Home » Why Is Demand For European Property Climbing Among British Investors?

Why Is Demand For European Property Climbing Among British Investors?

In a recent report, TheMoveChannel.com says British buyers are still in love with buying European property and that demand is growing, led by a boom in buying property in Spain.

Indeed, Spain moved into the number one spot for enquiries on the website only to be knocked off when the US took back its number one position in July 2016.While international investors are looking to buy US property thanks to the euro and the pound weakening against the US dollar, British buyers are also interested in America.

Enquiries about US property accounted for 8% of enquiries on the website.

US property market is enjoying strong capital appreciation

The MoveChannel’s director, Dan Johnson, said: “The US property market is enjoying strong capital appreciation helped with low mortgage rates, limited supply and steady employment growth.

“However, the relatively weak euro is a highly attractive prospect for international buyers looking at real estate in Europe.”

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Buyers are being enticed by rising property values in Spain and Portugal while France offers buyers low mortgage rates.

In addition, Mr. Jackson says the ‘timeless lifestyle appeal ‘ of Italian property is still proving to be a big draw for investors.

One of the big surprises in the survey of property buying intentions is that Greece is growing in popularity despite its economic turmoil, while Germany’s growing economy is also attracting buyers.

Seven out of the top 10 destinations are in Europe

Mr. Jackson added: “With seven out of the top 10 destinations being in Europe proves that the continent is losing none of its clout.”
The website’s top 10 sees the top spot being taken by the USA with 8% of enquiries, followed by Spain on 6.5%, then it’s the Philippines, Germany and the UAE. The top 10 is completed by Portugal, Italy, France, Greece and Ireland.

Mr. Jackson said Spain is becoming popular once again because its economy has been improving since the third quarter of 2015 and property prices have bottomed out in most of the country’s key areas.

He added: “With the pound weakening after the Brexit vote, the euro has also weakened which means that property is good value for UK buyers and they are boosted by low mortgage rates.

“In fact, the Spanish property buying activity in June 2016 was the highest since July 2013 and accounted for 30% of the website’s activity. The country is attractive for EU and non-EU buyers alike.”

Attractiveness of Spain for real estate investment

The attractiveness of Spain for real estate investment has been underlined by a report from accountancy firm Ernst & Young.
In its report, the firm says that Spain has climbed seven places this year to enter its top 10 for the world’s best countries for real estate investment over the coming months.

While Spain is in ninth position, it’s above many popular destinations including Italy and France.

The top 10 property investment hotspots highlighted in the Ernst & Young report places the US in first place followed by the UK, India, China and Canada. They are followed by the UAE, Germany, Sweden and then Spain.
When the accountancy firm analysed data to pinpoint the best cities for investment, British property buyers should be looking at Berlin, Hamburg, Dublin and then Madrid. Barcelona is also ranked in 12th position.

Spain's popularity for property

Spain’s popularity for property investment has also been proven in figures released by the National Statistics Institute (INE) which says that sales of residential property rocketed by nearly 24% in May this year to reach the highest number of sales since January 2013.

Buyers are heading to Spain’s coastal areas with Andalucía leading the pack when it comes to sales, followed by Catalonia, Madrid and Valencia.

It shouldn’t come as a surprise that demand is also pushing up prices and Spanish appraisal firm Tinsa says that property prices rose by 1.5% in June with Barcelona, Madrid and Valencia seeing a 3.6% rise.

In the Canaries and Balearics, prices rose by 8.7% and most large cities saw prices increase by 3%.

The company also notes that the Brexit vote has not impacted on the number of Brits wanting to buy property in Spain.

Growing confidence in the future of Spain's real estate sector

The sales director for Taylor Wimpey Espana, Marc Pritchard, says there is growing confidence in the future of Spain’s real estate sector.

He said: “Momentum is building within Spain in its property sector and this season is looking to be the best for many years, if not the best ever, for Spain.”

An academic at the University of Barcelona is also predicting that now is the ‘best time’ to buy a Spanish home.

Gonzalo Bernardos, who is the University’s professor of real estate, is predicting five ‘marvellous’ years for Spain’s real estate market with property prices rising by 12% on average around the country. He also forecasted that they will rise by 18% in Barcelona.

He said that Spain’s low interest rates are also helping to make property there very attractive, particularly for foreign investors.
Foreign investors will be leading home buying activity

Indeed, he says that while domestic buyers are returning in larger numbers to the Spanish property market, foreign investors will be leading home buying activity until 2018 and may push up prices by around 25% in popular locations.

British property buyers account for a large proportion of the MoveChannel users and after the Brexit vote to leave the European Union it appears that some ‘Remain’ voters are looking to another EU country to live in and enjoy the benefits they see in the EU.

