How UK housing market trends might influence European property markets in 2024

Property experts at Your Overseas Home highlight some of the ways that the dynamic UK housing market could continue to affect overseas property purchases in mainland Europe next year.

Related topics:  Overseas,  Property,  Investing,  Holiday Lets
Property | Reporter
7th December 2023
"There are many benefits to owning property abroad vs. in the UK, which is why, despite the various ups and downs, people continue to want to buy in and move to mainland Europe"
- Christopher Nye - Your Overseas Home

Whether you’re selling up to move or retire abroad full-time, buying a holiday home with the family, or investing in buy-to-let properties abroad, the UK housing market can have a direct impact on the overseas buying market.

For example, UK housing price trends, changing housing policies and fluctuations in the pound significantly influence investment patterns and property values across the Channel and in mainland Europe.

When property prices in the UK increase and become less affordable for domestic buyers, it naturally leads them to look for more financially viable opportunities abroad, particularly in areas known for lower property prices, such as Spain, Portugal and Greece.

Similarly, economic shifts – including fluctuating interest rates and currency exchange rates – influence overseas property investments. A strong pound, for instance, might encourage UK buyers and investors to venture into the European market as they can get more value for their money.

Here are six ways that the UK housing market could affect overseas property purchases in 2024:

Price trends:

Fluctuations in property prices in the UK can greatly influence decisions to invest in property overseas. For example, if housing prices in the UK increase significantly, investors might look for more affordable opportunities in foreign markets. On the other hand, a slight drop in UK property prices could drive more buyers to purchase domestically due to increased affordability. This has a knock-on effect as it could potentially reduce demand for properties in mainland Europe.

Economic factors:

Changes in economic conditions, including shifts in interest rates, inflation and currency exchange rates, can greatly influence the profitability of investing in overseas property markets. For example, a strong pound allows buyers in the UK to get more for their money overseas.

UK mortgage rates are another factor to consider. When mortgage rates in the UK are high, buyers might be deterred from purchasing property domestically due to increased borrowing costs.

Housing policies:

Regulations and policies related to housing in the UK can significantly affect overseas property investment, including things like punitive taxes on second homes. Stamp duty can be as much as 12 per cent on the highest-value properties in the UK, not to mention the threat of 300 per cent council tax on empty second homes in places like Wales and Cornwall. If restrictions or taxes for property ownership tighten domestically, it could cause buyers to consider property markets overseas, where the regulatory environment may be more favourable.

Socio-political climate:

For investors in particular, Brexit and its resulting uncertainty led many to diversify their portfolios and consider property markets outside the UK. Such socio-political changes can affect both domestic and overseas property markets.

Investor sentiment and portfolio diversification:

Perceptions of the performance of the UK housing market can influence overseas property buying trends. If investors feel the UK market is oversaturated, or they want to hedge their bets due to perceived risks, they may be more likely to invest in property abroad.

Investors also often seek to diversify their portfolios to spread risk. When the UK housing market is volatile or unfavourable, investors may choose to invest in overseas property to balance their portfolios.

Demand and supply gap:

If the demand for housing exceeds supply in the UK, therefore leading to increased prices, people might turn to overseas markets where property availability is higher and prices, as well as the cost of living, are potentially more affordable.

Christopher Nye, Your Overseas Home’s content editor commented: “For decades, the UK and mainland Europe have had a close but often complicated relationship. Unsurprisingly, this relationship extends beyond politics and economics and trickles into the world of property and real estate.

“There are many benefits to owning property abroad vs. in the UK, which is why, despite the various ups and downs, people continue to want to buy in and move to mainland Europe.

“Values in many locations abroad are still rising, for example, making properties in these areas safe investments. Not to mention, a lot of countries outside of the UK also enjoy lower property taxes, utility prices and general cost of living.”

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