The dire state of the economy is causing many Brits with second homes abroad to sell up and return to the UK.
The new Property Hotspots report from currency specialists HiFX, reveals that rising mortgage rates, property tax hikes and eurozone worries have proved too much for a lot of homeowners as 9% put their house on the market.
The country set to see the biggest exodus is Spain, where 45% of Brits are trying to shift their property. HiFX research reveals that eurozone turmoil and the resulting impact on property prices is why 9% of second homeowners have decided to sell up and take their assets back to the UK.
Mark Bodega, director at HiFX, said: “Since the housing bubble burst in 2008, property prices in Spain have fallen by a third, which has had a detrimental effect on the value of second homes. It is no surprise that property owners are fleeing the country as the outlook remains poor, with high levels of unemployment and slow growth.”
France is also set to suffer, with 26% of Brits planning to sell up across the Channel. Whilst France still remains the nation’s ‘number one’ property hotspot as voted by 23% of UK adults, the recent tax hikes has not endeared the country to second homeowners, HiFX said.
The government announced in July plans to increase capital gains tax from 19% to 34.5%, while the tax on rental income have now risen from 20% to 35.5% putting a huge strain on household budgets. Since these tax hikes were implemented, 28% of Brits have admitted that the cost of ownership of a property abroad is simply becoming too expensive.
For the 9% of Brits looking to flee the Eurozone, selling up is proving difficult. 30% of second home owners have had their property on the market for over 12 months with almost 8% claiming that their property has still not shifted after two years. 45% of Brits blame the abundance of properties on the market, a particular problem in Spain, which is suffering from a significant surplus of homes available on the open market. 34% of Brits struggling to sell their property think responsibility lies in the fact that no one is buying at the moment.
Bodega said: “Property demand in the Eurozone is currently very weak, as consumer and investor confidence has been knocked amidst the struggling economy. This is having a huge impact on the thousands of Brits already in the process of trying to sell their property overseas.”
19% of Brits claim that they have failed to sell their home as they cannot get the sale price they expected. With three in four (72%) second homeowners saying that their property value has decreased over the past year, the expectation of what people want for their property does not match how much the property is now worth. A number of Brits can’t afford to see the value of the Euro fall further and are using a forward contract to lock in the exchange rate on the proceeds of the sale in case the Euro depreciates further which many analysts believe is likely.
Bodega said: “Due to the current uncertainty in the financial markets, most of our clients are playing it safe and we have seen an 11% increase in the number of buyers hedging their currency purchase through the use of one of more forward contracts. In essence, this means that you can buy the currency now, and pay for it later. If the exchange rate moves at all in that period this will not affect you at all, as you have bought currency at the originally agreed rate.
“This movement is not surprising particularly as Sterling has performed strongly in recent months, in part due to the less unstable picture here, fall in UK unemployment figures and predictions that we will see growth return to the UK with the latest Q3 economic figures being announced on Thursday.”