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Dream Of Property Abroad Dies As Sales Fall Up To 42Pc In Crisis Years

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Telegraph 22/11/13

'Vast numbers of British families and older couples have shelved plans to buy holiday homes because of the economic crisis in Europe and an income squeeze back home, new figures suggest. Before the 2008 credit crisis struck, it had become common for those with money to buy property in sunnier climes, such as Spain or Portugal. As well as providing a getaway spot, letting the property often yielded an income.

However, the European property market crumbled when the eurozone plunged into crisis in 2011 and carefully laid plans have been scuppered by rising bills and smaller pensions in Britain.

Newly released figures show the number of new holiday homes bought by British residents in Spain has decreased by 26pc since 2008.

In Italy, the figure has dropped by 42pc and in Portugal purchases are down 31pc compared with five years ago, according to holiday home insurance provider Schofields. France has remained popular, with sales rising 19pc.

Mike Boles, a director at Savills Private Finance, the mortgage broker, said British buyers had become nervous about overseas property. Many are afraid it might be difficult to sell a foreign property if needed, as the housing markets in some European countries have practically stagnated.

Others are held back by tighter lending criteria. In Britain, increasing a mortgage to use as a deposit on a holiday house has become more difficult since the 2008 credit crisis. Mortgage lenders in countries such as Spain and Portugal, where local economies have been savaged by the eurozone debt crisis, have become reluctant to lend to non-residents.

Mr Boles said: “It is very difficult to get a mortgage locally in places such as Spain and Portugal. There is still some way to go before lenders will offer more deals to UK residents.”

Pension incomes are also down, dashing dreams of retiring abroad for many. Payout rates have fallen from around £15,000 on each £100,000 in the early Nineties to around £6,000 today for a healthy 65-year-old.

However, finance is more readily available in France, which Mr Boles said contributed to the country’s rise in popularity among British investors. He said France and Switzerland had garnered the most interest as mortgage rates were low.

Phil Schofield of insurer Schofields said French property was a safer investment than neighbouring markets. “Good transport links also make France an attractive option and many buy to eventually retire there,” he said.

By contrast, the Spanish and Greek property markets have been afflicted by stories of “illegal” properties being demolished and resorts being left unfinished. British buyers have in some cases bought houses built and sold without planning permission.

Prices in France have remained stable over the past five years, recording modest growth of 0.9pc. But this has not been the case in southern Europe, where prices have tumbled. Spanish property values are almost 28pc below their 2008 levels. In Italy, prices are down 14.6pc, according to estate agent Knight Frank. Greece has suffered falls of 31pc, and Portugal 11.4pc.

Some have seen the falls as an opportunity to secure a bargain. Phil Hoey, of currency exchange firm Caxton FX, said it was a buyers’ market. Those who are venturing into the eurozone have been able to push prices below market value.

Others warn some markets are still overvalued. A study by the Organisation for Economic Cooperation & Development in May suggested property in France, Spain and Italy was priced too high. Houses in Greece, Portugal and Ireland were undervalued.

Mr Boles said: “The euro will go down against sterling as the UK’s economy recovers, so investors will get more for their money. More people will see value in overseas property and the market will pick up again. It will take time, though – at the moment there is a fear that prices could still go down in places like Spain, for example.”'

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