Investors’ appetite for overseas property still strong

Overseas mortgage enquiries up by 37%, stoked by strong pound

 With the cold months approaching and the Met Office predicting a wetter-than-normal winter, there will be many people turning their thoughts to that dream bolthole in the sun. And it appears that there are many already doing so, according to Conti the overseas mortgage specialist, where enquiries have shot up by 37 per cent so far this year, compared with 2013.

Spain continues to top the list of hot spots, accounting for more than half (51 per cent) of enquiries received over January to September. The volume of enquiries for Spain has, in fact, increased by a massive 95 per cent when compared with 2013. France, in second place, accounts for 29 per cent of enquiries received so far this year, followed by Portugal with 12 per cent.

Interestingly, however, France appears to be making a comeback, overtaking Spain in the third quarter with 35 per cent of enquiries, and 45 per cent in September alone, compared with 32 per cent and 18 per cent for Spain respectively.

According to Conti, there couldn’t be a better time to buy, with the strong pound shedding tens of thousands of pounds off property prices in the euro zone. Sterling exchange rates had a bit of a bumpy ride in the lead up to the Scottish referendum result in September, but the dust appears to have settled and the pound to euro exchange rate is hovering near €1.27 at the moment.

Rewind to last summer when the pound fell to a low of €1.14, and the difference is pretty significant when you apply it to property prices. It means that a €200,000 property in Spain, for example, is now almost £18,000 cheaper, showing just how much difference the currency markets can make.

Clare Nessling, director at Conti, says: “When you combine the strong pound with the low property prices to be found in many European property markets together with historically low mortgage rates, affordability is better than it has been in years. With buyers’ budgets stretching that much further, the purchase of that place in the sun could seem even more tempting, especially when you compare the cost with overheated parts of the UK market.”

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 ifthey 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.

 Conti’s top ten tips for buying property abroad

 Never sign a contract that you don’t understand. If two versions are provided, i.e. English and local language, ask your solicitor to confirm the English version is a true translation, as you need to ensure it doesn’t contain errors, omissions or extras.

Obtain a mortgage ‘approval in principle’ This will confirm you can obtain the necessary funds before signing on any dotted line and prove to sellers that you’re a serious buyer. And it costs nothing.

Consider fluctuations in the exchange rate It’s generally advisable for an overseas mortgage and the income used to service the mortgage repayments to be in the same currency, to avoid any exchange rate issues.

Seek professional advice Take independent advice from an English-speaking lawyer who is not connected to your seller, estate agent or property developer.

Factor in additional costs Bear in mind that bills don’t end at the asking price. Lawyer’s fees, local and national taxes, insurance, and so on can often add at least a further 10 per cent to your purchase costs.

Arrange a valuation Before proceeding with the purchase, ensure an independent valuation of the property is carried out, which should point out any problems.

Check the developer’s track record If buying a new-build property, check the developer’s track record, obtain references from previous buyers, and look at comparable properties in the area.

Do your homework  Conduct thorough research about local facilities and transport. People gravitate to locations with a nearby airport, especially if it’s served by a budget airline. But remember there are no guarantees that cheap flights will continue indefinitely in one location.

Local money Open a bank account in your chosen country and, and set up standing orders in your local bank account to meet local bills and taxes. Failure to pay your taxes in some countries could lead to action by the authorities.    

Tax Check the inheritance and capital gains tax laws of the country where you are buying – e.g. it may be the case that your estate does not automatically pass to your spouse and you may need to compile a separate will.

 

 

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