example, if you take a mortgage out on a property in France or Spain, it may reduce your inheritance tax liability as there is a debt on the property.
The recent reduction in the capital gains tax threshold for owners of second homes in France should lead to a greater number of properties coming on to the market, and at more competitive prices.
6) Better investment opportunities. Many British buyers are exploring overseas opportunities in their search for better investment potential than they’re seeing in the UK property market. Even some first-time buyers are opting to purchase property abroad after finding themselves priced out of the UK market.
7) Price negotiation with keen vendors. Buyers in Spain are in a strong position due to the number of homes available and the possibility of negotiating prices down with some very motivated vendors.
It’s a similar situation in France – under current market conditions, people are keener to sell and therefore more likely to be receptive to offers lower than the asking price.
8) Rental income can help with mortgage payments. Renting out your overseas property can be a great way of helping to finance it, especially if the rental income is in euros (and you have a euro mortgage) as you won’t have to worry about exchanging currency to make your monthly repayments.
9) Easy access from UK. The number of flight routes to Europe from the UK, and their regularity, appears to be increasing every year, which is good news for overseas property buyers. But it’s also important to remember that there are no guarantees that cheap flights will continue indefinitely in one location.
10) Finance still available. There’s no doubt that the recent banking crises and economic gloom, across Europe in particular, have taken their toll on the international mortgage markets. But it’s still very possible to obtain finance, especially if you have a healthy deposit to put down and can demonstrate that your finances are in good order.