As featured in the December 2010 issue of Overseas Property Professional Magazine

The tide is turning

Bargain prices and historically low interest rates mean that many experts will tell you that "there's never been a better time to buy". But, two years on from the global financial meltdown, just how easy is it to secure a mortgage for an overseas property? Clare Nessling, operations director at Conti, the UK-based overseas mortgage specialist, casts a seasoned eye over what's on offer. Things, it seems, are definitely getting better.

The outlook may well be more positive than you expect. Unlike Britain and the US, where obtaining a mortgage has become more difficult, many European countries appear to have weathered the financial storm in pretty reasonable shape, and you may be pleasantly surprised by the healthy appetite of overseas institutions to lend to foreign investors. Just how easy it is, however, does depend on where you want to buy.

The French market, for example, is very stable, largely due to the cautious approach adopted by its financial institutions in the past. French banks are immensely careful about whom they lend to and, to limit risks, they spread their investments much more widely than those in the US or UK. This means that it's in a strong position to lend, and it's still possible to borrow up to 100 per cent of the value of a property. There are restrictions however - the minimum loan amount is €300,000, and earnings (single or joint) need to be at least €90,000. It's a great deal for those who can take advantage of it, but even for those who can't, it's still generally possible to borrow up to 80-85 per cent of the value of a property in France, with rates starting at just 2.10 per cent.

Despite the negative headlines about the Spanish property market, mortgage availability is surprisingly good. Mortgage providers still have a healthy appetite for lending to foreign investors, and you can still generally borrow up to 70 per cent of the value of a property there. At present, rates start from around 2.75 per cent, with repayment deals prevailing. And through brokers, it is still possible to get a Spanish mortgage with no repayments required for the first three years. The maximum loan to value is 80 per cent and interest is not deferred, it's simply not charged.

In Portugal, you can generally borrow up to 70 per cent of the value of the property (although 80 per cent is possible), but lenders have reduced their mortgage portfolios and fixed rate deals have become rare. Rates are very reasonable at present, however, starting from 3 per cent.

In Turkey, it's possible to borrow up to 75 per cent, and considering that the country didn't even offer mortgages until 2007, availability is generally very good. Lenders tend to prefer shorter terms through, with 10-15 years being quite typical, and rates are around 4 to 5 per cent at the moment.

Things have been improving very recently in Italy too. Its range of mortgage products had shrunk significantly in size over the last few years, but is starting to come back. A new international bank has recently joined the market to sharpen the competition with the existing players, and it's now possible to borrow up to 80 per cent of the value of a property there, and rates currently start at just 2.5 per cent. And things should continue to improve.

In most European countries, lenders assess borrowers on their ability to repay the loan rather than on income multiples alone, and the affordability calculations they use haven't really changed over the last year.

According to our own data, France is still top of the list for buying property abroad, taking a massive 43 per cent share of mortgage enquiries received this year, an increase of 12 per cent compared with the same period in 2009, and a massive jump of 29 per cent compared with 2008. It's particularly appealing to the more conservative investor, and retains those features which should mean that steady appreciation in value should be achieved in the medium to long term.

Spain is in second spot, claiming an impressive 24 per cent of enquiries, up by two per cent on last year, and by nine per cent since 2008. Buyers are 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 per cent since the peak in 2006/7.

Turkey comes third with a booming market, increasing its share to 18 per cent, an increase of five per cent since last year, and seven per cent over the last two years. The country is concentrating resources on expanding its tourism market, and there will be appreciation in value as the infrastructure is put in place. Turkey's acceptance into the EU will be an added boost when it happens. It's a medium to long term prospect, but with a much lower entry cost than France.

The USA is also increasing in popularity again. In Florida, homes are being sold for less than it cost to build them. Prices in some parts of the state have dropped by as much as 40 per cent, thanks to the repossessed sector. American banks are still, however, very risk-adverse and you'll need a deposit of at least 50 per cent if you want to secure a mortgage there.

France, Spain and Turkey together now account for a staggering 85 per cent of all enquiries received. Investors are focusing on tried and tested locations more than ever before, whilst the flurry of interest we saw in the far-flung emerging markets in 2008 seems to have totally disintegrated.

Clare Nessling is operations director at Conti, one of the UK's leading overseas mortgage specialists.