Nearly half of overseas property purchases by UK buyers are in a country they know

In its first annual report on the international property market, the Association of International Property Professionals (AIPP) estimates that nearly £20 billion has been spent in this market by UK buyers in 2006: that is in just one year.

The size of this market now is incredible. With so many new markets and new buyers, the possibilities are endless; so are the potential problems. As a non-profit membership organisation, we are working to make the industry much more professional; the size of the market these days and the needs of the client demand that we do so.

The figures show that Spain is still comfortably the number one destination for British people buying property abroad. The report also shows that buyers are wasting millions of pounds by transferring their money through the high street banks rather than using a foreign exchange specialist.

Where are they buying?

Nearly one-third (31.6 per cent) of overseas properties bought by British buyers are in Spain. In second place is the other perennial favourite: France, with a little under one-fifth (18.9 per cent) buying just across the Channel.

This report confirms that, despite the massive increase in emerging markets, nearly half of overseas property purchases by UK buyers are in a country they know, one in which they have spent many holidays and, possibly, learnt the language a little at school. This will surprise many people, including some in the industry. The story of the 2006 market is not just the old favourites though.

Bulgaria is well-established in the market now and barely merits a mention in the up and coming category any more. This report shows that it is now the third most popular country for UK property buyers, with 7.7 per cent of the market, just edging the US into the fourth place on 7.5 per cent. This is a phenomenal position for such a new market. Bulgaria is still one of the fastest growing markets, according to the report, but it is an established destination now for the UK buyer and its ascension into EU membership will perhaps help it further.

Seeing it sandwiched with Spain and France above and the US below highlights the level the Bulgarian market has reached. No market has grown to such prominence so quickly.

Italy sits just above a range of other destinations with 2.8 per cent of the market. Another long-established market and familiar country shows that the UK buyer has not yet fully embraced the emerging markets, preferring to buy where they know.

Why are they wasting money?

Perhaps the figures above give some indication as to why thousands of UK buyers are wasting millions of pounds when buying property overseas.

The evidence on property buying shows that people are sticking to what they know. Many of them are doing the same when it comes to sending their UK money overseas to purchase the property. They are asking the institution they know, the bank, to do this for them. Almost every time research is done, the results show that a foreign exchange specialist will offer a more competitive rate than a high street bank.

This is important for the consumer to recognise: foreign exchange companies know their market well, specialise in the service you seek and, in many cases, they save you a significant amount of money when buying property overseas.

It is estimated that 25 per cent of the international money transfers for property purchases are undertaken by foreign exchange specialists with 75 per cent done by the banks. The figures will be clearer when AIPP releases its full report later in 2007, but early indications suggest that approximately 200,000 purchases have been made by British buyers in the calendar year of 2006. On the percentage split above, that means 150,000 money transfer transactions for property purchases have been placed with the high street banks.

AIPP’s figures show that the average amount spent on an overseas property by UK buyers is £98,166.67. Based on the Table 2 above, 150,000 buyers will each have wasted £2,757.49 on their overseas property purchase this year as a result of poor exchange rates. That equals nearly £420 million in wasted money in one year alone.

The full AIPP report: “The Year in International Property, 2006” will be completed in early 2007. The early findings show that much of the UK buyers’ money has gone into the established markets, but Bulgaria shows the possibilities ahead for the other emerging markets: you can become a major player within five years. It is also clear that, though the UK buyer clearly knows his Spanish finca from his French gite, they have not quite grasped the most cost effective ways of moving money around the property-buying globe.

About the AIPP

The Association of International Property Professionals (AIPP) was formed in March 2006 to enhance the professionalism of the international property industry. The intention of the AIPP is to develop a more positive profile for the overseas property industry; to improve educational and training standards; to ensure purchasers receive high quality customer care throughout the sales process; to provide a collective voice for the industry on key issues; and to provide regulation, thereby giving the public an industry reference point and recognisable kite mark for quality assurance. To become a member of the AIPP, companies must have experience of the market, must submit to industry standard training and abide by the association’s Code of Conduct including its Disciplinary Procedure.

The international property market reports by the AIPP look at the historical performance of the market. It is not its role to make predictions on the market. The Association collates actual figures from its Members to provide definitive guidance on market activity.