France and Spain remain firm favourites for Brits buying abroad
France and Spain remain firm favourites for those looking to buy a place in the sun, according to the latest Property Hotpots Report from HiFX.
The report, which analyses nine years’ worth of property data, has found that although there has been an 80% decline in the number of buyers since the beginning of the financial crisis, interest in buying certainly hasn’t waned, with potential buyers up since the beginning of the year.
France
Over a third (35%) of buyers are looking for a property in France, with Spain coming in joint first this year. Mark Bodega, director at HiFX said: “When it comes to a sound overseas property investment, it’s no surprise France remains a firm favourite with Brits as it ticks all the right boxes. Borrowing costs have tumbled in recent months and mortgage rates are at their lowest in years. Affordability has also been boosted by a slower property market as worries remain that France may well be lagging the rest of the Eurozone in terms of economic growth. Of course there’s also the added appeal of easy access from the UK, better weather and the way of life so much adored by British Francophiles.”
Spain
With property prices in Spain falling since the financial crisis, Spain also remains attractive to potential buyers and 35% are currently looking for a property here. However, Mark Bodega urges potential buyers to do their research before taking the plunge. “Spain continues to attract Brits who are hoping to take advantage of depressed property prices. The average property price in the country is down almost 30 per cent since the market peaked in 2007, and while there are discounts to be had buyers need to pick carefully. The macroeconomic outlook remains poor, and because of this, we are unlikely to see any further stabilisation in the current housing market. Buyers should remember that Spain is in a precarious position, not so much due to the weight of her sovereign debt compared to GDP, but due to the high levels of private debt and an extremely weak housing market.
“Wherever you decide to buy, be it Granada or Guildford, it’s imperative that buyers do their research, ignore the hype and take on board the risk of buying in economically uncertain times before making any important decisions.”
No place in the sun
The report also reveals that there has been a steep decline in the number of buyers looking to buy property in emerging markets. Countries such as Bulgaria, Brazil, Egypt and Panama have completely fallen off the map. Mark Bodega, director at HiFX comments: “Prior to the financial crash of 2007/08, while France and Spain were the top destinations, people were increasingly turning their attentions away from the traditional markets to emerging ones such as Eastern Europe, Brazil, Egypt and Panama. This was being driven by programmes such as A Place in the Sun which encourage less wealthy individuals to look at international property ownership as a form of investment/ speculation. No longer was the market simply about more affluent buyers buying holiday homes – as the market began to overheat lots of less affluent people were jumping on the bandwagon buying in countries like Bulgaria and Romania.”
Across the pond
With buyers continuing to shun the emerging markets, the USA and Canada are starting to re-emerge as property hotspots, with 9% of buyers looking to purchase properties here in 2013. Over the past four months HiFX has seen that potential property buyers in the USA have continued to increase with enquiries from potential buyers up 8% since the start of the year. Mark Bodega said: “Brits are now turning their attention across the pond as signs of US recovery are beginning to become more apparent. There are bargains to be had but Brits looking to buy a US property as an investment need to focus on areas where the rental demand is strong and where taxation on property is low.”
Apres Ski
HiFX has identified an increase in buyers looking for ski properties, with 18% buyers looking for a property to come back to after a day on the slopes. Traditional favourites remain the most popular with Chamonix, Morzine, Trois Vallees topping the list, but clients are also starting to look further afield to places including Whistler, Lake Tahoe and even Queenstown in New Zealand. Mark Bodega comments: “We’ve noticed quite an increase in the number of people looking for ski properties. This is because they’re an asset which not only has lifestyle advantages but one which also offers the buyer the potential for long term capital particularly as they’re in short supply. The ski property market doesn’t follow the normal laws of supply and demand. Ski property owners are usually discretionary sellers with no pressing need to sell unless the right price is achieved hence the increasing prices and limited supply.”
Advice for Buyers
1 Do your research. Buyers should remember that their choice of where to buy really depends on why they are buying and on the degree of risk that they are willing to accept. If you’re looking at the purchase as an investment take the time to look at cold hard facts and figures such as annual rental yield data. Cities generally provide better rental yields than small costal villages. If it’s a holiday home, how easy is it going to be to get there? Is there more than one airline route in case one shuts down? Nothing beats pounding the pavements. You’ll be surprised how many rational people buy property without having even visited the area!
2 Always ensure that you seek specialist advice from independent solicitors, architects and surveyors before considering a purchase overseas. They should be proficient in your chosen country's laws and processes and also know the specifics involved in buying a property there. We recommend not to go with a lawyer that the estate agent or developer recommends. If either are unscrupulous, chances are the lawyer will be working in conjunction with them and will tell your clients what they want to hear, not what they need to hear. Personal recommendations are always the best.
3 Make sure you never sign a contract that you don’t understand (for example - if it is in a foreign language). If you’ve seen a ‘must-have property’ and are tempted to put down a deposit there and then suggest a `cooling off` period. Make sure you take your time; this is a huge purchase.
4 If you are arranging finance on the property, ensure that this is stated in any contract and that you have an 'opt-out clause' if the loan is not agreed (which will ensure any deposit paid is refunded). Arrange any mortgage finance 'in principle', before you agree to purchase the property, or before you sign any contracts and pay over a deposit.
5 Make sure you carry out a survey. I know it seems obvious, but 75% of Brits don’t bother when they buy abroad. In some countries it can be difficult to track surveyors down, but make sure you persevere. An initial outlay of £500 could save them a whole heap of trouble later.
6 Remember that bills do not end at the asking price. Lawyer's fees, taxes, insurance etc must all be met and can often be forgotten expenses.
7 Don’t forget the impact fluctuating exchange rates can have on the price of the property your planning to buy. On average it takes between six and eight weeks to complete a property purchase abroad. Even over just one month currency rates can change dramatically and have a real impact on the price of a property abroad. We also always remind people that they would never agree to buy a property in the UK if they did not know how much it was going to cost them; if you agree to buy an overseas property without fixing the exchange rate at the outset, that's exactly the gamble you’ll be taking. Forward contracts enable you to lock in the exchange rate for up to 12 months and are available from many of the UK’s leading currency specialists like HiFX.