20 March 2018
THE PROPERTY MARKET IN CONTINENTAL EUROPE PROVING RESILIENT
DESPITE UNCERTAINTY CREATED BY THE BREXIT NEGOTIATIONS, LAST YEAR SAW AN INCREASE IN BRITS BUYING SECOND HOMES ACROSS EUROPE. MIRANDA JOHN, INTERNATIONAL MANAGER AT SPF PRIVATE CLIENTS, EXAMINES THE REASONS WHY.
Brexit initially caused concern for some Brits buying overseas. But once the dust settled, and perhaps because of the realisation as to how long the process is likely to take, many have taken the plunge regardless. The reality is that British homeowners have been part of the fabric of France and Spain in particular for many years, predating UK entry into the EU in 1973, so these countries are unlikely to impose awkward legislation. Indeed, Portugal already has international visas in place so is ahead of the curve and clearly does not wish to have barriers to property ownership for non-residents.
Brits remain in evidence across the board in Europe, especially when it comes to more expensive property – €1m-plus. The Spanish Balearic islands are notably busy with Spanish banks confirming an increase of 16 per cent in sales last year compared with 2016. Meanwhile, Portuguese agents reported record enquiries and transactions up 18 per cent on the previous year.
The French and Spanish markets have a long, established track record of financing non-residents wishing to buy second homes. As there are a good number of lenders with specialist divisions for this purpose, there is a wider range of mortgages available. The most attractive terms are on a repayment basis. There is very little difference between fixed and variable rates so long-term security provided by the former usually offers excellent value. In many cases there are early repayment penalties on fixed rates but in Spain, for example, some lenders will let you repay up to 25 per cent of the loan on an annual basis with no charge. In France, it may be possible to avoid fees for early repayment, although this is decided on a case-by-case basis. Portugal is also becoming more competitive with far more attractive interest rates.
The availability and attractiveness of mortgage finance still largely depends on property location. For properties costing more than €2m in prime areas such as the Alps, South of France, Balearic islands and Barcelona, a significant number of private banks are happy to lend. While a local bank will offer a standalone mortgage, a private bank wants a relationship with the borrower so requires assets under management. However, private banks can be useful if a client doesn’t fit the rigid mould of retail lending because they are older or if their income is not consistent or offshore.
Unfortunately, Portugal and Italy are not well served by private banks, which limits the options available. In Portugal, particular care should be taken if buying via an offshore company as there may be only a very restricted and expensive option, or worse still, none at all. As with any type of property purchase abroad, it is wise to seek independent advice beforehand.