Savills International has today published research that shows that France has recently overtaken Spain as the most popular destination for people to invest in a second home. HomeAway.co.uk has also revealed information that confirms this trend. France is seen as a country with much greater stability than Spain and people are more confident that the value of the property won’t decline. It is also a location that is easier to reach for people in the UK and can be travelled to without taking a flight.
Areas that are attracting the wealthy are the least affected in the downturn and these are areas of France – most notably the Alps and other areas of southern France, as well as the Algarve region of Portugal. The fact that the very wealthy have remained less affected by the economic downturn has meant that the areas with the highest property values have maintained their value. Other such areas include some of Italy’s high end locations and certain Spanish islands including Mallorca.
UK buyers consider several factors when choosing where to invest in a second home. One of the most influential factors is proximity to an airport as this can significantly reduce the travel time required to get to the home. Other important factors include having a well developed tourism infrastructure and whether there are good bars and beaches close to the home. Children’s entertainment as well as golf courses are also an important factor.
In France, Italy and Switzerland, buyers have typically opted for older, traditional style properties, while in the US and Cyprus, and also albeit to a lesser extent in Spain and Portugal, investors have tended to buy more modern properties. This reflects the volume of new build development in these locations.
Holiday home owners like outdoor living, reflected in their preference for balconies and terraces with their properties. Buyers like the modern conveniences of their primary home to be available in their holiday homes. Internet connection is on the rise, particularly in long haul destinations. Air conditioning is in half of properties and 80% of home owners have access to either a private or shared swimming pool.
More than half (55%) of our survey respondents said that income generated from letting their property partially covered costs, helping them to mitigate against current global economic conditions. More interestingly, almost a third of respondents said that rental income completely covered their costs and 13% indicated it made them a comfortable profit: Over one in 20 holiday homes generated in excess of £30,000 per annum.
A 2011 survey of more than one thousand tourists who were looking to rent holiday properties showed that similar to traditional overseas buying trends, Spain, France, the UK, Italy, Portugal and the United States topped the list of favourite destinations. They were followed by areas in south eastern Europe, Cyprus, Greece and Turkey, with Ireland in tenth place. These are typically summer destinations, with almost 80% of holiday rental requests being for the months April to September, with peaks in July and August.
In areas where prices are thought to have bottomed-out, most notably in selected US locations, investors are now looking at high yield potential and capital appreciation opportunities that will come with recovery. This demonstrates that appetite for investment has not disappeared.
There are investment opportunities where low house prices and high rental income can generate strong yield potential, especially in areas of the Caribbean, such as the British Virgin Isles and parts of the US, South Africa, the Spanish islands and in Portugal’s Algarve region. This demonstrates that despite comparably low capital values in these locations, holiday home rental demand supported by strong tourism fundamentals, remains strong.
Rebecca Gill, research analyst at Savills International and the author of the report, said: “Clearly, holiday home owners and tourists share similar preferences for overseas properties. Strong underlying “lifestyle demand” for a property helps to support an investment case. It is these fundamentals that drive longer term capital appreciation and attract rental income.”
Tim Boughton, General Manager, HomeAway.co.uk commented “The holiday rentals market is one of the fastest growing sectors in the travel industry with around one in five people now opting for this type of accommodation over a hotel due to the value and experience it offers. This is good news for today’s lifestyle-motivated buyers as it generally means they can be assured of a strong rentals market which will help contribute towards costs.”