Strong pound giving investors more bang for their euro
Excellent buying conditions are continuing to draw British buyers back to the overseas property market. The number of enquiries received by Conti, the overseas mortgage specialist, in the second quarter of this year increased by 38 per cent when compared with the same period in 2013. And over the period of January to June 2014, enquiries shot up by 58 per cent compared with the first half of last year.
As for current hot spots, it’s the classic European destinations which are pulling the buyers in. Spain continues to be top choice, accounting for a huge 59 per cent of total enquiries received in the second quarter, continuing the pattern Conti saw emerging in the first quarter. France, in second place, accounts for 27 per cent of enquiries, followed by Portugal with eight per cent.
Bargain property prices and low interest rates are boosting buyers’ affordability, but the current strength of sterling is also having a very positive effect on their budgets, and the pound rising to a 22-month high of €1.26 is good news for anyone thinking of making a purchase.
When you consider that it was only last summer that the value of sterling was around €1.14, the difference is pretty significant when you translate it into property prices. It means that for someone considering a home in the eurozone worth €200,000, the property now costs £158,730 compared with £175,439 at the start of August 2013. That’s a saving of £16,709.
Clare Nessling, director at Conti, says:
“Prices are good, rates are low and lending conditions are improving, so it’s perhaps no surprise that buyers are returning to the market. What has exacerbated the situation is the concurrent performance of the UK economy where the pound has been strengthening against other currencies including the euro, and this is also having a big influence on buyers’ enthusiasm.”
As always, Conti says that it’s vitally important for buyers to seek the right advice. Bitter experience has taught many overseas property buyers that scrimping on independent legal advice can effectively cost them their holiday home. Buyers should always go through the same process that they would follow if they were buying a property in the UK. There’s nothing to be gained, and everything to lose by cutting corners and failing to carry out due diligence.
Conti’s overseas mortgage tips
Obtain a mortgage ‘approval in principle’
This will confirm you can obtain the necessary funds before signing on any dotted line and prove to sellers that you’re a serious buyer. And it costs nothing.
Consider fluctuations in the exchange rate
It’s generally advisable for an overseas mortgage and the income used to service the mortgage repayments to be in the same currency, to avoid any exchange rate issues.
Seek professional advice
Take independent advice from an English-speaking lawyer who is not connected to your seller, estate agent or property developer.
Factor in additional costs
Bear in mind that bills don’t end at the asking price. Lawyer's fees, local and national taxes, insurance, and so on can often add at least a further 10 per cent to the cost of your property purchase.
Arrange a valuation
Before proceeding with the purchase, ensure an independent valuation of the property is carried out, which should point out any problems.