18 January 2017
WHAT DOES THE YEAR HAVE IN STORE FOR BRITS BUYING PROPERTY ABROAD?
2016 TURNED OUT TO BE A DRAMATIC YEAR AND THE UNEXPECTED VOTE TO LEAVE THE EU MEANS BRITS PLANNING ON BUYING PROPERTY ABROAD FIND THEMSELVES IN UNCHARTERED WATERS. MIRANDA JOHN, INTERNATIONAL MANAGER AT SPF PRIVATE CLIENTS, DISCUSSES THE ISSUES WHICH MIGHT AFFECT THEM THIS YEAR.
Some markets have absorbed the aftershocks of the referendum outcome and business indicators are good but this is not the case across the board. For example, areas of France and Portugal have bucked the trend with international buyers back in force even if there are question marks over whether a visa could be required in future.
For any buyer requiring finance, research before offering on property is essential, as there is a considerable difference between countries and even areas within countries in terms of lenders and products available. If a property is very rural, for example, banks limit their loan-to-value to 50 per cent or lower. Areas, which have historically attracted Brits (the Dordogne and much of mainland Spain), have been disproportionately hit. In Europe, many banks have established dedicated divisions for UK and international buyers as this is a lucrative part of their business and there are no signs that this will change as a result of Brexit.
The fall in sterling against the euro, as well as the European Mortgage Credit Directive of last year, have resulted in stress testing being introduced by banks to ensure potential borrowers don’t get into difficulty if there is a significant currency move. It is all about affordability, with the onus on banks to justify any lending decision they make on income after tax.
In terms of rates, Spain and Portugal are sharpening their pricing. France has always had a competitive second home mortgage market with historically low interest rates reflecting this although signs are that long-term fixed rates will finally rise this year.
Within France it is evident the type of buyer has changed: the Alps, St Tropez and Provence have fared better than the Cote d’Azur where there were areas that held huge appeal for Russian buyers. While convenience such as ski-in ski-out in the Alps is still desirable many buyers are looking for a year-round holiday destination so chalets and apartments in more attractive village destinations are set to be popular this year.