British buyers are increasingly motivated by lifestyle over investment property and are relying more on mortgages to fund their purchases, according to a new report from Savills Research in association with Holiday-rentals.co.uk
The ‘Second Homes Abroad 2008’ report found that the total value of UK foreign owned property now stands at £58billion, an increase of £5.2billion y-o-y and that there are currently 425,000 properties owned by UK citizens overseas, an increase of 35,000 properties in the last 12 months.
To find the information, the firms analysed a series of government reports, and Savills/Holiday-rentals.co.uk data from over 1,500 interviews conducted earlier this year.
In its profile of the UK overseas buyer, it found that Spain and France still dominate the list of preferred destinations, although purchase activity had fallen from its peak level during 2004 – 2006. Some 34% of UK foreign owned property is now held in Spain, followed by France (23%), non-European (16%), other European (16%), USA (6%), Portugal (3%) and Italy (2%).
Some 50% of overseas second home owners said that owning a holiday home was the primary motivation for purchase, followed by almost even numbers of retirement (18%), fly to let/investment (17%) and capital growth/resale (16%) investors. Purchasing in an ‘ideal holiday location’ was listed by 80% as being a highly important factor in choosing where to buy, with over 60% either neutral or listing ‘not important’ the future resale potential of the property.
Financing the purchase
The report found that since 2000, the number of UK overseas second home owners personally financing their acquisition had fallen from 80% to just 20% last year. It put this rise in use of finance down to the increasing political and economic stability in the countries of purchase, the liberalisation of the mortgage markets in the respective countries and the ability to finance purchases from the high-levels of equity built up in their main UK residence.
Obtaining a mortgage from a US-based bank was the easiest option for those respondents needing finance in their country of purchase, followed by Spain and Cyprus. Just over 15% of purchases in Italy were used by obtaining finance in the country, which, according to Savills, is due to the relatively immature mortgage market in the country.
Getting there outweighs green concerns
Contrary to popular opinion, the overwhelming majority of respondents to the survey (67%) said that the introduction of green taxes and concern for the environment would not stop them purchasing and visiting an overseas property in the future. Only 25% of respondents said that they would look to ‘travel to their property less frequently’ over environmental concerns, with just 6% stating that they would be prepared to sell their overseas home and 2% would consider a purchase closer to the UK.
The report found that of UK buyers that travel over six hours to get to their second property in destinations such as Dubai and the Caribbean, all have salaries in excess of £100,000 per annum.
Despite this trend, the Savills/Holiday-rentals research suggests that with a decline in UK house prices and the global credit crunch underway, it does not expect to see a significant increase in the volume of holiday home investment by 2010. However, more positively, the research found that demand is still there, with markets such as Cyprus, Greece and Turkey, all shaping up as future contenders for the Spanish and French crowns.
Courtesy of www.opp.org.uk
