“With the endless stream of doom and gloom stories about the economic downturn, you could be forgiven for thinking that the nation’s dreams of owning a property abroad have totally dried up.
Not so. Despite the UK property slump and the struggling pound, the overseas property market is alive and well for British investors, and it appears that more and more of us are seeking a little slice of life overseas.
According to a recent Mintel Research report, one in three Brits is now contemplating emigration.
And a quarter of us are considering investing in a holiday home, according to the recent Holiday Lettings’ Insights Report, with Spain being the second most popular location being enquired about by prospective holiday let buyers, after the UK.
There have also been reports about how the eurozone debt crisis is scuppering UK buyers’ hopes of securing an overseas mortgage.
But bargain prices and low interest rates mean that buying property abroad may never have been more affordable.
So just how easy or difficult is it to finance the purchase of a foreign home?
The answer may be more positive than you expect, but just how easy it is does depend on where your clients want to buy.
The most popular destinations amongst our clients are still France and Spain, both of which come with easy access and good rental opportunities.
Enquiries for both locations have increased considerably over the last three years, as investors continue to stick to locations they know and trust.
Turkey and Portugal area still popular too, while interest in Australia has also been creeping up recently.
Mortgage availability
Despite the recent banking crisis and the subsequent turbulence unleashed on the UK mortgage market, overseas mortgage providers have a healthy appetite for lending to foreign investors.
In addition falling property prices, in some cases by up to 50%, and historically low interest rates are making it much more affordable to buy overseas property.
The French mortgage market has remained very calm throughout the global downturn, primarily due to its financial system having been more cautious in the past.
It currently offers the widest range of finance options and best available rates in Europe for UK buyers, and as it’s in a relatively secure situation, loan to value ratios are still high and it’s quite normal to be able to borrow between 70-90% of the value of a property.
Rates currently start from just over 2%.
In Spain, mortgage availability is surprisingly good, despite the negative reports about its property market.
Maximum loan to values are still around 65-70%, although smaller deposits are possible in areas where house prices are more resilient, such as the Balearics, the Canary Islands, Madrid and Barcelona.
Rates currently start from around 3%, with repayment deals prevailing.
The Spanish banks now own a lot of repossessed properties, so are offering some attractive rates in order to get these off their hands.
In Turkey, it’s possible to borrow up to 80%, and considering that the country didn’t even offer mortgages until 2007, availability is generally very good.
Lenders tend to prefer shorter terms though, with 10-15 years being quite typical, and rates start from between 4 and 5% at the moment.
Tourism has risen dramatically over the last few years, making rental yields very lucrative.
In Portugal, you can still generally borrow up to 70%, but lenders have reduced their mortgage portfolios and margins have increased.
The country may be struggling with debt, but it has managed to escape the type of property crash experienced by Spain, due to its tighter lending conditions and stricter planning laws.
So although lending is currently more restricted, I expect this to improve.
Due to current exchange rates, a mortgage could even be a good idea for clients who think they don’t need one.
Their immediate exposure to currency fluctuations is much lower than if they’re paying by cash, as they’ll only have to exchange the money for their deposit and fees for now.
If they’re lucky enough to be a cash buyer, it may be appropriate to arrange a mortgage for them until sterling becomes stronger, at which point they can pay it back, and ultimately reduce the price they pay for the property.
Join the bandwagon
If you’ve not yet considered the overseas mortgage market as a new source of income, it’s a good time to do so.
There’s no doubt that demand for overseas mortgages has declined since the peak we saw almost five years ago, but the market is still alive and well.
It could well be that your existing portfolio of clients includes several who fall into this market; such as people who are planning to retire abroad or to live permanently overseas, or those who are interested in investing in property, but who may not yet have considered foreign opportunities.
There are plenty of British buyers who are more willing to explore overseas opportunities in their search for better potential returns on investment than they’re achieving in the UK.
It’s also crucial to remember that there are many people who already own property abroad, who may not have considered remortgaging, or thought it necessary.
Commission rates start at 25% per case, but higher levels can be achieved when volume increases or through membership of a qualifying group or network.
We’ve been signing up an average of 70 brokers per month since last summer, bringing the grand total to more than 8000. Why don’t you join them?”
