We’re having such a dismally wet summer that it’s beginning to drive many of us abroad – at least on holiday. Is this the shape of things to come? Who knows, but climate change has definitely led to soggier winters. So soggy July aside, here are four more reasons why now might be the best time for that dream property purchase abroad.
1. More For Your Pound!
We have the French to thank for the latest dip in the Euro – the rate is 1.18 if you hadn’t noticed. The fact there’s a hung parliament (without any clear path to stability) in France, is more likely to send the Euro lower – particularly if it results in a prolonged period of negotiations.
Says Robin Haynes of A Place in the Sun Currency: “The cost of the Euro remains near its cheapest for 22 months, with a typical €200,000 property purchase currently over £10,000 cheaper than at the time of Liz Truss’s time in Number 10, just due to the more favourable exchange rate.”
He adds that the UK election, on the other hand, has provided a very stable situation in the UK, which was already priced in to the stronger pound in recent weeks. “The Bank of England are tipped to start cutting interest rates later in the summer – and lower interest rates often mean a weaker currency. “Take advantage of Forward Contracts to lock in the current rates for your completion payments months away.
2. Mortgage Rates – Going Down
As Robin Haynes mentions, UK mortgage rates are heading in the right way but what about in Europe? In June 2024, for the first time in five years the European Central Bank (ECB) cut interest rates by 0.25%, down to 4.25%.
Although the rate drop was small, it was welcome news to many prospective buyers waiting for a fall in rates before making a decision to proceed with their purchase, says Simon Staples of Mortgage Direct. “Our team has had many clients that have been sitting on the fence over the past 6 to 12 months wondering if market conditions would turn in their favour – as they now are.”
In Spain, bank rates remain highly competitive and are considered some of the best around in Europe. Forecasts suggest more modest cuts over the next few months ahead, he adds.
3. Property Prices Home and Away
There are many people sitting on the fence rather than buying this summer – whether at home or abroad. If you are waiting to sell your UK home before a move overseas, the good news is that the market here is pretty buoyant – average house prices have increased by 1.9 per cent in the year to June, according to the ONS. First-time buyers are out if force.
That said, with the average UK house price now £306,000, think how much more that buys abroad for €362k. That means a lovely three-bedroom villa or farmhouse with a pool in many areas of both Spain, France and Cyprus, to name just three.
Consider that there are fewer people out on viewings trips and so less competition for homes, according to agents in Spain. In France, there’s a property slump: the number of properties sold in the 12 months prior to February 2024 was the lowest in almost a decade, according to the Notaires de France. Prices are falling in many areas of southwest or northwest France. Time to get a deal?
4. Taxes and a Labour Government
Consider the fact that you might be taxed less if you move abroad. Flat rate of 5 per cent? Check out Cyprus. Or 7 per cent? See what you fancy in Southern Italy.
What about the change of government? There could be good news if PM Sir Keir Starmer keeps his promise to bring us back closer to Europe, that could mean that UK nationals might enjoy better residency or freedom of movement (again).
There will also be those who might wish to leave the UK to protect their assets, with the PM saying he will close ‘specific tax loop holes’. Labour have confirmed they will not look to increase income tax or national insurance, but most advisers feel Capital Gains tax is an obvious area for review, says Jason Porter of Blevins Franks.
“Reverting to taxing gains as the top tier, at the same scale rates as income could potentially push the rate from 20% to 45% on shares - hitting some people hard.” Similarly, those with large estates may see the elimination of some of the IHT tax breaks.
Read more:
