Never a Better Time to Buy Abroad

Buying properties abroad can be nerve-wracking, especially in today’s economic climate. The fact that you will be dealing with a wholly different market from the UK, and you have little interaction or immersion with different areas, can make selecting and committing money to a property incredibly daunting.

Now is the best time to start considering making an investment in holiday property though. The Great British Pound is slowly growing in strength against the Euro, in fact buyers can expect to buy 25% more Euros per pound than they could three years ago, when the exchange rate was almost equal.

It means that you get a lot more for your money. This is coupled with a housing crash in many European countries. Spain in particular is a hotspot for those looking to purchase a holiday home. Due to the severe economic downturn in the country, house prices have plummeted, with some Spanish banks offering some properties discounted up to 70% against their 2008 price.

Head of Savills International, Charles Weston Baker, revealed that they have recently sold a property, which was originally valued at £5million, for just £1.2million.

However, economists and property experts have warned that house-hunters be wary. Spain having more than a million homes unsold, it means that supply will not exceed demand for many years and means that recovering house prices will be significantly delayed and while the recession in the UK seems to be lessening, the Euro-zone crisis is still tempestuous and there is no guarantee that house prices will not tumble again.

James Price, a partner at Knight Frank International has said, “[O]ne may question how much of a bargain these are. Such markets are likely to take some time to recover. This would include parts of mainland Spain and the more developed areas of the Algarve. Put another way, certain spots may still be considered reassuringly expensive. The trick I would say is to look at firmer markets. Getting good value rather than a bargain is probably a good tack.”

In terms of finding lenders abroad, France is the best bet with some banks offering up to 80% LTV (loan-to-value) mortgages and interest rates between 2.3% variable and 3.6% fixed on 20-year terms. Spain, Italy and Portugal are less willing to supply loans, the LTV in Spain is around 60% with a 4.5% interest rate. The LTVs in Italy and Portugal are higher, but interest rates are higher at 4.7% and 6% respectively.

Now is definitely a good time to have a look at properties abroad, if you can afford it. But be cautious and logical. Don’t be fooled by low prices and great bargains, it’s most likely because they are placed in high-risk areas. Shop around and find the best deal and make sure that you’re confident before you commit.

photo courtesy of Andrew_D_Hurley