Tag Archives: economy
Exchange rates and golden visa encouraging overseas buyers in Spain
Currency exchange rates are encouraging even more foreign buyers back to the Spanish property market and this is reflected in increased sales, especially in popular areas. New legislation to relax the requirements for Spain’s golden visa which allows non-European Union buyers to gain citizenship if they invest in the real estate market is also set to encourage more buyers from overseas. In the Balearics the currency rates are currently by far the biggest influencing factor in the property market, according to Alejandra Vanoli, managing director of Mallorca Sotheby's International Realty. ‘Thanks to negative interest rates, affluent Germans are currently paying to keep their money in the banks and some would rather see it being put to good use in real estate investment. Mallorca is an obvious choice, German tourists have been coming to the Island for more than 50 years and represented 38.6% of all foreign arrivals to Mallorca in 2014, they have their own weekly newspapers, radio station and Air Berlin dominates the Airport. There is a strong bond,’ he said. He explained that with the British pound is at a seven year high against the euro, a two million euro property would have cost £1.67 million a year ago, but just £1.44 million today, some 14% more affordable. Swiss buyers are in a similar situation. The Swiss Franc soared when the National Bank abandoned its euro peg in the middle of January and a property costing 2.54 million Swiss francs a year ago would now cost 2.11 Swiss Francs, a saving of around 17%. The golden visa, which was introduced in September 2013, has seen 530 foreigners granted a visa so far with the majority, some 490 people, doing this through putting at least the minimum of €500,000 into property. Most of the property investors have been Chinese, Russian or Arab with business entrepreneurs coming largely from the United States and it has earned the Spanish economy an estimated €700 million so far. Previously the visa was granted to the applicant, their spouse, children under the age of 18 and disabled children of any age. This has now been extended to unmarried couples, economically dependent relatives and children of any age. Also, while the economic criteria remain the same, the path has been made smoother with applicants able to start the process upon arrival in Spain rather than applying from overseas. The visa will also be given within six months even to those who haven't formalised a property purchase, provided they've signed a contract and paid a deposit. ‘We are expecting more non-European purchasers but at the moment Mallorca is still very much dominated by British buyers who have been coming en masse since the 1960s, the Germans, and the Swedish who also have a long standing love affair with the Island,’ said Vanoli. ‘Mallorca is reported to be the most popular holiday destination for Swedes in 2015. Like the Germans, they have… Continue reading
Prime London property market likely to be subdued until after election in May
The mood of buyers and vendors alike in the prime London residential market is likely to remain subdued up until after the general election in May, it is claimed. Uncertainty surrounding a potential mansion tax, interest rates and the introduction of capital gains tax liability for non-resident owners are also contributing to the general market angst, according to the 2015 market forecast report from Chestertons. Moreover, a tightening mortgage regulatory environment with the European Mortgage Credit Directive due for implementation by 2016 and the Basel III requirements by 2019 on top of recent new UK rules, may see lenders become more cautious, the firm believes. Indeed, anecdotal evidence suggests that even high net worth individuals are experiencing more difficulty in having their mortgage applications processed despite the fact that exemptions from MMR requirements were given to those with a net annual income of at least £300,000 or a net worth of at least £3 million. The report points out that the UK economy, although forecast to slow this year, is nonetheless expected to remain one of the best performing among developed countries. Indeed, the HM Treasury panel of independent forecasters currently projects GDP growth of 2.6% compared to an estimated out turn of 3% in 2014, although it expects unemployment to reduce further. The panel also forecasts inflation will creep up, although much depends on the price of crude oil and household expenditure. For the time being, the possibility of deflation remains real. It also points out that pricing is likely to become more sensitive in the shorter term following the revision of Stamp Duty and the potential introduction of a mansion tax, and as buyers sense that they have the upper hand in a softening market. ‘Nonetheless, there are pockets of the market which should be active in 2015. Foreign investment driven purchases should remain robust especially in the new build sector which remains buoyant in terms of both buyer demand and price growth,’ the report says. ‘The UK should enhance its attraction as a safe haven for flight capital from a troubled Eurozone and countries with historic ties with Britain who are experiencing geo-political unrest, such as Egypt, Nigeria and other parts of west Africa. Moreover, various surveys indicate that UK buy to let landlords are keen to expand their portfolios while the attraction of property as a pension supplement for households in or approaching retirement continues to grow in popularity as evidenced by the increase in buy to let mortgage lending last year,’ it explains. ‘As we suggested in our previous report, the outcome of the election could have a considerable impact on the prime London residential market. We expect values to remain flat or see further slight reduction in the run-up to the election,’ it points out. ‘Thereafter, if a Conservative Government or a Conservative led coalition is returned the firm anticipates a gradual uplift in values over the remainder of the year. Otherwise, any combination of Labour/Liberal… Continue reading
Affordability could put brakes on house price growth in London
Affordability constraints will limit house price growth in mainstream London over the next five years, according to a new analysis report. In London, the total value of housing rose by 20% or £247 billion in 2014 alone and by 61% or £563 billion over the past five years and this has huge consequences for Londoners, whose finances are being stretched further and further as house prices continue to rise at a disproportionate rate to the rest of the country.? According to the analysis by real estate firm Savills, this value gap simply cannot widen at this rate indefinitely, which is why the firm expects mainstream London to see just 10.4% growth over the next five years, compared to 19.3% across the UK as a whole. Katy Warrick, London development researcher at Savills, pointed out that mortgage regulation is one of the main constraining factors to further house price growth. ‘This new lending environment is one of loan to income caps, stress testing of borrowers’ affordability and capital repayment requirements. Coupled with fast moving house prices against a context of limited income growth, this means higher deposits are required,’ she said. ‘Jump forward five years and we expect that prices will grow just 10.4%, as fewer first time buyers will have been able to access home ownership for these reasons,’ she added. The analysis shows that at the end of the third quarter of 2013, a first time buyer household earning £53,000, the median in London according to the Council of Mortgage Lenders, could have afforded to buy a property worth £264,000 at 3.74 loan to income multiple with a 75% loan to value mortgage. This assumes they could raise the required £65,000 deposit. At prevailing interest rates servicing this mortgage would account for 21% of gross household income. ‘Over the course of 2014 incomes grew by 4%, and if we assume the same mortgage conditions as before our hypothetical buyer can now borrow £206,000 and afford a property worth £274,000. The amount they can afford has risen by 4%, but, as we have seen, house prices will have risen much more,’ explained Warrick. In this example, the £264,000 house is now worth £320,000, resulting in a funding shortfall of some £46,000. ‘The options for buyers are pretty stark; find a much bigger deposit, borrow more money at an even higher multiple of income, or buy a smaller property or one in a less expensive area. The first two options may not be possible, the last may not be desirable,’ she added. If the same example is taken into 2019, the property would be worth £353,000 while incomes will have risen by 22% according to Oxford Economics. Assuming loan to value ratios remain the same, the buyer could now obtain a property worth £324,000 with a £252,000 mortgage. This means that while the funding shortfall is reduced, it still sits at £29,000. ‘Even if that shortfall can be found, the costs of servicing the mortgage… Continue reading