Mr. Jackson said “It’s too early to see the impact of the UK vote to leave the European Union but the rise in the popularity of Spain for buying was in the same month as the vote.

“Our research shows that British buyers are not out of love with Europe and with enquiries for real estate in Cyprus rising 20% and enquiries for property in Ireland entering our top 10 for the first time means this may be the result of many Remain voters who are looking for a move to somewhere in the EU.

“Spain is not just a European lifestyle favourite, however, it’s also a sought-after opportunity for investors and the country’s economy is steadily improving.”

British investors are looking towards Spanish property

Another reason why British investors are looking towards Spanish property is that prices there are still 30% lower than they were before prices crashed in 2007. For many people, buying property in Spain represents an attractive prospect.

This has been echoed by estate agents working along the Costa Del Sol and Costa Brava who say that demand for property there has been growing since 2013 – despite the fall in the value of the pound and uncertainties over Spain’s economic prospects.

In addition, estate agents in Marbella are saying they are not experiencing a shortage of buyers from around the European Union so if the value of the pound falls still further, there will still be interested buyers for Spanish property.

Figures also reveal that in the first quarter of 2016, 3% of all property purchases made in Spain were by Brits.

However, growing numbers are also registering their interest with Spanish estate agents, with many of them reporting that there are lots of people disillusioned with the referendum result and are considering moving to Spain.

Others simply want to buy a second in the sunshine with most enquiries being made to estate agents in Barcelona, Madrid and Valencia.

France is proving to be a popular location for real estate

One reason that France is proving to be a popular location for real estate, according to property experts, is that mortgage rates there have been declining for non-residents which has boosted investment values.

However, British property investors are not just looking at Europe and America for buying opportunities. According to the Dubai Land Department, Brits now make up the third biggest group of investors for property in the city.

The MoveChannel says that Dubai is a regular presence in its rankings for 2016 and its position is being boosted by improved transparency in the property buying market.

Another surprising star for British buyers is the Philippines with lots of strong property opportunities for post-Brexit investors.

Unexpected downside for many when buying property in Europe

However, one survey has revealed what will be an unexpected downside for many people when buying property in Europe and that’s the fact the continent is home to the world’s highest property taxes.

The research was conducted by accounting network UHY which wanted to know how much a property buyer would need to pay in tax in 26 property markets around the world on a home worth $1 million.

The shock finding is that the average European tax is nearly 4% of the property’s purchase price, while the global average is around 3.3%.

Buying property in the UK places the country in the 11th place in the table, where property purchase tax accounts for 3.5% of the home’s value.

For buyers looking at properties in Belgium, they will find it the most expensive country in Europe for them to buy a home with tax accounting for a hefty 11.3% of the property’s value.

Other European countries in the top 10 include Spain, Germany, France, Croatia and Malta.

Why aren't British buyers being put off from property purchases?

But when it comes to buying property in Europe, why aren’t British buyers being put off from property purchases with the declining value of the pound?

Many people would think that with a falling pound making property more expensive in the Eurozone, there would be fewer Brits buying. But research proves this is not happening.

One firm that looked into this conundrum is international property investment firm Athena Advisers, who found that 2015 proved to be excellent for British buyers purchasing property because of the strength of the pound made homes cheaper in Europe.

However, in recent months the value of the pound has plummeted, which means buying property has become much more expensive but the firm’s analysis says there are contributing factors that reduce the effect on the pound’s fall.

A spokesman for Athena Advisors said: “In France, for instance, there is the decreasing mortgage rates that are available to non-residents which enables buyers to retain their investment value.”

Indeed, their figures show that while deposits have become 20% dearer for British buyers since July last year because of exchange fluctuations, the falling French mortgage rates means the interest payable has been reduced by 22% over a 20-year mortgage term.

The spokesman added: “While property deposits are upfront, mortgage interest and cash costs are repaid over the loan’s duration which nullifies the pound’s falling value and helps British buyers to retain some of their buying power.”

In addition, the firm says that British people buying second homes with euros have room for negotiation with sellers.

This is also supported by one French finance firm which says that British buyers find the appeal of fixing a mortgage rate for 20 years at 2.15%, or less, as a strong incentive for buying a home there.

Looking ahead, economic experts are also predicting that while the pound may fall still further in value in relation to the euro, the Bank of England has already stated it will lower interest rates and deliver substantial monetary easing which will make financing costs lower and boost Eurozone property buyers still further.

So, when it comes to the question of why demand for buying property in Europe is rising for British buyers, it’s not all about enjoying an opportunity to invest. For a substantial number of people, it’s the chance to enjoy living in the European Union after the United Kingdom leaves.

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