Industry News

Sharp price falls in European property hotspots and a gradual strengthening of the pound are luring cash-rich UK investors back to the continental mainland just in time for summer.

Foreign exchange providers and estate agents are reporting revived interest from cash-rich Britons looking to snap up holiday homes in popular locations across France, Spain, Italy and Portugal.

Meanwhile Conti Financial Services, an overseas mortgage provider, has seen inquiries jump 20 per cent in the past few weeks.

The burst of activity follows months of subdued sales as British buyers have been reluctant to pump money into mainland Europe with the pound falling to virtual parity with the euro. It also reverses the recent trend of continental European buyers piling into the UK market as the exchange rate for them is so favourable.

Currencies Direct, a foreign exchange provider, said the number of UK-based clients buying euros to purchase properties in mainland Europe had risen to double last year's figure.

"We have seen a dramatic increase in the amount of money entering the international property market in the last few weeks," said Mark O'Sullivan, the group's director of dealing.

"A lot of wealthy Brits have been sitting on significant sums of cash and it appears the recent sterling recovery has given them a confidence boost."

The pound is still weaker against the euro than a year ago but has clawed back some value in the past two months.

While its prospects remain uncertain - sterling's recovery suffered a setback last week when Standard & Poor's, the credit agency, lowered its outlook for the UK - analysts believe it will continue to strengthen.

Adam Jordan, private client dealer at Moneycorp, said people who had been tentatively searching for properties abroad were now starting to buy.

Last week Moneycorp transferred more than double the amount of sterling into euros compared with the week before. Mr Jordan said the euro was trading at the top end of its recent 1.09-1.14 range against the pound and any move above that was likely to trigger greater appetite from property buyers.

"It will be interesting to see if the highs are retested in the next few weeks," he said. "The pound briefly broke out of the range last week but the improvement was subdued by the S&P data."

The other incentive for buyers are the recent price falls, which have spread across Europe, hitting most areas. Nick Barnes, a partner at Knight Frank, the agent, said nowhere had escaped the contagion from the economic downturn, although some markets had fared better than others. The worst hit has been Spain, where prices in some southern coastal resorts have fallen up to 40 per cent from their peak value.

Popular areas of Italy, Portugal and northern Majorca have also suffered price falls of 10-20 per cent. Mr Barnes said Chianti was looking reasonably good value, while buyers could also secure reasonable discounts on the Algarve's Silver Coast.

More recently even prime areas of France have been affected. "Prices are far less distressed in, for example, the Côte D'Azur, as there has not been the oversupply," explained Mr Barnes. "But vendors who now want to sell have got to be realistic with pricing. Values are probably off 10-12 per cent."

Mr O'Sullivan said the price falls might encourage more buyers even if sterling remained at its current level.

"Savvy investors realise that although the pound is 15 per cent weaker against the euro than this time last year, the 30 per cent discount they can haggle on a property's asking price means their pound is now worth closer to €1.40-€1.45."