Are More UK Investors Going to Buy Property Abroad?

 

buying-property-abroad

There are currently a number of reasons to suspect that the UK’s property investors may be about to increase their interest in overseas markets. Not least of these is the continuous roll-out, over the next few years, of tax changes designed to target investors in the UK market.

The Council of Mortgage Lenders (CML) expects that by 2017, the number of UK homes purchased as buy-to-let investments will be down by more than 20% compared to 2015. However, most of the investors who are no longer buying UK properties will likely be looking for alternatives rather than giving up on new investments altogether. Continuing to invest in buy-to-let but doing so in overseas markets that are sheltered from the UK’s current anti-lettings climate could prove an attractive solution.

In particular, many markets in Europe are just at the start of recovery from recession. For investors, this means the chance to pick up properties at bargain low prices just when forecasters are reasonably confident that values are going to rise again. A global low interest rate climate also means that investors have access to some attractive mortgage deals in many property investment destinations, especially those that have been hit by recession and are just at the start of recovery.

However, not all factors are in favour of overseas investment at the moment. For example, while mortgage deals both in the UK and abroad are offering quite attractive rates at the moment, the value of this for UK buyers of properties in many European markets is about to be hit by the Mortgage Credit Directive. This affects mortgages granted in one currency to a borrower who lives in an area where a different currency is normally used. Under the new rules, borrowers will have to make customers aware of the impact that fluctuations in exchange rates could have, notify them of any 20% adverse rate movement, and provide additional protections against the risk that fluctuations in exchange rates could pose.

This may not be the only negative impact that exchange rates have on the prospect of an international property investment. For a little while now, one of the key factors helping to stimulate overseas property investment by UK residents has been the relatively strong position of the pound. Most particularly, a strong value against the Euro has stimulated investment in many European markets, including those such as Spain which has always been a favourite of UK buyers. However, now the pound has entered something of a slump against the euro and other key currencies such as the US dollar. As such, British buyers are not seeing their funds convert so favourably into overseas currencies as they were a few months ago.

Ultimately it remains to be seen what alternative investors will find to UK property investment. However, even with these drawbacks there is a lot of potential for overseas markets to provide investors with an effective way to avoid the upcoming tax changes.

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