The Bigger Issue


Sun, sea and sand Where is there value to be had in overseas property and what potential pitfalls shou


In these challenging economic times investors appear to be shunning the emerging property markets where we saw a flurry of activity just a few years ago and putting their trust in the more established destinations - especially those with history of providing good rental returns and where security lies for a longer term investment. Based on the enquiries we’ve received in 2011, France


remains the top location, accounting for just under half (45%) of quotes issued. Second is Spain with 28%, and Turkey is third with 11%. Australia, Portugal, and the USA are also popular. Purchasing an overseas property is an exciting prospect, but


the biggest mistake an investor can make is failing to seek the right advice at the outset. Many still assume that buying abroad will be similar to buying


in the UK, including the whole mortgage process. But while the front end loan administration may be similar, this is only the start of what can be a lengthy and complicated process if not managed properly. Each country presents a myriad of eligibility criteria, regulations, administration requirements and language barriers. I’m not trying to put people off – with overseas mortgage


rates at an all time low and some great property bargains to be snapped up, there may never be a better time to buy. But it’s crucial that the right advice is sought and that clients are guided through the whole process with care. Investors should go through the same process that they


would follow if they were buying a property in the UK. They should always enlist the help of an English-speaking lawyer who is not connected to their seller, estate agent or property developer. They should also ensure that an independent valuation of the property is carried out, which will highlight any issues such as subsidence, wiring defects or possible boundary disputes. One of the biggest advantages of taking out an overseas


mortgage is that the lender will do its own checks on the property, ensuring it’s registered in the buyer’s name, that a proper legal title exists, and that a valuation takes place.


Clare Nessling, operations director, Conti


Dominating the usual top ten overseas property hotspots are Spain, USA, Italy, Portugal and France. The US banks seem to be punishing the overseas investor by


putting difficult loan criteria in place so I see this market taking longer to recover. In Spain, the sheer oversupply of cheap properties on the market doesn’t make sense for the investor looking for capital growth or income. The USA and Spain will provide little capital growth for the


foreseeable future however the States is a good choice if you are an investor looking for income as some properties are yielding 14%.


I would only buy in Spain if it was for personal use. It is a different story with France, Portugal and Italy, as these


destinations have always tended to be more of a lifestyle choice than for solely investment purposes. 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 these three’s robustness is the


banks in those countries continued inclination 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 tips for the overseas property buyer are to pick a


market where, despite the worldwide depressed economy, the property prices have remained fairly stable. And pick a market that has finance freely available, so that you do not need to tie up as much of your own money in the property. And finally consider using a mortgage to purchase


the property even if you weren’t considering using one so that you can have the peace of mind the bank checks will offer.


Kevin Macadam, senior broker, Overseas Mortgage Broker


Our experts have had their say, now it’s your turn to have yours. Visit www.mortgageintroducer.com and vote for the expert you think makes most 30 mortgage introducer JULY 2011


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