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Spanish Property Purchase A realistic alternative!

Nothing new perhaps, but there is no doubt that this is the time to be re-considering an alternative property acquisition outside of the UK and the rest of Europe. With Buy to Let yields declining rapidly in the UK for instance and the element of scepticism with regard to the impact of rising interest rates on the UK property market, it is time, once again, to visit the basics and attraction of overseas property. Consider this as an example. A three-bedroom home in Spain can be purchased at little more than £100,000. What would you be able to buy in the UK for that money where property prices have escalated beyond any reason? And then there is the yield. Such homes can be let long term with a guaranteed income of Euros 5-600 per week. That's Euros 30,000 versus a debt service of circa Euros 9,000 on a full repayment mortgage over a 20 year term. Show me where that can be achieved in the UK. And now, exclusive to Rose Developments, that cost can now be reduced even further by an 'Interest Only' mortgage to just Euros 500 a month. What value!

So let's lay out the fundamental pros and cons of the UK vs Spain as the most popular place to but a home.

UK Pros No exchange rate risk (albeit that, with property equity here in the UK at such levels, it is often just as easy to raise 100% of the financing on the UK property)

Known market. Purchasers are less comfortable with the regimes overseas but the use of specialists can overcome this basic fear.

A continuing buoyant BTL market. But how far has it got to run?

Local. The property can be more easily overseen for the purpose of maintenance and management.

Cons Rising interest rates.

Reducing BTL rental yields

Regulation. It slows the process down and has had a massive negative effect on the mortgage industry in the UK since launch in November 2004, perhaps even leading to a slowdown in the property market itself.

Spain Pros Low interest rates. The Eurobor rate is just 2.25% at the time of writing with an average mortgage rate of circa 3.50%. Fixed rates are available from just under 4% for 5 years. And don't forget the 'Interest Only' exclusive!

Loan to value. Up to 80% (case dependent) with the average at 70%.

Yields. Letting agents can arrange long term lets (if the property is not needed as a holiday home). As with other countries, such as Florida for instance, it is not unusual to find yields way into double figures.

Appreciation. Whilst this varies area to area, the south coast of Spain has seen rises of up to 20% in the last year alone but still remain attractive in comparison to the UK.

Holiday home? What is being saved by using the new property as opposed to the expense of a holiday elsewhere? And what value the weather! The major reason for buying overseas in the writers humble opinion.

Cons Exchange rate risk. This will apply if a mortgage is obtained on the new home but, in order to avoid this, perhaps 100% can be raised on the UK property.

It's overseas! The major reason for concern with many would-be purchasers. The great unknown and a reason why you would only want to use specialists to arrange the formalities.

So, balancing all of this, there is a very positive sway in favour of taking the step of acquiring a property other than here, but where and why?

There appear to be a handful of places that European, and in particular, British purchasers automatically think of when posed the question. But Spain is by far the most popular. So why is this?

For starters, there is an enormous ex pat European and, in particular, British population especially on the south coast all the way from Gibraltar in the south-east to Murcia in the south-west. For those that do not know the area that translates into a coastline of some 400 to 500 miles most of which offers attractive beaches. Whilst it is not now that easy to find beach frontage these days, it is unusual to see property more than a mile or so from the coast, so hardly a major negative.

The Spanish government remain determined to maximise the potential of the ease of access (just 2 hours or so from the rest of Europe) and the stable climate. There is massive development there still with 70,000 units either under construction or in planning in just Almeria province alone. And, of course, that degree of build offers many an attractive deal to be had.

The ex pat European, and the British in particular, do not like to be in a strange land and they take comfort from the size of their own national population there and the simple fact that English as a language is almost as widely spoken as the local language. The British are inordinately lazy when it comes to learning a foreign language and this ease of communication gives that certain peace of mind.

If you ask 10 people would they consider a 2 nd property purchase or, more to the point, a holiday home acquisition, 9 of them will respond positively even if they haven't already made such a step. It's everyone's dream and we can help them achieve that end. The basics are all there; large equity values in the UK, low purchase prices by comparison in Spain with low interest rates.

And don't think that arranging an overseas mortgage is difficult either. There are specialist advisers based in the UK and in Spain that will take the strain off. You can sit back and let someone else take the pressure. Rose Financial Services are one of only a specialist few that can assist you locally.

Mark Mountney is a partner in Rose Financial Services, a specialist mortgage brokerage based in the Parque Comercial, Mojacar. He is a fully qualified mortgage and financial adviser in the UK with some 10 years experience in managing his own firm. Mark was also a founder of The Association of Mortgage Advisors, the trade association for mortgage intermediaries with 13,000 members