Athena: British Overseas Property Purchases Now Increasingly Funded by Finance Options

Camille Letuve Athena

According to international property investment firm Athena Advisers Brit’s are still buying European property desipte the fall in value of Pound Sterling witnessed over recent months.

And say Athena, most of them are making a profit.

It’s been a tumultuous year for Brits buying property abroad; first they were rocked by the Brexit vote which hit confidence and then Pound’s subsequent tumble cut their overseas purchasing power.

Exchange rates added a whopping ~20% to the cost of house prices in Europe following the fall.

We reported late in 2016 that second-home agent reported a slump in Brits looking to buy a second-home in Italy as apprehensions over the triggering of Article 50 grew.

But trying to guage how overseas property purchases are proceeding depends on who you listen to.

Partner Camille Letuve at Athena Advisers explains the Dollar is the currency of choice right now.

“We’re seeing resurgent interest in many mainstay European property markets through Dollar markets, such as the US, but also lots of from expats and domestic buyers from the middle and Far East. Here we’re seeing Euro purchases in Dollars, often from British buyers, whose Dollar has become around 24% stronger in the past two years,” says Letuve.

Buyers Seek Alternative Ways of Securing their Overseas House

This means that for Brits looking at properties around the $4million mark, over the last two years they have become almost $1m cheaper, due to recent currency shifts.

Letuve is one of the founding 3 partners of Athena Advisers, established in 2003 to help bridge the cultural divide between property investors and buyers.

He focuses on Europe and in particular has been keeping an eye on the French market, which has attracted a number of Brits since the summer.

He says, “The market has certainly changed since the Brexit referendum took place. With the Pound falling against the Euro, Sterling-buyers in France are increasingly inclined to ultilise low French mortgage rates to retain value in their purchase.

“As we enter the ski season, this trend is particularly evident in the mid- to high-end of the market with the majority of ski property purchases between €500,000 and €10m using finance, sometimes even when the purchase could take place in cash. Loan-to-value rates are normally in the region of 60% to 80% leaving only a deposit exposed to currency fluctuations.”

It’s no surprise that investors to the property market are finding alternative ways to get the most out of their cash, despite the daily quandary over exchange rates.

But are loans and USD the answer when it comes to investing internationally or are we awaiting a rise in the Pound to get things back on track?

Letuve believes in following the local market. He tells

“Even with the Pound bouncing back around 5% on the Euro in the last month or so, largely due to the events across the Atlantic, it has never been more important for buyers to understand the French mortgage market and how much long term value and security a long term fixed rate product offers.”

The firm itself is multi-national, it specialises in attractive new-build and renovation development projects in key prime markets.

Originally focused on European property investment opportunities in France, London and Lisbon, their property portfolio now includes alpine chalets in France to sleek town houses in London, beach houses in Mauritius and period properties in Paris.

The company have been monitoring the market over the last few years, paying particular interest to the highs and lows of the Pound, which has been the driving factor behind a lot of sales.

Letuve says, “The only tangible result of Brexit so far has been hesitation from British buyers. 2015 was a very good year for British investors targeting European markets like France, Spain or Portugal. In July 2015, the pound stood at €1.44, the highest it had been for eight years.

“Then with markets like Lisbon offering extreme value in prime property and in France mortgage rates at historic lows, any value for British investors was amplified even further.”

But as the referendum came closer, Athena Advisers saw the Pound follow a general downward trend, levelling off around €1.26 ahead of June 23rd, making investors act fast to secure investments prior to any currency shifts.

So how almost 8-months later, what was the result of that fateful day?

Letuve explains, “Since then the purchasing power of the British in Europe has been strongly affected, but the level of demand has remained close to the same level as it was prior to the referendum. This is particularly true for investments or second home purchases in France where the decline of the pound has been matched by the decline of mortgage rates.

“This means that if the euro has today become around 20% more expensive for sterling buyers since summer 2015, if you look over the last two years, French mortgage rates have fallen by much more, reducing the amount of interest payable on a 20-year fixed rate loan by 42%. On a mortgage of €400,000 the total amount of interest has dropped by more than €58,000.”

So there is still money to be made on property investment in Europe, whether buying in GDP or USD, especially in France. But only towards the higher end of the market looking towards long term loans. The lower priced investments will return a much lower yield as they become more easily affected by currency fluctuations.