Buying into the American dream - 22nd June 2007

The USA has long been the favourite long-haul destination for Britons seeking to invest in property abroad. This is especially true of Florida, with its undeniable attractions of year round sun, glorious coastline and plethora of theme parks. However, the US economy is still suffering, with the consequent impact on the housing market. In the property market as a whole, rises in mortgage rates mean that some Americans are struggling to keep up payments, repossessions are climbing in numbers, and supply of new property is somewhat outstripping demand.

So is this bad news for UK nationals wanting to establish themselves in the US, principally the Sunshine State, either permanently, or for a few weeks a year, renting out their villas for the rest of the time?

This is not necessarily the case borne out through testimony given to Senate Committee hearings on the economy by the National Association of Realtors (NAR), at meetings held towards the end of 2006. Thomas M. Stevens, president of NAR stated, "After five years of outstanding growth, the housing market is undergoing a period of adjustment and becoming more and more of a balanced market between buyers and sellers." The statement went on to note that also contributing to the cooling housing market was the increase in mortgage rates of nearly 1%, therefore the more speculative investors were pulling back and first-time buyers being priced out of the market.

Prices and sales vary across the states, but it seems that prices are now stabilising, and although still subject to some decline, this indicates a return to a more normalised approach to investing in American real estate. There are far fewer quick sell-on bargains to be found, and the view should be towards long-term investment, with a steady growth in the future, but it is probably good-bye for the time being to the significant profits made in previous years.

Simon Conn, MD of Conti Financial Services Ltd, the UK’s leading overseas mortgage specialist notes: “If people in the UK are looking to find a bargain property to achieve a quick return, then an investment in Florida is not for them at the present moment, and emerging markets closer to home are a much better bet. However, people are still buying in Florida as this is where they want to live or take holidays. Although down on the boom years, our American business is up in the first quarter of 2007 on 2006, and it seems that with the current strength of the pound to the dollar, and if the investment is seen as long term, then people should not be deterred from realising their dream. Caution is important as with any purchase whether here or abroad, but the US is still a buyers market.”

Central Florida has still the greatest pulling power for British buyers, namely in the Orlando and Disney theme park areas such as Kissimmee, Davenport and south Clermont. New developments currently on sale in Davenport include three bedroom pool homes within ten minutes of Disney World from between £160,000 to £180,000, ideal for letting. In the city of Kissimee, with its excellent access to Orlando’s attractions, three bedroom town houses, again with pools, can be bought for as little as $250,000 to $300,000.

Types of Florida Mortgages available through Conti

Repayment and Interest Only mortgages are available.

For Sterling mortgages, the minimum loan is £30,000, $60,000 if the loan is in US Dollars, and $75,000 in other currencies. There is no maximum, but it cannot exceed 80% of the valuation or purchase price, whichever is the lower.

Current interest rates are from approximately 1.99% Low Start for Florida in US Dollars for loans up to 80% Loan to Value, and from approximately 7.25% variable in US Dollars for loans up to 80% Loan to Value. In Sterling, rates are from 5.99% fixed for one year in Sterling a "special Sterling scheme" is available in for Florida only. For all other currencies, the rates are from 1.50% above cost of funds.

Example mortgage:
A repayment mortgage of $100,000 over a period of 30 years at a variable interest rate of approximately 7.25% will mean a payment of around $689.00 capital and interest per month, a total approximate amount payable over the term of $251,980 including capital, interest, arrangement & survey fees.

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