Buyers are back looking for holiday homes. Mortgage broker Conti Financial Services, which specialises in overseas mortgages, reports a big increase in mortgage applications and the busiest month for over a year. The foul winter in the UK has probably helped concentrate buyers’ minds on that place in the sun and mortgage applications rose by 48% in March compared with the previous monthly average.
European banks have not suffered as much from the sub-prime crisis as UK mortgage lenders and Conti says that overseas mortgage providers have money to lend to foreign investors. ‘Falling property prices across many European destinations – in some instances by as much as 50% – mean that the chance of owning a place in the sun may never be better, and historically low interest rates mean it’s become even more affordable for British buyers,’ says Clare Nessling, Conti’s operations director.
‘The most popular destinations amongst our clients are still France and Spain, both of which come with easy access and good rental opportunities. Turkey is also popular, as it offers some great property prices and all the benefits of its Mediterranean location, minus the effects of the strong Euro,’ she says.
Nessling reports bargain hunters out in force in Spain where oversupply of properties and fears about planning permission have left the banks holding repossessed properties which are being sold off. ‘Confidence is definitely growing, but there’s also an element of buyers snapping up bargains in traditional hotspots while they have the chance.’
If you want your holiday home to pay for itself with holiday lets, you will generally have to organise a euro or foreign currency mortgage. Most European tax systems will only allow rental income to be offset on a mortgage secured on the rental property.
According to Nessling, British investors buying second homes in Europe are taking out euro-denominated mortgages. But be aware that if the pound, which has recently strengthened against the euro, falls out of bed – which it could well do if we have a hung Parliament after the May election – your euro debt will be increasing and monthly repayments will go up too – unless you are able to let the property in euros to cover the outgoings. However, most UK owners tend to rent to other Brits who are largely not prepared to pay more on rentals denominated in the stronger euro.
So where will you find a bargain? ‘Those European countries yet to record their first quarter of growth since the credit crunch include Spain, Denmark and Ireland where an oversupply of stock is holding back prices,’ says Liam Bailey, head of residential research at international estate agents, Knight Frank. If you want a bargain, Knight Frank’s figures show that average property prices are down 8% in France and Spain over the past year while Greece is off 5.2% and Italy down 3.5%.
If Italy is too expensive, try Croatia where average prices are lower than Italy, just as scenically beautiful and prices are down 7.3% year on year. Prices in Portugal have been static but for the biggest bargains of all, with year round sun, Dubai is the place to look where property prices have collapsed by 47%.
Most UK buyers looking for a property abroad sign up on websites to see what’s available. Rightmove, for example, reports a big increase in searches for property in Europe with the Alentejo in Portugal up 28%, Costa Calida in Spain up 13% and an increase of nearly 13% for properties in Italy.
Even in upmarket areas like Tuscany owners have been reducing prices to get a sale. Rightmove has a three bedroom farmhouse near Lucca, fully restored with infinity pool which has been reduced by €50,000 to €650,000.
In the south of France, offers are invited on a five bedroom converted stone building with pool and large garden near Toudon in the Alpes Maritime, fully restored and with wonderful views. The guide price is €680,000 but you could probably get it for less.
But things are moving, so don’t delay. Boutique international agency Unique Living which specialises in upmarket properties in prime locations in Europe such as the French Riviera, Provence, Algarve, Costa del Sol, Mallorca, Ibiza and Southern Cyprus, reports that turnover figures for June 2009 to February 2010 outstripped figures for the same period in 2007, previously its most successful year.
‘We attribute this to some of our key property markets bottoming out and astute buyers knowing when to grab a once in a lifetime bargain’, says Serge Cowan, managing director. ‘Early in 2009 we realised that there were many home owners who literally had to sell and therefore the asking prices were dropping significantly. In March we launched our ‘Reduced to Sell’ section on our website. House prices fell but those brave enough to commit secured superb future investments.’
But he warns that prime French Riviera properties which have seen an average fall of 15% have not all dropped. ‘Some of the hottest properties retained their value, similar to the market in the UK and some homes continued to increase.’ He says that the market is now beginning to pick up, ‘but there are still some properties offered at reduced prices, although these properties are not as readily available as they were this time last year so our advice is to be quick,’ he says.
