UK property market report (Summer 2010)

ANALYSIS OF THE UK MARKET FOR OVERSEAS PROPERTY (SUMMER 2010)

Since the election and creation of the Conservative and Liberal coalition government in May, there has been greater confidence in the UK tackling its budget deficit. This combined with concerns over the stability of the euro, which has been undermined by the massive debts of Portugal, Spain and Greece, has resulted in the pound reaching a value of €1.21.  Since January last year, when sterling was at its lowest against the euro, it has increased in value by 20 per cent. Undoubtedly, this will be good news for UK buyers who are considering buying property in the euro zone.

The relatively cheap prices, compared to the peak, are beginning to stimulate interest with UK buyers. The number of Brits searching online for overseas property doubled in March 2010 compared to the previous year, according to portal Primelocation International.

UK property prices continue to rise. Prices increased by 0.5 a per cent in May, taking the average price of a UK home up to £169,162 which was £15,000 more than a year ago, according to the Nationwide, one of the UK’s largest mortgage lenders. Year-on-year prices rose by 9.8 per cent. However, transaction volumes remained low.

But against this positive housing market news, the future outlook is uncertain with a number of dark clouds on the horizon. The government is in the process of making drastic cuts to public spending, which may depress the market again.
Capital gains tax will be increased to 28 per cent for higher earners in April next year, which may deter UK property investors and second home buyers but increase their interest in the purchase of overseas property.

About 430,000 foreign holiday homes are owned by Britons, according to a joint Savills and HomeAway.co.uk survey published earlier this year. Of these properties, around half are near the coast, a third are rural and only seven per cent are in inland urban locations. About 80 per cent are within 60 miles of an airport, 85 per cent of which were serviced by low-cost airlines. British buyers look for a three or four bedroom property in quiet coastal locations. Lifestyle rather than investment are the main reason for owning an overseas home. UK purchasers have also turned away from the exotic and have focused their attention on more traditional destinations such as Spain, Italy, France, Portugal and the US. The historically low prices during 2009 in these areas tempted mainly discretionary cash purchasers to buy.

More lifestyle purchasers are likely to join them, particularly within the euro zone. This is because of a stronger pound and bargain property prices in popular holiday destinations, such as Spain and Portugal, which are likely to see further price falls, as governments impose tough austerity measures to bring down massive budget deficits.

Relatively low-prices in other close by destinations in emerging markets, such as Romania, Morocco and Montenegro, may also begin to attract buyers for quality property. Florida, with historically low prices, may also begin to attract buyers, but Gulf of Mexico facing properties may suffer a slight drop off in interest due to concerns about the possible effects of the Deep Water Horizon oil spill.

References: Sterling prices, Savills and HomeAway.co.uk report Daily Telegraph article, Global residential review 2010, Savills, and Nationwide May property prices report.

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