Overseas property demand surges as UK lockdown eases
Real estate giant Rightmove revealed a surprising new trend for British buyers last month, as their property website showed a spike in demand for overseas homes.
The company said that the surge in overseas property searches coincided with the relaxation of lockdown measures in the UK, with movers seeking property abroad.
With Britons following stay-at-home orders amid the UK’s coronavirus lockdown, many had the opportunity to reflect on and re-evaluate their living situation.
While UK property searches are bound to increase as the easing of lockdown measures revives the UK property market, Rightmove noted a record-breaking interest in the hunt for property abroad.
After the UK government announced quarantine free travel to 59 countries on 28 June, the real estate portal registered more than one million searches for overseas property, and Europe was a popular destination.
European property in high demand in 2020
Rightmove said French property was in the highest demand, with searches surging 32% year-on-year, searches for property in Spain (25%) came in next, followed by Portugal (24%) and Italy (17%). Greece was the fifth most-searched-for destination.
Of any European country, France has one of the largest British-born populations, with Brits finding the lifestyle, education system and proven property markets appealing. France also has a shorter working week at 35 hours, so the work-life balance is often an attractive proposition for Brits wanting to relocate.
However, property agents across Europe have reported being inundated with phone calls and enquiries for overseas properties.
Gavin Vercoe, chief operating officer at Chestertons International, said his firm recorded a sudden increase in enquiries over the last few days of June, in line with the UK government’s announcement.
Mr Vercoe said: “There was a 340% increase in enquiries for European properties across the Chestertons network in the last few days of June, compared to European enquiries received over the weekend two weeks prior.”
If you’re considering purchasing a property abroad, we advise using established estate agents who have a strong knowledge of the local market and can negotiate a contract with desirable terms.
Foreign exchange specialists such as Halo Financial can also navigate past the risks associated with fluctuating exchange rates to help save you money; both when buying a property overseas and when sending money abroad for taxes, or bills.
What to expect from the UK property market now and post-2020
While there is still a lot of uncertainty surrounding the future of the UK property market as the threat of a second wave of COVID-19 seems imminent, the housing market is showing signs of recovery.
According to the latest Halifax house prices index, UK house prices fell by 0.1% month-on-month in June. While this was the fourth consecutive month of declining property values, the latest data and analysis from Home.co.uk has revealed prices are rising.
Home.co.uk says that pent-up demand, low stock and the new stamp duty holiday has encouraged vendors to raise UK housing prices, which signals a return to confidence in the market.
If housing prices continued to fall this would undermine the British economy, and in turn, pound Sterling (GBP) support.
While overall activity will be inevitably low in the short term, once the market returns to growth, we expect UK house prices will rise which will help to underpin the pound (GBP) against its major trading rivals.
Several other measures are also being introduced and extended beyond 2020 in a bid to revive activity in the market.
Holiday let mortgages are being reintroduced in the UK amid easing of lockdown restrictions
In anticipation of a staycation boom, Leeds Building Society reintroduced holiday let mortgages alongside the reawakening of the hospitality and travel sectors.
The building society is offering two options for a holiday let mortgage, the first being a 2.84% fixed mortgage up to 60% loan-to-value (LTV), and the second, a 3.34% fixed-rate mortgage up to 70% LTV.
These holiday let mortgages are fixed up until 30 September 2022 and complete with fees assisted legal services, free standard valuation and no product fee.
Matt Bartle, Leeds Building Society’s Director of Products, commented: “The government’s stamp duty holiday will likely encourage more interest in the buy-to-let market, including holiday lets.”
He added that while “buying a holiday let, carries risk, it enables an investor to diversify their portfolio risk by letting weekly to a range of occupiers, rather than relying on one individual to pay rent every month.”
Rishi Sunak increases the stamp duty threshold
To alleviate some of the damage inflicted on the housing market by the coronavirus pandemic, Chancellor Rishi Sunak raised the tax threshold on properties in the UK.
The original threshold was on properties up to GBP 125,000, but under the new measures, house buyers will no longer have to pay stamp duty on properties worth up to GBP 500,000.
Mr Sunak said the stamp duty holiday will be in effect up until March 2021 and could save home buyers as much as GBP 15,000 in tax, with an average saving of GBP 1,800.
The stamp duty holiday also applies when purchasing a second property, although you will be required to pay the additional 3% Stamp Duty surcharge that applies to second homes.
Nevertheless, second homeowners will still be saving as the previous requirement was to pay 3% on the first GBP 125,000 and 5% on homes costing between GBP 125,001 and GBP 250,000.
The stamp duty holiday is also prompting lenders to reintroduce low deposit mortgages to tempt buyers.
Low UK mortgage deals for first-time buyers
Amid signs that the UK housing market is recovering, Nationwide, Coventry Building Society and Co-operative Bank’s Platform are offering UK mortgages on small deposits, in efforts to entice first-time buyers.
Nationwide brought back the 90% LTV option on UK mortgages in response to the Rishi Sunak’s stamp duty holiday. After restricting similar measures a month before, Director of Mortgages Henry Jordan, said: “We feel it is the right time to enhance our lending”.
However, 90% LTV mortgages will become a concern for the Bank of England (BoE), which is responsible for financial stability, and the Financial Conduct Authority, which regulates businesses, as it increases the risk of negative equity.