Assetz® News - Calm across the channel for investors?

Calm across the channel for investors?

17th August 2009 |

The property market in many countries has been hit hard by the credit crunch, as the ability of individuals around the world to raise finance has been hit in the midst of the international financial crisis. But the effects have not necessarily been uniform.

In the US, where the whole crisis started and in the UK, where banks have had a high level of exposure to subprime debts across the Atlantic, the level of exposure has been high and the damage well documented. With Lehmann Brothers crashing and British banks either being nationalised or partly taken into public ownership, the crisis has been deep and the supply of mortgage finance severely restricted.

One way this has affected the property markets in other countries is by limiting the ability of Britons who may invest in property there to raise finance in their own land, while also having an impact through the wider effects of the whole crisis on the international economy.

For these reasons, France has still seen a property downturn, with the country enduring a recession of four successive quarters before last week's news that growth resumed in the three months between April and June.

Yet it remains the case that in France, the mortgage market is still favourable compared to Britain, since banks in the country had little exposure to the follies taking place in the US. This point was made in an article on overseas property finance by Micheal Axelrod, an overseas mortgage expert with Conti Finance for mortgagesoverseas.com.

He stated: "French banks are immensely careful about whom they lend to and, to limit risks, most of them spread their investments much more widely than those in the US or UK. The French system also means that lending is very much based on affordability and only those people who can really take on the debt are allowed to do so."

As a result, he noted, banks there will still be willing to lend at 100 per cent loan-to-value (LTV) levels to the right people, with 80 per cent LTV deals being "pretty normal".

This could make it a good time to invest overseas, Mr Axelrod stated, noting that other countries are also more widely open for business than British and American banks. This, he suggested, could be fortuitous as interest rates are low in most places. In France, of course, the main refinancing operations euro rate applies and has fallen from 3.75 per cent last October to one per cent now.

Indeed, France may be ripe for investment now, according to property firm Leggett Immobilier. Last week the portal stated that buyers are becoming unusually busy for August, having decided prices are at their lowest level. The company commented: "We have not seen so much choice for good quality properties at the right money in years."

So for those looking to buy in France, now may indeed be the time, not least if the market is indeed at its bottom and set to rise due to gaining a confidence boost with news that the country is out of recession.