The global downturn has impacted on the foreign holiday home market, but some areas have been hit harder than others. The ball is in the buyer’s court. Fiona Tankard shows you where to look for the best deals

An estimated 1.2 million Britons already own a property overseas and fed up with the low rates they are getting on their savings and inspired by reports of tumbling prices, many more are hoping to bag themselves a bargain in the sun.

 

“People are looking for a long-term investment, which they can use for a holiday home where they can escape with their friends and extended families. They are predominantly closer to retirement age or retired and are increasingly reluctant to wait until the market stabilises in order to enjoy a lifestyle that they have worked hard towards,” says Georgina Richards, associate of Knight Frank International Residential. She adds that the reduction in prices over the last six months mean now is a good time to buy.

This is borne out by Ann Wright, international development manager at Primelocation International. “In a recent visitor survey, we found that 70 per cent of respondents were still actively looking to buy an overseas property, despite the current economic uncertainty,” she says. “If you are looking for a second home, then now is a good time to buy. Property is still a good investment, as long as you take a long term perspective – there are no ‘quick profits’ to be made in the current market.”

What should you look for?
Don’t forget about the word ‘holiday’ when thinking about your holiday home. It’s a place to relax and have fun, not spend hours cleaning, renovating, painting or weeding the huge garden that seemed a good idea at the time. You may only have a long weekend there and so the ideal property will be one you can enjoy immediately. All you should need to do is open the shutters, fill up the fridge and turn down the beds.

This means you are looking at somewhere already restored, a new build or a place with minimal work needed. The current market reflects this and is something to bear in mind when you are thinking about future resale value. Georgina Richards says: “People tend to be looking for completed, fully renovated properties or properties that require minimal work, avoiding projects which may incur hidden costs; instead leaning towards properties that are ready to use immediately.”

You may be able to recoup some money by letting your property out when you’re not there. Although Tuscan villas may appeal, think about city pieds-a-terre in popular tourist locations. Forget New York or Paris and go for a city apartment in Munich or Berlin – insiders tip these cities as smart, safe investment choices at the moment.

Checklist for choosing a second home location:

• Prior knowledge of area/happy memories
• Suitable for year-round visits
• Easy maintenance
• Low annual outgoings
• Possibilities for renting out/long term investment return
• Easy access to airport/station/motorway/ferry from UK
• Good finance options
• Reasonable journey time from your UK home
• Price
• Good accessible local facilities
• Year-round entertainment, culture, sports for all the family
• Weather
• Low risk of flooding, earthquake, fire

Where to pitch up?
Traditionally Spain, the USA and France have been the UK’s top three favourites for second home purchase, but over the last few years ever more exotic and unfamiliar destinations have been emerging. Is it best to opt for the tried and tested or go for that unknown potential goldmine?

In the present climate, smart thinking says it makes sense to stick with what you know. Knight Frank are still seeing a high level of interest in their core markets “namely South/South West France, Italy, the Algarve and Mallorca, as well as the Caribbean,” says Georgina Richards, adding that people are focusing on places where “prices have continuously remained stable, accessibility is good, infrastructure is solid and security is not a concern.”

Chris Deverson from the UK foreign exchange specialist Moneycorp confirms this. “We are seeing fewer enquiries from ‘niche’ property markets such as Bulgaria, the United Arab Emirates, Cyprus and Turkey,” he says.

Top tips
1 Consider taking a mortgage out in local currency, but for security choose a multi-national bank.
2 Choose countries whose property markets have been relatively unaffected by the global recession and where tourism is still strong, such as Germany, France and Italy.
3 France has been operating a leaseback scheme (Residence de Tourisme) for 20 years. This means you buy the freehold of a designated property then lease it back to the management company for a certain term. You are normally guaranteed rental income and can retain limited use of the property.
4 Choose holiday properties with additional perks. Landscape Properties Group, for example, sells Masseria villas with five acres of land in Puglia and Basilicata in Italy and guarantees new owners free organic food, wine and olive oil for the duration of ownership.
5 Price Waterhouse Coopers report Emerging Trends in Real Estate Europe, 2009 has four German cities – Munich, Hamburg, Frankfurt and Berlin – in its top ten. Germany is seen as a stable long-term investment by the industry’s top pundits.
6 Consider buying with friends or family. As long as you draw up a contract (in case one party wants to sell and the other doesn’t, for example) this could make your holiday home more affordable.
7 Always get your own independent lawyer to check things over and make sure any legal documents are translated professionally.
8 Want to take a punt? Insiders say Brazil, India, Croatia and Montenegro are experiencing steady growth. Prices are low too.

The good news is that it is still possible to pick up a bargain in the popular areas. Deverson points out that prices in some parts of Spain have fallen by as much as 40 per cent over the last two years. “Although we have also seen sterling depreciate by 20 per cent over the same period, this still represents a very attractive buying opportunity for those ‘cash-rich’ overseas investors,” he says.

Prime Location’s Wright agrees. “Much of Europe has experienced recent price falls and if buyers do their research and take their time, there are lots of bargains to be found. Coastal locations continue to prove popular and we have found searches for homes in Portugal and Italy have also increased, up 15 per cent and 13 per cent respectively since last year.”

Case study
Klosters, Switzerland
Umbria, Italy
Lynn and Rowan Downing own two holiday homes, one in Klosters, Switzerland and the other in Umbria, Italy. Each had their own second home before getting married and they were determined to keep them both on. They try to visit each for several weeks a year, more if possible. Lawyer Rowan says “I was watching colleagues saving for their retirement and then dying from stress before they could enjoy themselves. I decided that my pension plan would be the house in Klosters. We love skiing, we can get rental income from it when we’re not here and it is wonderful to feel part of a different and very welcoming community. My work is quite cerebral and so it is extremely relaxing for me to do something physical when on holiday, like chop some logs or go skiing.”
Lynn’s motives are different. “When I was single I bought the house in Italy as I love the country and always imagined myself living there permanently. I wanted to try out the lifestyle and get established before moving there. I have got to know the locals, learnt the language and discovered the area. I also rent it out when we aren’t here and it brings in a small, but useful amount of money for us, which covers the bills.”
Although both their properties have increased in value since they bought them, neither of them bought them for pure investment. “It’s nice to know I could always sell if I needed to,” says Rowan. “But to me the Swiss house is my escape, my sanity.” Lynn agrees, adding: “My Italian house is a vital part of my life. I love going there. There’s always so much to do and to explore.”

Of course, one key consideration when buying a house in another country, apart from price, is the time it takes you to get there. France and Spain aren’t two of the most popular choices for nothing – they are relatively close by. Talking of which, a ferry or train may be the best option, you don’t always have to fly. But if you do, then beware of setting your cap at a cheap house on a ‘new’ budget flight route as these can disappear overnight. Wright comments: “Locations which are well serviced by a number of different airlines typically offer a safer investment.”

A second home abroad, however, is more than just an investment – you will be spending a lot of time there. It will become a home from home. So opt for somewhere that resonates with happy memories and the chance to generate many more. 

Contacts
www.knightfrank.co.uk
www.moneycorp.com
www.primelocation.com
http://france.assetz.co.uk
www.dreamhomesinpuglia.com
www.proventureproperty.com