Now could be perfect time to buy abroad

"The plateauing decline in property prices in popular destinations such as France, Spain, Italy and the US means that now might be the right time for UK investors who are brave enough to spread their wings," says Geoffrey Simmonds at brokers Overseas Mortgage Professional.

Many properties are currently offered with significant discounts and guaranteed rental income for the next three to five years.

Contrary to the turbulence unleashed on the UK mortgage market by the global banking crisis, overseas home loan providers have a healthy appetite for lending. The twin factors of falling property prices – in some cases up to 50 per cent – and historically low interest rates are creating good investment opportunities.

In addition, the falling value of the euro to sterling has made property in the eurozone around 10 per cent cheaper for British buyers over recent months.

Those who opted for a euro denominated loan should benefit

significantly as sterling continues to show its strength.

Those who took out a 250,000 euro mortgage in February – when the rate was 1.1 euros to the pound making a cost around 227,000 – should have to pay 35,000 less if the exchange rate moves to 1.3 euros to sterling.

To avoid exchange fluctuations, it is advisable to use the same currency for an overseas mortgage as for income.

The lesson of the late 1980s and early 1990s is not to take out home loans in inflexible single currencies such as Japanese yen or Swiss franc. Instead multi-currency mortgages allow flexibility.

Equity release is also possible with up to 80 per cent in France and 70 per cent of a property's value in Portugal and Spain.

Mortgage rates have never been so low for investors. Conti, the UK's leading overseas mortgage specialist, gives the following typical examples:

n 2.20 per cent (variable) in euros for France with maximum 80 per cent loan to value (LTV);

n 3.50 per cent (capped) in euros for France up to 100 per cent LTV;

n 2.50 per cent (variable) in euros for Spain with maximum 60 per cent LTV or 2.27 per cent and 70 per cent LTV;

n 3.39 per cent (variable) in sterling for Portugal with 70 per cent LTV;

n 3.53 per cent (variable) in euros for Portugal up to 80 per cent LTV;

n 4.05 per cent (variable) in euros for Turkey up to 70 per cent LTV.

All these offers are on a repayment basis apart from the 2.50 per cent mortgage in Spain which is on an interest only basis.

Conti was established in 1994 and provides overseas mortgages in over 45 countries and remortgaging in 15.

For an American property with Florida particularly popular, Conti quotes 4.75 per cent in US dollars (70 per cent LTV) which is fixed for five years and again on a repayment basis.

Ask an independent financial adviser who has experience in this sector about the benefits of opting for a long-term fixed or capped rate mortgage currently as opposed to the possible short-term value

available through a cheaper variable rate.

Recently, mortgage lenders in France and Portugal were offering 10 year fixed loans for as little as 3.6 per cent, which may prove to be excellent value in the years to come.

With their easy access and good rental potentiality, France and Spain continue to be the most popular countries for overseas mortgages from the UK.

France enjoys a very stable market, primarily owing to its cautious financial system. It is still possible to borrow up to 100 per cent of the value of a property. Lenders have even gone as low as 1.95 per cent recently. Yet "the bargains won't last forever, so prospective buyers may want to act sooner rather than later", tips Clare Nessling, Conti's operations director.

Buyers of Spanish property are also in a strong position owing to the number of homes available, low interest rates, and the chance to negotiate price reductions from some very motivated vendors. Prices in areas like Costa del Sol have plummeted by 40 per cent since the peak in 2006/07.

Turkey is often referred to as the 'new Spain' and is the third most popular location for UK buyers abroad. It offers some appealing property prices and all the benefits of a Mediterranean location, minus the effects of the euro exchange rate.

Demand for quality rented accommodation in the popular tourist resorts is likely to continue to outstrip supply, ensuring lucrative rental yields.

Portugal continues to have strong appeal although some locations report price falls up to 30 per cent. As its economy moves out of recession, Portugal has weathered the downturn better than Spain owing partly to less over-development and speculation.

The US picture is less encouraging with home sales at almost record low levels. The supply of unsold homes, including repossessed homes, is increasing. Around 60 per cent of housing analysts predict residential property prices will fall this year.

Yet with many American houses at half their 2007 prices, there are bargains to be seized. An Orlando two-bedroom property which sold for US$210,000 four years ago was recently sold to a UK investor for $65,000. Purchases at such distressed prices should show good long term investment value.

For all properties, have full checks undertaken on title including liability for developments in the area, which has sadly caused such heartache to many who have purchased in Spain. This advice applies equally to investments made 'off plan', where the building has not yet started.

Ensure, too, that an independent valuation is conducted. Look too at planning permissions and building licences, not relying on either an estate agent or developer for such definitive information.

As another warning, overseas mortgages are not regulated. When taking up an offer, cost in such extras as the arrangement charge (typically 100-150) and final fee, which depends on the commission earned from the lender (often one per cent) and which should be clear at the quotation stage.

Investing in underdeveloped countries can offer an added risk. "Five years ago, countries such as Bulgaria and Romania proved very popular with international property investors, but these same investors now find themselves without a mortgage provider willing to re-finance," warns Mr Simmonds.

Finally, if using your own savings and not requiring a mortgage or converting sterling into another currency for a home loan, opt for a forward contract with a specialist broker, like HiFX, Travelex or World First. It's possible to lock in a rate for even two years forward. Usually there are no fees for making international payments.