IIp15-16_Int Fin.qxd 12/1/09 15:44 Page 3
International Finance | 15
Opportunity
knocks abroad
The international mortgage market has helped
create significant investment opportunities
overseas
by Simon Smallwood,
Business Development Director,
International Private Finance Ltd
A
lthough the uncertain financial One of the key deciding factors is the Market mayhem
landscape experienced over the availability of non-resident mortgage finance. With all the stories in the press regarding the
past few months has caused A growing number of existing overseas turmoil in many mortgage markets around
nervousness amongst interna- home owners are taking advantage of the world, it is interesting to look at how non-
tional investors, it has also cre- current exchange rates by ensuring that debt resident mortgage offerings have been affected
ated opportunities, and is secured against a property portfolio in in some of the most popular markets for sec-
overseas property purchases have remained a the most efficient way. For example, buyers ond home ownership.
popular investment. are becoming increasingly interested in The mortgage markets in France, Spain,
In recent years, the number of overseas raising euro finance, secured against residen- Portugal and Italy, four of the most popular
property owners has significantly increased. tial property in locations such as France, markets for second home owners, work very
This interest has primarily been fuelled by the Spain, Italy and Portugal, and using these differently to those in the UK or US. The first
booming property markets around the world, funds to reduce existing debts in the UK. They major difference is how affordability is calcu-
a reduction in travel costs, and a growing are taking advantage of an exchange rate of lated. Rather than using earnings multiples, as
number of developers building properties around 1.25 compared to a rate of 1.51 in the majority of lenders do here in the UK,
targeting non-resident buyers in evermore February 2007. lenders overseas take a more cautious outlook,
exotic locations. Those keen to use their negotiating power and base loans on the borrower’s debt burden.
However, as a result of recent world eco- to snap up a discounted property, but reluc- As a general rule, lenders allow between 30 –
nomic change, overseas property investors and tant to purchase euros using sterling deposits, 40% of the borrower’s income to be taken up
second home owners are reassessing which should consider taking out a flexible mortgage with repaying existing mortgages, loan com-
markets are currently the most attractive. at the highest loan to value to complete the mitments and the new overseas finance.
There have been significant price drops purchase. This provides the opportunity to The interest rates payable on a European
around the world, meaning that those willing redeem all or part of the mortgage at a later mortgage will depend on the index that the
to take the plunge are securing deals and date, if and when the exchange rate moves in mortgage product tracks. In the majority of
reduced prices that would not have been the client’s favour, and minimises losses from European markets most products are based on
imaginable 12 months ago. the current weak pound. the Euribor (European Interbank Offered
www.investmentinternational.com January 2009 Investment International
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