Property abroad: Holiday homes

Investors are eschewing equities and opting for bricks and mortar, says Laura Latham

With a recession in full swing it may seem crazy to consider buying a holiday home, but that’s what many people are planning. With so much economic uncertainty, paltry interest rates on savings and diminished returns from equities, investors are using cash assets to buy something more substantial.

Global property markets may have become overheated in recent years, but now even prices in sought-after locations are dropping. This means anyone with the cash to spare has an opportunity to get a good deal for the long-term.

“In the current climate, there’s certainly a trend for buyers to move their money into property,” says Andrew Hawkins of international estate agent Chesterton. “It may not offer great returns in the short-term, but with property you have a tangible asset.”

Hawkins says clients are nervous about equities, because they “are worried about anything with a purely theoretical value”. Buyers with decent deposits want holiday homes that offer income. This includes properties with guaranteed rental returns, such as French leasebacks, in which owners rent their property out via the developer for a specified number of years with accompanying tax breaks.

In addition to France, Hawkins recommends Switzerland, where he says you can find property from around £180,000 offering “long-term, steady returns”. He says there are still good buys in Spain, providing you research the market. “Spain will come back and right now buyers looking to the long-term can get good deals.”

Georgina Richards of Knight Frank reports that the fervour of buy-to-let has evaporated and today’s buyers are looking for somewhere they want to holiday themselves. even so, they will only buy when they have a bargain.

“People are looking for deals,” she explains, “they only want to know about reductions and always ask the position the vendor is in.”

Richards reports buyers are keen to find a secure, long-term investment, aiming to hold on to their property for five to seven years. They’re also steering clear of regions such as Eastern Europe or South America, in favour of “tried and tested” locations, including Barbados, the Algarve, southern France and Italy.

“Buyers are no longer keen on new markets,” she says, “they want established, mature areas with easy access and stability. Right now there are good properties at good prices and people with cash are in the best position.”

Knight Frank: 020-7629 8171, www.knightfrank.co.uk ; Chesterton International: 020-3040 821, www.chesterton-international.com

Investing in a holiday home: Buyer’s guide

* Guaranteed rental schemes can offer up to 6 per cent returns

* Not all schemes are properly managed, so check contracts and buy from a developer with a solid track record

* Prices in many countries have dropped 10 to 20 per cent, while in Spain some vendors are lowering prices by 30 to 50 per cent

* Dirt-cheap property isn’t always a bargain; a home in a good location costs more but should hold its value