Property investment > Investment
According to a new report by Savills into second homeownership abroad, the majority of buyers are after a traditional holiday getaway rather than an overseas cash cow. The number of UK-owned overseas properties has shot up by 55 per cent over the past five years, to an estimated total of 425,000.
You might expect lower house price growth in Europe (averaging just five per cent in 2007) to take the shine off an overseas purchase but the majority of buyers are untroubled by this.
Indeed, Savills report that the number of homeowners buying for retirement or leisure purposes is on the up. Having the ideal holiday location is the key driver to securing a second home, with purchase price coming in second. But while house-hunters are still after a bargain in the sun, 50 per cent suggested that the resale potential was not important for them. And while they do tend to rent out their properties, this is more to avoid them standing empty than to capitalise on any investment potential.
Nevertheless, Savills did find that 33 per cent of second homeowners were buying with an eye on investment, with 16 per cent hoping their purchase would net them a profit off rising house prices and 17 per cent going after the rental opportunity. Interestingly, while they let properties for an average of 18 weeks a year, compared to leisure buyers' 15 weeks, their weekly rents were some 12 per cent lower than their less money-orientated counterparts. But while investors were charging around £549 a week compared to leisure buyers £622, they were generating much better yields thanks to purchasing at lower prices. An investor typically bought abroad for £182,000 and achieved a gross yield of 5.4 per cent. For the holiday-conscious leisure buyer, they were prepared to pay considerably more, around £220,000 while achieving yields of 4.2 per cent.
Savills forecasts that growth in second homeownership will slow over the next 24 months, but note that buyers' long-term outlook remains positive.
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