FEBRUARY 2011 |
www.opp.org.uk WORDS | Kevin Macadam
BUSINESS
BUSINESS Mortgage column | 43 Pick your market
The distressed property markets might appear, on the surface, to offer the discerning buyer some really good overseas property bargains. But do they? OPP mortgage expert Kevin Macadam is not so sure. He prefers a bit of calm and stability, and he talks us through his much more discerning choices. The question is, where are they?
top destinations for overseas property buyers and investors … and once again there are no surprises in their top ten lists. When an investor invests, they typically look for either income, capital growth or a mixture of the two. A younger buyer probably doesn’t need the income so is more likely to be excited about capital growth. Someone approaching their late 50’s wants a balance of growth and income and somebody that is retired is likely to be looking for income from their investment. The most successful property investors have built their portfolios by using a mixture of their own deposits and bank lending to make their money spread further. This means that their input
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into the property purchase is less burdensome and they have less money tied up in the property. Also there are other added
o the usual property gurus have given their tips on what they think will be this year’s
benefits of taking a mortgage on the property and approaching things in a business-like way. Usually, the monthly mortgage interest is a tax-deductible cost and if the bank is prepared to lend on the property then that is also a good sign that the title of the property is good and that there should be no nasty surprises for the buyer further down the line. The bank will want to ensure that every i is dotted when it comes to their loan security and having them involved in the purchasing process should give the buyer added comfort. Dominating the top ten lists as usual are Spain, USA, Italy, Portugal and France. However, my personal thoughts are that if I was investing now I would be steering clear of the USA and Spain at the moment as I currently can’t see when their property markets are going to begin to recover. I know there is an argument that when the market is low it is a great time to invest. I would agree, up to a point,
if you are buying for personal use and you are not looking to making a quick return on your money. However, if you are considering purchasing as an investment, the length of time before you will begin to see a return is likely to be too long. At the moment I can’t foresee a time when I think the USA and Spanish markets will truly recover.
“Successful property investors have built their portfolios by using a mixture of their own deposits and bank lending”
Right now, it still feels a long way away. And, in the US market, the banks still seem to be punishing the overseas investor by putting diffi cult loan criteria in place when it was not the overseas buyer that created the problem in the fi rst place. This is why I see this market taking longer to recover. And, as the US banks like to sell their loans on by securitisation there is no appetite for these loans – the buyers of these loans don’t seem to appreciate that overseas buyers provide less risk as they usually put down a larger deposit. In Spain, the sheer oversupply of cheap properties on the market just doesn’t make sense for the investor who is looking for capital growth or income. As they have in the American market, the banks have repossessed developments and properties and are now selling these properties back through their own real estate arms in an attempt to move the stock off their books. It is a different story with
France | should prove to be a good bet for your clients as things improve
France, Portugal and Italy, as these destinations have always tended to be more of a lifestyle choice than the preserve of investment buyers.
Kevin Macadam is managing director of Overseas Mortgage Broker, which specialises in helping international property agents and developers provide their clients with funding solutions around the world. For more information go to
www.overseasmortgagebroker.co.uk
And because of their popularity as a place where people aspire to live they have weathered the property storm better and property prices have not been hit as hard and have been quicker to recover. One of the main reasons for the
robustness of these three countries is that the banks there continued to lend. In all three of these countries, despite harsh economic conditions, it has been business as usual from their banks. There has been a slight tweaking
of loan to values but, in the main, the lenders have kept to their agendas and weathered the storm. Interest rates across all three countries are around the 2.85% mark and with loan to values of at least 75% available they remain an attractive proposition for investors and lifestyle buyers alike. So, my best tip for your property clients is pick a market where, despite the worldwide depressed economy, prices have remained fairly stable ... pick a market that has finance freely available so that you do not need to tie up too much of your own money in the property. In short, tell clients to consider
using a mortgage to purchase the property even if they weren’t considering the option ... and they will get the peace of mind that the banks checks will offer.
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