17 May 2019
Overseas market recovers despite Brexit uncertainty
Brexit uncertainty is having a negative impact on the UK housing market, deterring many would-be buyers and sellers from making a decision. However, Miranda John, international director at SPF Private Clients, says that when it comes to Brits buying property overseas, the market is in recovery mode. Buyers seem to have had enough of waiting for an outcome and are getting on with their lives.
New banks are entering the fray, while existing local lenders and private banks remain keen to lend to the right client. While there were fears that local banks would no longer want to lend to Brits following Brexit, they have all widened the net as to the type of business they want, with most of them already accepting business from outside the EU. Nearly all have invested in English-speaking staff and even if Brexit does happen, there will still be lenders keen to lend.
Most encouragingly of all, a large, well-known bank is relaunching its international offering in the next few months, lending in France, Spain, Switzerland and Italy. A bank of this importance returning to the market is a very good sign.
Below we run through the lending situation in the key countries which appeal to Brits buying abroad:
It used to be extremely difficult to get funding for property purchase in Italy but that has changed. For example, estate agent Savills is launching an impressive development in Rome where prices start from approximately €1 million and the penthouse will set you back €5m – a few years ago no lenders would have been interested in non-resident buyers but now at least one private bank is and a broker we work with in Italy could arrange funding of up to €1.5m or €2m.
Mortgage pricing is really competitive with long-term fixed rates falling. While the loan-to-values are not high as 60 per cent LTV is the maximum, rates are competitive with lenders keen to lend to professionals. Fixed rates from the private banks start at 1.4 per cent, while long-term fixes are available from less than 2 per cent from mainstream lenders.
This is still our biggest market, particularly the Alps, the South and Paris. In the Alps we are seeing lots of big deals on ski chalets and apartments, with more demand for resorts such as Morzine and Les Gets. Private banks are really keen to lend here, with nearly a dozen willing to do so but they do not finance in every resort so this is something to check out early on in the process.
Many purchasers are families who ski once or twice a year and instead of paying £10,000 to rent a chalet are now buying one and renting it out when they are not using it. The rental may not cover 100 per cent of the mortgage payments but will go some way towards doing so. Turnkey chalets and penthouses, which demand less work, are most in demand.
Borrowing rates in France are still competitive although not as low as in Italy. But even someone borrowing a really high LTV of 85 per cent would be able to fix for 20 years at 2.5 per cent. If they really want a cheaper rate, it may be possible to fix with a local bank for 20 years at just 1.85 per cent with a higher deposit of at least 30 per cent. Mortgages are generally repayment but there is limited scope for interest-only solutions, although only for high-net-worth clients.
The market for overseas homes in Portugal is busy and we have seen an increase in demand. High-end properties in the Algarve but also Lisbon, Cascais and Porto are proving popular.
The market is also improving. There have been some recent tax changes so buyers don’t have to pay initial mortgage taxes as in the past, with the banks bearing this cost instead. Lenders haven’t put up their mortgage rates too much – although they are not as low as in France or Italy. Fixed rates don’t really dip below 2 per cent but it is possible to fix for ten years at 2.5 per cent.