With July 2015 looking likely to be the wettest on record in the UK, there will be many people turning their thoughts to that dream bolthole in the sun. And it appears that there are many already doing so. Our mortgage enquiries for the second quarter of 2015 were up by eight per cent compared with the same period last year, and trips abroad this summer could be set to inspire many more people to buy their own little slice of life overseas.
Spain continues to be top choice, accounting for just under half (45%) of our enquiries between April and June, consolidating the country’s performance in the first quarter of the year and signalling a strong comeback from its recent economic problems. France, in second place, accounted for almost a third (31%) of enquiries, followed by Portugal with 18%.
Investment in all three countries has been buoyed by the growing strength of the pound against the euro, which recently hit a seven and a half year high and is shedding thousands of pounds off property prices. A €200,000 holiday home now costs £140,845 compared with £158,730 a year ago, a saving of £17,885 on currency rates alone.
Affordability is also being boosted by low interest rates and bargain property prices, and these ideal buying conditions appear to be pulling buyers back to the overseas market in their droves.
Property prices
Prices in some of the most desirable areas of Spain, for example, have fallen by up to 50% since 2007, but the market appears to be on the path to recovery. According to Eurostat, the statistical office of the European Union, prices in Spain were up by 1.6% year-on-year during the first quarter of this year. Investors are therefore feeling more confident about the future and making their move while there are bargains to be had.
Prices in France fell by 1.9% year-on-year in the first three months of 2015, according to the Knight Frank Global House Price Index. A slower property market has been pushing French prices down over recent years, and under recent market conditions, people have been keener to sell and therefore more likely to be receptive to offers lower than the asking price.
And in Portugal, property prices are predicted to rise by 2.7% over the next year, with an ongoing steady recovery in prices being supported by rising demand and increasingly strong growth in sales activity, according to the June 2015 RICS/Ci Portuguese Housing Market Survey.
Obtaining finance
When it comes to finance, you may be pleasantly surprised to hear that it’s still generally available. Quite understandably, overseas lenders have become stricter about whom they lend to over recent years, and they’re now judging each case on its own merits rather than relying on specific criteria. But there’s still a healthy appetite to lend to foreign nationals, especially if buyers have a good deposit to put down.
It is, therefore, a great time to consider the overseas mortgage market as a lucrative new revenue stream. Many intermediaries have avoided this market simply because they’ve been unsure about how to tap into it. But numerous brokers have become involved as the result of a single client enquiry, and then been surprised at how easy the process is and gone on to seek more overseas opportunities.
Case study – ‘Embrace any opportunities you have access to’
John Hall, an Associate of S Hall Chartered Accountants in London, has recently ventured back into the overseas mortgage market, through the company’s financial services arm, in order to help a client buy a large stone property set in 2.7 acres of land in Lorgues, in southeastern France.
“I had dealt with Conti before so knew that consulting a specialist broker was my best option as arranging an overseas mortgage can be a long and complicated process if not managed properly. For example, even though my client was buying the property in his own name, he still had to provide lots of information and identification regarding his wife to the French lender. I also wasn’t aware that life assurance is a requirement of securing a mortgage in France, and that the term of the policy needs to be longer than the mortgage term. These things were not problems, but they just go to show how things work very differently in other countries and how you can’t afford to make any costly mistakes by trying to go it alone.
“Having a specialist on board really took the pressure off as they took care of all the administration and managed the process from start to finish. I fear that I would have been running around like a headless chicken otherwise.
“It would also have taken me a long time to research the French mortgage market and find the best possible deal for my client. Conti managed to source a very competitive rate of 2.65% denominated in euros over a 15 year term.
“I have great confidence in what can be delivered, so would be more than happy to accept any future overseas mortgage requests. More importantly, my client was very happy with the outcome, so the result was positive for everyone involved.
“The overseas mortgage market can seem quite daunting, but I would advise other intermediaries to embrace any opportunities they have access to. It’s a simple case of passing over to the experts. And it means that you can earn valuable revenue while getting on with the day job. The best of worlds you could say.”
Clare Nessling is director of overseas mortgage specialist Conti