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Global Market Insight 30 November 2014

Chestertons Overseas Research and Lifestyle CORAL Spring 2014


Following one of the wettest winters on record spring has sprung and the focus of the second home market steers away from ski chalets in the Alps and winter sun retreats in Barbados and towards the Mediterranean, specifically the South of France and Mallorca. In Britain the economy is growing, inflation has fallen to a four year low and house prices in London are comfortably ahead of their pre-recession peak, with the South East just 1.5% below its previous peak. Factor in the strength of the Pound against the Euro coupled with record low interest rates both at home and on the continent, and it is clear to see that conditions are ripe for those looking to purchase a property abroad.

The South of France is widely considered to be one of the most expensive and popular destinations for second home owners and high-net-worth individuals in the world. Stretching from Marseille in the west to the Italian border in the east the region is home to some of the most exclusive addresses in the world such as St Tropez, St Jean-Cap Ferrat and Cap d'Antibes. Although house prices have dropped throughout France there is a growing optimism that 2014 will prove to be a turning point for the wider property market, whereby the higher end of the market has proved robust to the testing economic climate. Much was made last year of President Hollande's proposed 75% wealth tax on high earning French residents, but at the end of 2013 the tax was approved with certain alterations. The tax is applicable to companies and organisations paying salaries above €1m, not on individuals and households as this would have significantly increased the number of people eligible for the tax.

As of the 1st September last year the new changes to capital gains tax (CGT) were introduced in France. The rate of tax of 19%, plus a 15% social charge, are unchanged but second home owners will be exempt from CGT once they have owned a property for a minimum of 22 years, instead of the previously required 30 years. Following five years of ownership a 6% discount on CGT will be available, increasing every year there after. Furthermore, in an attempt to stimulate the housing market, property sales completed before the 31st August this year will be eligible for a supplementary discount of 25% on both the tax and social charges.

The appeal of Mallorca has certainly strengthened among British buyers looking to own a second home or live permanently on the island. Latest figures from the National Institute of Statistics show that in 2013 there were 19,623 Brits now living permanently in Mallorca, together with an estimated 60,000 second home owners. Mallorca boasts one of the most spectacular and beautiful coastlines in Spain with its clear blue waters, secret coves and private beaches, not to mention the trendy cafés and restaurants and abundance of historical, cultural and leisure activities in areas such as Andratx, Pollensa, Deia and Son Vida.

Last year the Spanish government announced a new law, which allows non-EU buyers of residential property to become Spanish residents if they purchase a property worth €500,000 or more. It was hoped that the "Golden Visa" would lead to a marked increase in foreign investment from Asia and the Middle East and this has clearly been the case as Taylor Wimpey España reported a 2,500% increase in Middle Eastern enquiries in comparison with 2012.