Credit Crunch Affects Overseas Property Market

The recent so-called "credit crunch" is expecting to have a lasting effect on the overseas property market, according to analysts. Mark Leeman, investment analyst and consultant in the city of London comments "The UK banks which were more than happy to pump money into foreign property are re-thinking their strategy and this will have a huge effect on second homes in other countries owned by British people".

"It's getting harder and harder to gain a new mortgage because of the tightening of bank belts. That may be bad news if you need a mortgage for a house in the UK, but the effect on foreign investments will be much more significant".

Mark's comments tie in with my own investment experiences and the general impression I get from conversations with new purchasers of property abroad. Although it may take some months to have a real effect, owning a second home abroad will become a lower priority for all European banks.

Already there has been a dramatic reduction in new mortgage application approvals in the UK, and in the last 3 months we saw the first drop in UK property prices in 13 years. I also believe the stats of the last decade, with its abundance of money in our pockets and banks willing us to buy more and more property, are about to change.

If you are a cash investor this may be good news for your property abroad business, however if you intend to borrow money (which most people do) then you're chances of obtaining a mortgage with a "normal deposit" have definitely reduced.

My advice at the moment would be to proceed of you have a deposit greater than 40%, don't buy outside the EU just now and if you're simply thinking of purchasing a property abroad then hold off for at least six more months until the true effects of the credit crunch begin to purvey the overseas property marketplace.