Buying and selling property abroad post-coronavirus crisis

Domestic and overseas property markets have been feeling the effects of the coronavirus outbreak since the World Health Organisation (WHO) declared the virus a global pandemic in March 2020.

Several real estate agencies in China, Australia, Europe and the UK have reported sharp declines in enquiries from overseas buyers, or have had no market activity at all due to lockdown restrictions.

Other markets such as Canada and the US are also reeling from the halt in operations, underscoring the impact of the coronavirus pandemic on the global housing sector.

According to Worldometer, COVID-19 has infected over 128 million people and claimed more than 2.8 million lives worldwide since the outbreak first began.

Initially, the UK government had advised people to refrain from selling or buying property abroad and at home due to growing uncertainty in the market. Whilst property market activity both home and abroad has picked up as the global economic outlook improves, there are still many challenges when it comes to buying and selling a property abroad.

Property portal Zoopla had forecast the UK housing market would experience an 80% drop in transactions year-on-year in the individual spring months, and an average fall of 60% across the quarter in 2020.

The second half of 2020 proved to be less severe for the UK property market, largely supported by Chancellor Rishi Sunak’s stamp duty holiday which was announced during July.  Savills reported that transactions in October 2020 were 24% higher year on year and anticipate that demand will remain steady until the end of the stamp duty holiday, which is set to end in June 2021.

However, the UK’s current inability to travel is impacting markets in other countries such as Spain and Australia. According to Spain’s Association of Land Registrars, in 2019, Britons accounted for 14% of foreign market share – the largest group of foreign homebuyers in the country.

The lack of overseas investment due to the coronavirus has caused Spain’s second-housing market to decline significantly. Estate agents expect demand to stagnate or fall further after the coronavirus has passed due to Spain being one of the country’s worst-affected by the virus.

Rising unemployment levels amid the lack of economic activity and business closures are also impacting housing markets.

In Australia, major banks announced mortgage loan repayment deferrals and reduced housing prices to offset the economic downturn and ease financial pressures on those who have lost their income.

However, if property prices decline, this will create negative equity, meaning that homeowners looking to sell property could face making a loss.

Therefore, it seems that homeowners selling property abroad after the coronavirus are likely to suffer more than buyers due to the possibility of reduced housing prices.

If you are interested in selling or buying property abroad after the coronavirus but are growing uncertain, we’ve put together a guide which may assist you with your overseas property purchase, or sale. Just speak with one of our property specialists about the best way to handle property purchases abroad.

Monitor housing prices

Historically low inventory and reduced mortgage rates increase competitiveness in the housing market, and recessions have a minor effect on the property market, but the coronavirus has severely disrupted life and markets.

Every day the landscape for what home buying and selling could look like post-pandemic alters due to the virus’s developments, so we recommend monitoring both housing prices and foreign exchange rates closely.

The best time to buy property abroad is when your home currency strengthens against the foreign currency, and shifting exchange rates will directly affect your property purchase.

For example, if your base currency is pound Sterling (GBP) and you’re interested in buying a property in Europe for EUR 300,000, how much that property would cost you today compared to three months ago differs.

Towards the end of 2019, the British pound to euro exchange rate (GBP/EUR) was EUR 1.1697, meaning a EUR 300,000 property would have cost GBP 256,476. Three months later, the exchange rate was EUR 1.148, meaning a property of the same price will cost approximately GBP 261,324, which is a significant difference in cost.

Although previous studies suggest pandemics have little impact on housing prices, the severity of damage caused by the coronavirus may cause property prices to fluctuate sharply post-pandemic.

Global production has declined, and unemployment levels have spiked to record levels which may impact property demand.

For those interested in buying property abroad, this could be a buoyant factor as reduced demand means less competition and lower house prices.

But if house prices stabilise after Covid-19 passes, then those looking to sell property abroad will benefit from profitable returns.

Virtual house viewings

If you are an expat buyer or interested in making an overseas property investment, virtual house viewings are a great way to view a property.

Travel restrictions and lockdown measures imposed by governments have made physical house viewings extremely difficult, which may be dampening buying sentiment. However, property websites such as Rightmove, Zoopla and OnTheMarket have overseas sections that allow you to sell or buy property abroad.

Other established estate agents such as Knight Frank, Savills and Hamptons International also sell international property online in the UK.

It is also vital to monitor currency exchange rates as this will impact the expense of your overseas property purchase. Fluctuations in exchange rates will also affect mortgage repayments if you are paying from a British bank account.

Exchange rates have been volatile due to the coronavirus pandemic, although markets have softened as the rate of infection and the death toll has shown signs of slowing in recent days.

Based on the current market sentiment, it seems that the British pound (GBP) will edge higher against major currencies after the coronavirus pandemic, but the outlook is not absolute.

Exchange rates can be monitored through currency charts, but as markets are fast-changing, it may be challenging to secure a competitive rate.

We advise that you speak with a Halo Financial currency expert if you are in doubt, as we are specialists in foreign exchange and closely monitor global market trends. Alternatively, you can check your currency rates below.