Whether for holidays or investment: Home in on abroad
British prices are in the doldrums, but sterling is on the rise, so now is the time to seek overseas options
Sunday 06 January 2013
Eurozone toxicity and civil unrest made for a dramatic year in 2012, but it also gave rise to opportunities for foreign buyers. With the UK's property market still in the doldrums and a strong currency, more UK buyers are looking to invest in bricks and mortar abroad. The question is, where should you start looking and what do you need to watch out for?
Spain is still top of the list for many Brits looking for a holiday home in the sunshine and prices came tumbling down – repossessed property prices fell by 65 per cent in 2012 – amid the economic turmoil. There are still bargains to be had, although tax breaks introduced by the Spanish government are due to end in January when the VAT rate for new property will rise from 4 per cent to 10 per cent.
If you're buying a repossessed property, you need to be prepared for a more complicated, lengthy process and if the property needs work you'll need an expert to assess it for potentially costly structural problems. Above all, be careful where you buy – repossessions are often in areas where properties struggle to maintain their value.
"While property price declines continued in 2012, signs were that quality properties, in decent locations and not flooded with other 'me-too' properties nearby, were becoming more price-resilient. This will continue in 2013," says Louise Reynolds, a director of Property Venture.
If you want somewhere that will hold its value, Ms Reynolds suggests areas near to new infrastructure improvements such as the new high-speed AVE rail network and the €1bn Paramount Theme Park in Murcia due to open in 2015, which will boost the local economy and housing market.
If you don't want to gamble on Spain, the record low interest rates make France an appealing prospect. Recent property tax hikes under the newly elected government are a blow, but will not be enough to deter most buyers looking across the Channel.
"Out of our entire international network, France was our big seller last year ," says Tim Brown, the head of international sales at Chesterton Humberts, which has a mixture of properties along the French Riviera, chalets in French Alps and homes in Paris and Normandy.
The weather, lifestyle and proximity to the UK make France a continued favourite, but with sterling going so much further, 2013 could be a great time to buy. And, if you can find a bank to borrow from, you get the best of both worlds by paying in sterling and borrowing in euros.
"While the euro is currently appreciating due to year-end repatriation flows and central bank reserve purchases, we expect euro weakness to re-emerge in the new year," says Philip Hanson, from currency specialists Travelex.
Italy is an easy sell with its climate, history and beaches, not to mention the food and wine. Its sluggish economy has also meant that sellers are finally willing to soften prices. Italy hasn't been tarnished by overdevelopment in the same way as Spain and demand remains strong from Americans, Russians and Brits. "The Italian lakes remain a strong favourite with British buyers, with Lake Como remaining by far the most popular upmarket destination for second-home ownership," says Paul Belcher from Italian buying agent Ultissimo. "We expect prices on the Italian lakes to continue to rise gently through 2013. Economic hardship may bring to the market some desirable Italian family homes, and will help the British buyer to enjoy better value while they are in Italy."
If you need finance, mortgages are readily available but typically capped at 70 per cent of the purchase price. The process can be expensive, with agent's fee of at least 3 per cent, legal costs of around 2 per cent and on top of this a substantial purchase tax, which can be a full 10 per cent.
Winter sun in the Caribbean is the dream for many buyers and as a former British colony, a tolerable eight hours from the UK, Barbados is still the most popular island.
"There are no taxes when buying and no inheritance, or capital gains tax. There are also no restrictions to foreign buyers and property is owned freehold. Our laws in Barbados are primarily based on UK law so it makes the process very simple," says Kieran Kelly of Chesterton Barbados.
Many of the islands do cater for the rich and famous, but prices may not be as steep as you think – Savills is advertising a two-bedroom, two-bathroom apartment in St James, Barbados for £185,190.
Overall the Caribbean market was relatively unscathed after the crash and Richard Way, editor of OverseasGuidesCompany.com, explains that Antigua (and Barbuda) has plans to introduce a citizenship scheme for vetted applicants investing US$400,000 (£246,000) in eligible real estate. "Elsewhere, while some developments in St Lucia, including The Landings and Sugar Beach, offer financial investment perks such as tax exemptions, life on the island has just got more expensive with the introduction of VAT," he says.
Each island has different legal requirements so wherever you're looking at property there will be an independent set of laws to chew over but a decent estate agent will help you. For example, many British buyers looking in St Lucia end up setting up a company for tax purposes.
The market in Florida is on an upward trend so it may be a case of buy before it is too late. Many of the dirt-cheap foreclosures and short sales have been snapped up, but it's still an affordable place to buy a holiday home.
Average prices across the state increased by 9 per cent in September to $145,000 for single-family homes and by 20 per cent to $107,000 for condominiums, according to Florida Realtors Industry Data.
Picking the right location and the right management is crucial, so do your homework and use reputable agents. Short-term risks associated with the US dollar and a third round of quantitative easing shouldn't be ignored, but as a long-term investment these should be ironed out and rental opportunities are attractive.
"Miami's strong rental market clearly reflects the demand for local housing that is attracting both US and foreign investors," says Patricia Delinois, the residential president of the Miami Association of Realtors.
"Many local residents who defaulted on loans during the market downturn are not able to purchase homes again, thus generating demand for rental properties that should persist for a few years and should continue to boost market performance," she adds.
The rising stars
For adventurous buyers looking to move away from the traditional destinations, Poland, Turkey and Montenegro are proving popular.
Poland has enjoyed stable growth through the recession and was pushed into the limelight as co-host of Euro 2102 football championships. Poland also ranks as the sixth-most attractive country for foreign investment, according to the United Nations Conference on Trade and Development, ahead of all other European Union countries.
Turkey too has a growing economy and experts are expecting good things for 2013. Property is substantially cheaper than in other major European counterparts and rules around non-Turkish nationals buying property were relaxed in 2012, which should spur sales and drive prices up.
"Istanbul contributes 55 per cent of Turkey's trade and hosts 16 per cent of the country's population. A youthful population and lots of migrant workers are attracted to the city. They will all need somewhere to live and this offers the chance of a profitable buy-to-let in 2013," says Ms Reynolds.
Montenegro has caught investors' attention, as it is predicted to have the fastest-growing tourism sector in the world over the next 10 years, according to the World Travel & Tourism Council.
With a coast along the Adriatic Sea, the country has long been favoured by the rich, but the market is still young and demand is strong, particularly from Russian buyers.
Prices are lower than that of its neighbour Croatia and as part of the eurozone, Britons can also make the most of the weakened euro.
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