Top Destinations for Overseas Property Buyers and Investors?

So the usual property gurus have given their tips on what they think will be the top destinations for overseas property buyers and investors and once again there are no surprises in their top ten lists.

When an investor invests typically they look for either income, capital growth or a mixture of the two.  A younger buyer probably doesn’t need the income so is more likely to be excited about capital growth.  Someone approaching their late 50’s wants a balance of growth and income and somebody that is retired is likely to be looking for income from their investment.  The most successful property investors have built their portfolios by using a mixture of their deposits and bank lending to make their money spread further.

This means that their input into the property purchase is less and they have less money tied up in the property.  Also there are other added benefits of taking a mortgage on the property.  Usually the monthly mortgage interest is a tax deductible cost and if the bank is prepared to lend on the property then that is also a good sign that the title of the property is good and there should be no nasty surprises for the buyer further down the line.  The bank will want to ensure that every I is dotted when it comes to their loan security and having them involved in the purchasing process should give the buyer added comfort.

Dominating the top ten lists as usual are Spain, USA, Italy, Portugal and France.  However my personal thoughts are that if I was investing now I would be steering clear of the USA and Spain at the moment as I currently can’t see when their property markets are going to begin to recover.  I know there is an argument that when the market  is low it is a great time to invest.  I would agree to a point of you are buying for personal use and you are not looking to making a quick return on your money.  However if you are considering purchasing as an investment, the length of time before you will begin to see a return is likely to be too long.  At the moment I can’t foresee a time when I think the USA and Spanish markets will recover.

With the USA market, the banks seem to be punishing the overseas investor by putting difficult loan criteria in place when it was never the overseas buyer that created the problem.  This is why I see this market taking longer to recover.  As the US banks like to sell their loans on by securitisation there is no appetite for these loans as the buyers of these loans don’t seem to appreciate that overseas buyers provide less risk as they usually put down a larger deposit.  

In Spain, the sheer oversupply of cheap properties on the market just doesn’t make sense for the investor thats looking for capital growth or income.  Like the USA market, the banks have repossessed developments and properties and are now selling these properties back through their own real estate arms in an attempt to move the stock off their books.

It is a different story with France, Portugal and Italy, as these destinations have always tended to be more of a lifestyle choice than for solely investment purposes.  Because of their popularity as a place where people aspire to live they have weathered the property storm better and property prices have not been hit as hard and have been quicker to recover.  

One of the main reasons for these threes robustness is the banks in those countries continued attitude to lend.  In all three of these countries, despite harsh economic conditions it has been business as usual from their banks.  There has been a slight tweaking of loan to values but in the main the lenders have kept to their agendas and weathered the storm.   Interest rates across all three countries are around the 2.85% mark and with loan to values of at least 75% available they remain an attractive proposition for investors and lifestyle buyers alike.

So my tips for the property buyer are to pick a market where, despite the worldwide depressed economy, the property prices have remained fairly stable.  A market that has finance freely available so that you do not need to tie up as much of your own money in the property.   And finally consider using a mortgage to purchase the property even if you weren’t considering using one so that you can have the peace of mind the banks checks will offer.