The great British return: UK citizens choose Eurozone property once again
Last year marked the return of British buyers to Eurozone property and positive market conditions are leaning in their favour when it comes to the weakened currency union. While local incomes are growing and the pound sterling is strong, European mortgage rates are at an
British activity on the continental European real estate markets has grown over the last eighteen months and UK citizens are returning to their old haunts. The number of property sales to British in Spain and France grew 27% and 33% in 2014 respectively, and the trend persists this year. British made 35% more purchases in Spain during the first quarter of 2015 in comparison to the same period in 2014. A poll conducted by Gocompare.com at the end of last year shows that 20% of British planning to purchase property for the first time want to do so abroad.
Pound sterling strength
British buying power abroad is increasing. The pound sterling gained 10% against the euro in 2014 and real estate prices in the Eurozone are going down. Economic stagnation and the Greek debt crisis have been fuelling Eurozone weakness and punishing local buyers but it has indeed been a boon for Great Britain. Unsurprisingly Spain is once again leading the charge: sales of houses and apartments rose proportionately to the falling euro, from 1,542 in Q4 2013 to more than 2,000 in Q4 2014.
The share of UK citizens among foreign buyers property for sale in Spain has also grown from 14% to 18% between Q1 2014 and Q1 2015 while the share of other major property buyers, particularly from France, Germany, Italy, Belgium and Russia, has fallen amid incertitude in the single currency zone.
Google searches have also been reflecting growing interest in continental real estate. During the first three months of 2015, Eurozone property searches originating in the UK grew by 37% compared to last year. In contrast, searches for US property, third favourite of the British, only gained 4% during that period.
Cheaper Mediterranean property
Real estate prices in many European countries, particularly along the Mediterranean (e.g., Greece, Spain, Italy and Cyprus) have come down and some property markets have shed 20% to 40% of their
It is particularly profitable to purchase real estate in Eurozone countries, a fact that British buyers understand very well. Renewed growth of prices in Spain, Cyprus and Portugal
British income growth
Incomes grew by 4.5% and GDP by 3% in 2014, proof that the British economy is finally recovering from
Historic interest rates
Interest rates in the Eurozone and the UK are at an
Purchasing power parity
All the above has made the Eurozone attractive. Put simply, the pound sterling gives British value for money when it comes to real estate in the Eurozone compared to last year.
Let’s assume that, in 2014, a UK household with an annual income of £60,000 wanted to purchase a 100 sq m property in France for £500,000 (EUR conversion) with
|Price per square
|Property price, GBP||500,000||441,776||−12.0|
|Mortgage rate, %||3.0||2.3||−23.0|
|Payed interest, GBP||45,000||34,500||−23.0|
|* Share of the property purchase expenses in the annual income of the buyer|
Political instability abroad
Political factors have also contributed to the growing demand for European real estate. The spread of fundamentalism, terrorism and attacks specifically targeting tourists has hurt recent holiday destinations like Egypt, Turkey and Tunisia. The number of British visitors to Egypt has plummeted 56% compared to 2010, and 22.5% for Turkey.
On the other hand, Britain’s classic favourites along the European Mediterranean have regained popularity. For example, UK tourism to Italy and Malta grew by 31% and 22% respectively in 2014, compared to 2010. So as the tide turns
What to expect
It seems likely that the most favourable exchange rate of the pound sterling to the euro may be behind us, but real estate in the Eurozone will remain a good buy for UK citizens for the foreseeable future. The most positive forecasts say property prices will stagnate in the Mediterranean Eurozone, that is, if they don’t fall more. At the same time, Euribor interest rates should continue to decline until at least 2017 while UK GDP is expected to grow at least until 2020 contributing to higher income for its residents. What will happen after that will largely depend on how and if the Eurozone can get the economy and currency back on track, not to mention the eventual conclusion of the Grexit saga. In the meantime, it’s a safe bet that British buying in the Eurozone will continue as long as their economic growth does.
Yulia Kozhevnikova, Tranio
Darya Berezina, Tranio