Cost of buying a home overseas drops

The cost of buying an overseas property has fallen in some of the most popular destinations, according to research from Knight Frank, the independent global residential and commercial property company.

Quoted in the Financial Times, it says that the volatility of the pound over recent years has had a significant impact on British buyers and their ability to finance overseas purchases, as its decline against most of the leading currencies caused property prices to soar.

However, the situation for UK investors looking to buy abroad has improved, due to sterling stopping its decline and regaining some value. The company says that property prices in Russia have dropped the most, by 24 per cent in sterling terms in the 12 months to December 2009, and the cost of buying a second home in the USA is 9 per cent less than a year ago. European countries such as Spain, France, Italy and Greece have also experienced declines, which makes the case for investing in these countries more attractive.

Spain, a long-time favourite destination for British buyers, is still 12 per cent more expensive in sterling terms than two years ago, but changes in exchange rates have meant that prices have become 8 per cent cheaper over the last 12 months. And whilst properties in France are 15 per cent more expensive than two years ago, prices have come down by 6 per cent over the last 12 months.

This is clearly having an effect on the interest being shown by potential investors. According to the international property website, Primelocation.com, there's been a lot of interest in Spain, France and the USA from UK buyers recently, with these three locations accounting for 83 per cent of total searches on the website in December 2009.

Clare Nessling, Conti's Operations Director, says: "We've seen a rise in interest over the last few weeks, particularly for mortgages in France and Spain. There's a feeling of growing confidence amongst prospective buyers, and the fact that sterling is starting to claw back some value has given them a boost. When you combine this with the lower property prices that we're now seeing in many locations, as well as historically low interest rates, it means that property has simply become more affordable."

According to Conti, British buyers are sticking to the more traditional overseas locations, especially those with history of providing good rental returns. The smart investor is no longer simply looking to where the best bargains for a swift return can be found, but to where security lies for a longer term investment.