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Your Money > Mortgages Articles > First time buyers...
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By Alice Lilley
First-time buyers frustrated by their inability to get a foot on to the property ladder in the UK are looking increasingly further afield in a bid to become homeowners, according to recent research. A recent survey from Hiscox, the specialist insurer, found that the perceived advantages of buying abroad among young Britons included the prospect of a better rental income, a simpler purchasing process and the fact that they might be able to combine renting with using the property as a holiday home. Find out how much houses are selling for in your area Steve Langan, UK Managing Director at Hiscox, said: "More young people than ever before are finding their route into the UK property market blocked and are turning to overseas property investment as a more affordable and potentially lucrative investment option." Not all first-time buyers looking to invest abroad plan to rent their properties out, however. A recent survey from UCB Home Loans revealed that many of the growing number of young people considering buying abroad would rather skip establishing a career in the UK altogether and head elsewhere to begin their working lives. Will Eaton, a 33-year-old computer programmer who lives near Courchevel in the French Alps, was not a first-time buyer when he decided to move to France. He can, however, understand why so many young people are choosing to decamp overseas. Eaton said: "I bought a house in Sheffield, where I went to university, just over 10 years ago. However, when I sold it in 2004 I used the capital to purchase a house in France. I was already living in France at the time, and I couldn't see any reason to go back to the UK. Thinking of a buy-to let- property? Visit the Mortgage section "I think my current home, which I bought for 250,000 euros, has gone up about 25% in value over the last three years, although I haven't had it valued. You can buy a house for much less in other parts of France. However, the downside from an investment point of view is that few areas have such a bouyant property market as Courchevel." According to property market commentators, house price inflation in the country you choose to buy failing to keep pace with the UK is one of the main potential pitfalls of buying abroad. Other disadvantages include more complicated legal processes and, of course, the language barrier. Ray Boulger of mortgage broker John Charcol said: "It is potentially a very dangerous option. You need a deposit of at least 20% and the different legal processes can prove very challenging. It's not always easy to resell an overseas property and those who fail to do so may find it very difficult to get a mortgage for a property in the UK." Such issues are one of the main reasons why a growing number of those priced out of the market where they live are choosing to invest in a cheaper part of the UK instead. Research from National Savings and Investments, a government-funded savings account provider, suggests that while a quarter of Britons would consider moving to another country to live more cheaply in order to save for a deposit on a home in the UK, almost the same percentage would be happy to move to a cheaper part of the country for the same reason. Among young people of between 16 and 354 years of age, the percentage that would consider this option jumps to more than a third. This is hardly surprising when you consider the immense difference between, for example, the City of London, where the latest Land Registry figures show the average property price as topping £425,000, and Sunderland, where a typical home costs £128,137. The problem for many cash-strapped youngsters, however, is that even cheaper areas of the UK have become out of reach over the last few years. Boulger said: "Getting on the property ladder has always been difficult, but particularly so in the last few years as house prices have risen in excess of earnings. The average property in the UK now costs £200,000 while the average first-time buyer shells out around £150,000 for their first home." Worse still, despite indications that house price inflation is slowing in the wake of a spate of interest rate rises, the cost of buying continues to rise with the latest Halifax house price index recording a 1.8% jump in UK house prices last month alone. Martin Ellis, chief economist at mortgage lender Halifax, said: "A shortage of both new and secondhand properties available for sale has continued to push house prices up so far in 2007, particularly in London. There are some signs that the increase in interest rates is dampening housing demand, but this is yet to feed through to prices themselves." It is not, therefore, difficult to see why the prospect of buying in Crete, where the average property costs about £60,000, or Bulgaria, where you can snap up a typical house or flat for under £25,000, must seem very appealing to those struggling to get a foot on the ladder. Investment group Cretan Life claims that about 40% of UK inquiries for land or property in Crete now come from first-time buyers, up from just 7% a year ago. Search for a property for sale Andreas Theocharides of Cretan Life said: "The combination of cost and complexity is causing first-time buyers to give up on Britain and invest overseas. With no end in sight to spiralling costs and red tape it looks like this trend is set to gather pace." Useful links
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