From Turkey to South Africa to Cape Verde, British buyers are broadening their horizons ‘It’s becoming a feeding frenzy to be the first one in’ to a new area.
Turkey is now more ‘up’ than ‘coming’ but house prices are still cheap.
So have you thought about owning a holiday home in Egypt, South Africa or a set of poor islands located off the coast of Africa?
Possibly not, but all these destinations have been the subject of a blitz of enquiries from Britons looking to buy a second home, according to research from the overseas mortgage specialist Conti Financial Services.
The number of UK households owning an additional property abroad rose by 45 per cent between 1999 and 2004 to almost 257,000, reports the Office for National Statistics.
While more than half of these homes are in the traditional destinations of Spain and France, today’s buyers are also choosing to invest in more distant, more affordable shores that offer the potential for greater growth in property values – though with a higher degree of risk.
“It’s becoming a feeding frenzy to be the first one in (to a new location),” says Simon Conn, the managing director of Conti.
One example is Cape Verde, the former Portuguese colony that comprises 10 islands 300 miles off the north-west coast of Africa.
The islands, complete with turquoise waters and white sands, are still in the early stage of commercial development but investment is pouring in.
Currency exchange specialist HIFX reports that enquiries about Cape Verde have gone through the roof.
“The country’s national airline, TAVC, will begin operating a direct flight between Birmingham and Praia (Cape Verde’s capital on the island of Santiago) from November,” says Mark Bodega, the marketing manager of HIFX.
Properties start at around £50,000 for a two-bed apartment. Elsewhere, popular destinations previously off the radar for those seeking second homes include Turkey and South Africa.
After a government decree last year, under which foreign nationals can now own freeholds, Turkey is more “up” than “coming”, says Mr Conn.
But with properties averaging between £55,000 and £70,000, prices are still cheap.
In South Africa, meanwhile, you can pick up a four-bed house with swimming pool near Cape Town’s vineyards for just £140,000.
Given this wide range of destinations, a broader demographic of buyer is also emerging.
Suzanne Sullivan, the marketing director at foreign exchange specialist Currencies Direct, says young professionals between 30 and 35 are attracted to the more up-and-coming destinations.
“Many are first-time buyers who have been priced out of the UK market and want to get on the ladder elsewhere (while continuing to rent here). Some haven’t even seen the property they are buying.”
Other young buyers are already on the ladder, have benefited from house price rises here and can remortgage to release the cash for a second home.
Opportunity usually brings risk and buying a second home overseas – for rent or as a holiday house – carries plenty of that.
It is vital to do your homework. Each country has its own tax laws, its own way of doing business and its own economic issues.
For example, the South African rand is particularly volatile and can fluctuate against the pound by as much as 8.65 per cent in one month. So there are dangers if you take out a home loan in sterling.
However, if you use a foreign exchange specialist, you can mitigate currency risks by fixing your mortgage rate in advance.
Interest rates on overseas home loans, though, can be much higher than in the UK: a variable-rate deal in New Zealand will often cost 9.9 per cent, and in South Africa 8.5 per cent.
Hefty deposits are more likely to be the norm: up to 50 per cent is required on some Caribbean islands.
In Croatia, Thailand and Brazil, meanwhile, overseas nationals are not usually allowed to take out a mortgage, which means paying in cash.
One risk in some countries is that your property deeds might not be worth the paper they’re written on.
War tends to be the reason for this, with land and homes becoming a point of contest after displaced peoples return and lay claim.
This has happened, for example, in Croatia and Northern Cyprus.
Source: Belfast Telegraph