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The Failing Pound Has Little Effect on Eager, Overseas Property-Hungry Brits - 16 April 2010
Brits may be feeling the pinch of poor exchange rates recently, but that’s not stopping them from buying homes overseas.
Several U.K. real estate firms report that sales of foreign properties were higher last month than they have been in over a year. This is a surprising twist, considering the sterling has been performing weakly in comparison to most European currency.
One explanation for this rush to buy despite the unfavourable exchange rates is that homes in popular holiday destinations, like Spain and France, are still relatively cheap. With prices 15 to 20 percent below market value, the loss in exchange rate is canceled out, and in some cases, still puts Brits ahead.
Furthermore, Brits are increasingly taking out euro mortgages—putting little cash down and capitalizing on lower rates. This is under the notion that the pound will soon be superior again—a prediction of many economic forecasters—and when it does rise, these homeowners be able to pay back their euro mortgages faster.
In the meantime, experts suspect that Brits will rent out their overseas properties, and therefore, collect rent, make mortgage payments and pay their bills in euros.
According to many property insiders, the British property investor is back in a big way. Even conservative buyers who are wary about exchange rates are finding an investment loophole—Turkey, which consistently ranks third, behind Spain and France, for overseas property sales and interest. The European country doesn’t use the euro, and therefore, the pound still has some strength there.
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