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AIPP report: International Property Market 2006

‘In 2006, Britons spent nearly £20 billion on overseas property yet most of the figures produced about the market are made up by companies trying to sell property,’ said Paul Owen, chief executive of the Association of International Property Professionals (AIPP).

‘In a market of this size, it is incredible that no reliable statistics have been produced.

‘Most of the so-called reports are produced by international property companies who take their own sales figures, guess their share of the market and do the calculations to show ‘market statistics’; actually, they are nothing of the sort. They are guesses, some well-qualified, some not and some more ‘creative’ than others.’

Established in 2006, the AIPP was set up to improve standards of professionalism in the market. The role of the non-profit organisation includes the production of independent figures.

In its first annual report on the international property market, the AIPP estimates that during 2006 nearly £20 billion was spent by UK buyers overseas with the average price of a British-owned property costing £98,166.67.

Based on sales to the end of 2006, the broad and unbiased sample group included more than 30,000 actual purchases sourced from foreign exchange transactions and independent of agents, developers and countries. The report is the first of its kind as the market has not previously had official data.

‘Our figures are based on sound factual foundations without an underlying sales message,’ said Mr Owen.

Market in need of definitive figures
Britain’s own Office of National Statistics (ONS) has the most reliable figures but they are also flawed; only taking account of the number of households owning property overseas. This does not take account of households owning more than one property overseas and that is a sizeable number.

The ONS last produced figures on the state of the market in 2003/04. These showed 231,000 Brits owning property overseas with a value of £23 billion. This had increased from £7 billion in 1994/95, an increase of 228% in 9 years.

The average price of property, estimated by the ONS and using statistics from the European Union, placed the average value of a British-owned overseas property at £99,567.

The AIPP’s 2006 report shows the average price as £98,166.67. Being three years later, do AIPP’s figures mean that prices have not gone up in that time?

‘Rather than showing no appreciation in property prices in that time, it actually reflects the emergence of new markets with significantly lower property prices such as Bulgaria and other former Eastern Bloc countries,’ explained Mr Owen.

Ambitiously high?
If both ONS figures and AIPP figures are correct, does this mean that the transactions completed in 2006 alone nearly matched transactions in all years up to 2003/04?

‘We doubt that is true,’ said Mr Owen. ‘Remember that that ONS figures only show the number of households owning, not the number of properties owned overseas; that leaves a large gap in their figures. If nearly £20 billion of spending in one year sounds high, I assure you it is likely to be conservative.’

The AIPP estimate that their Foreign Exchange Members (with Member numbers of 177, 8 Members are Foreign Exchange companies) constitute 15% of the foreign exchange market for property transactions by UK buyers (refer Table 1.3), giving a total figure of approximately 200,000 purchases by UK buyers in 2006. (NB. This is purchases, not 200,000 individual buyers; many will have bought more than one property overseas).

Results – where are they buying?
AIPP’s 2006 Report shows that Spain and France are still the top two markets for Britons buying abroad.

Nearly 1/3rd (31.6%) of overseas properties bought by British buyers in 2006 are in Spain. In second place was the other perennial favourite France with a little under 1/5th (18.9%) buying just across the Channel.

‘This report confirms that, despite the massive increase in emerging markets, half (50.5%) 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 at school,’ continued Owen. ‘This will surprise many people, including some in the industry. The story of last year’s market was 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 3rd most popular country for UK property buyers, with 7.7% of the market, just edging the US into 4th place on 7.5%. This is a phenomenal position for such a new market. Bulgaria is still one of the fastest growing markets, according to the research, but it’s an established destination now for the UK buyer and its recent 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, in 5th place, sits just above a range of other destinations with 2.8% of the market.

Regular, reliable, independent reports
When AIPP was first set up in early 2006, there was a report on the international property market in the national press. The sources (all claiming to be definitive) gave figures ranging from 250,000 to two million overseas properties owned by British people. It was a very clear indication of a market in need of balance, independence and authority.

In a market devoid of authority or independence, Mr Owen said the AIPP’s figures will become definitive and provide official market data that is long overdue.

‘The market needs factual data. The AIPP will not do predictions, conjecture, up and coming hotspots etc. Our figures will reflect what has happened each year and we will leave the crystal ball to others.

‘There just has not been an official body with the time, knowledge and desire to produce the information; the AIPP fills that void,’ concluded Mr Owen.

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