Eurotoxicity, exchange rate highs, tax breaks
It doesn’t need me to tell you that the Overseas property market has fundamentally changed over the last few years. In the heady days of peak buying during the likes of 2007, UK buyers thought nothing of raising equity on their homes to buy a holiday home in Spain or elsewhere. Not only did buyers do it with near abandon, but they were able to because lenders facilitated this.
There have been 100% mortgage deals in the likes of Spain for bank-repossessed property, but buyers are thinking twice about being able to buy at such high lending multiples and questioning its affordability. In the long run, servicing such a debt burden on a property, can make on-going yields look less than favourable.
Overseas Property – European Highs of 2012
The tax breaks granted by the government in Spain, VAT on new builds halved to 4% during 2012, has helped generate interest and got people to re-enter the market. Even though the numbers of purchases don’t seem to have gone up significantly, it has acted as a catalyst to get people back into the market.
The UEFA Football Championships, co-hosted by Poland and Ukraine, stimulated interest in Poland and raised its profile on the European property stage. Incentives were offered to get manual workers back from the UK to Poland, to upgrade the sports stadia and infrastructure, ahead of the football championships taking place in June 2012. People took note of this powerhouse of a country emerging in Europe. Ponder this fact, Germany is considered the powerful economy of Europe, yet the European Commission expects that Poland, Europe’s 6th largest economy, will have grown quicker than Germany in 2012, +2.5% versus Germany’s 0.6%
For UK-based overseas property buyers, exchange rate highs of 1.29 Euros to Sterling have helped make European property that much more affordable and prompted window-shopping at least. Euro mortgages have been 40% cheaper in 2012 vs 2008 when Euribor (the European mortgage benchmark interest rate) topped 5%. This coupled with exchange rates has provided many buyers with a win: win property scenario.
Overseas Property-European Property Lows of 2012
During 2102, “Eurotoxicity” helped overseas property buyers realise the sobering reality of the link between sovereign debt and the safety of that nation, as a location for buying an investment property or a holiday home. A country’s ability to honour its debt and function as a nation suddenly became an important criteria in selecting where to buy an overseas property. We have also seen civil unrest in Greece, Spain, Italy and Portugal protesting against austerity measures. This European version of the Arab Spring, has ensured many overseas property buyers have delayed their buying decisions, until the future becomes more certain and 2013 unfolds…
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Property Venture® is an award-winning, UK-based agency for overseas property who helps people buy investment property and holiday homes in Europe, more easily and safely than they can on their own, because we offer grounded common-sense advice.
The focus is mainly greater Europe: Poland property, UK investments, Spain property, Turkey property, Cyprus property
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Tags: Euro, European property, Exchange rate, investment property, Poland, Spain