What are the factors that will affect overseas homebuyers in 2024? With borrowing costs about to come down and visas (maybe) becoming less necessary, Property Guides polishes up its crystal ball and sees a positive year ahead for home buyers abroad and the international property market in 2024.
The rush that property markets enjoyed when the Covid lockdowns ended in 2021 was fizzing out by the second half of 2022. Then this year, geo-political events combined with post-pandemic economic fragility helped trigger soaring inflation, interest rates hikes and all-round uncertainty.
Some overseas buyers will have been spooked by the situation. But signs point to conditions easing up next year. These are the key considerations for house-hunters and the international property market in 2024.
Could it be time to buy a second home in 2024?
Economic conditions
Property-buyers will be keeping a sharp eye on interest rates as we ring in the New Year, both in the UK and wherever they are planning to purchase. As central banks slowly regain control of inflation, and economies feel the pinch of high rates, expectations that 2024 will be a year of cuts are mounting. Which should mean cheaper mortgages entering the market. The question is when? The answer to that will depend on where you are.
In the UK the Bank of England (BoE) has warned against getting too hopeful just yet. At the same time, markets are quietly confident of three rate cuts during the second half of 2024, with the BoE base rate predicted to level off around 4.5% from its current 5.25%.
Things are expected to happen quicker across the Channel. From an all-time low of -0.5% and after 10 consecutive hikes, the European Central Bank’s benchmark rate has stabilised at 4%, which is also a record high in the ECB’s 25-year history. After drastic drops in inflation and with dark clouds gathering over some eurozone economies, analysts suggest there could be a rate cut as soon as March 2024. Some forecast a benchmark rate reduction to 2.25% by the end of the year.
Meanwhile, across the Atlantic the earliest prediction for a cut of the Federal Reserve’s benchmark rate, currently at 5.25 to 5.5%, is as soon as March. But there is growing opinion that this won’t happen until July. As with all these predictions, there’s no certainty and it’s a moving target.
The key takeaway for house-hunters is that foreign mortgages are likely to become more affordable in 2024. Just be prepared to have to wait till the second half of 2024 for this to happen.
Prices
Generally, property prices in 2023 have been unexpectedly resilient across Europe and other key markets. In Spain, banks are forecasting a rise of 2% to 3% during 2024, with demand increasing as mortgage rates fall and lack of stock in some areas helping to drive things.
In Portugal, the latest RICS/Ci Housing Market Survey (October) points to a flat market stating: “Looking forward, the picture for the coming three months contrasts with the outlook in a year’s time as the former shows some downward pressure being anticipated whereas expectations over the latter time-frame show a marginally positive net balance.”
France is looking forward to the Paris Olympics, which should provide a boost to its market, especially the rental sector.
Reforms to rentals
Watch out for changes to rules governing holiday rentals in various destinations in Europe. Next spring the French Government is looking at passing new laws for the short-term rental market, including Airbnb – not only could they soon attract VAT but also see a reduction in the tax relief they currently enjoy.
Meanwhile, in October Portugal introduced new rules governing the allocation of its AL licences, which are required for all short-term holiday lets, as part of its ‘Mais Habitação’ directive. Key changes which will have an impact going into 2024 include the suspension of new AL licences for apartments, rooms or hostels integrated into an autonomous fraction of a property.
Coastal areas across the country and the entire Algarve are affected. Homeowners with an existing AL licence were required to prove they were still operating holiday accommodation before 7th December this year or risk having the licence revoked. Existing AL licences will be assessed in 2030 and now any new licences granted will need to be renewed after five years.
Similarly, new regulation introduced in Catalonia could limit opportunities within in its short-term rental market. It means all homeowners renting to tourists need to apply for a licence within the next five years, with a municipal limit of ten licences for every 100 residents.
Shift in visa landscape
Following years of offering wealthy foreigners the opportunity to buy property and gain residency through investment visa schemes, there is a growing trend for European governments to limit this option or do away with it altogether. Your accessibility to so-called ‘golden visas’ may well be different in 2024 compared to 2023, depending on the destination.
Golden visas typically require applicants to invest a minimum amount in property (usually €500,000) and prove a certain level of income. In return they receive permanent residency for themselves and their family, often with loose requirements for how long they need to spend in the country.
In October Portugal passed a law abolishing the property investment routes for a golden visa (other types of investment are still available).
A pioneer of this type of visa, in October Portugal passed a law abolishing the property investment routes for a golden visa (other types of investment are still available). The country is also phasing out its popular Non-Habitual Resident regime, which offers tax breaks for new foreign residents. Applications will be accepted until the end of 2024 so long as preparations for a move to Portugal are made before the end of 2023.
Elsewhere, earlier this year Ireland scrapped its version of the visa altogether and in August Greece increased the required level of investment for golden visas from €250,000 to €500,000. Let’s see what 2024 brings.
ETIAS and visa-free travel
British and other non-EU citizens, including second homeowners, can enjoy one more year of travelling to and from Europe without having to tackle a new electronic border control system.
The European Commission is in the process of rolling out its European Travel Information and Authorisation System (ETIAS), designed to help its member states monitor foreigners entering and exiting their borders. All non-EU citizens who don’t require a visa for short stays to an EU country will soon need to be registered with ETIAS to travel to the EU (technically the Schengen Area plus three other nations).
Under ETIAS, travellers will need to pay a registration fee and upload their biometric details to a database, enabling electronic checks at borders and doing away with the need for passport stamps. That is, assuming it all works! The system was due to go live in 2024, but the European Commission now expects it to be ready to launch in 2025.
Meanwhile, 2024 could see increased pressure on the French and Spanish governments – and potentially any other popular expat destination – to relax the visa rules for British property-owners. A bill that would allow Brits to travel to and from their second home in France without the need for a visa and outside the limitations imposed by the 90/180 visa rule came close to being approved this year. It was passed through lower parliament but was rejected in December by the upper house. In Spain, there are similar calls for visa rules to be relaxed for British homeowners. This issue isn’t likely to disappear anytime soon and could develop further in 2024.
The future is getting greener
Environmental, social and governance (ESG) regulations are becoming increasingly prominent in the EU’s property sector. Most notably, the climate emergency and the need for building retrofitting are gaining importance, fueled by the hottest summer on record in 2023. Developers launching new projects next year and onwards won’t be able to avoid the need to meet greener regulation.
Critically, 2024 is year the EU’s Energy Performance of Buildings Directive (EPBD) is due to be signed off. Across the EU it includes minimum energy ratings for homes of E by 2030 and D by 2033, rules which will apply to rentals, as well as the phasing out of fossil fuel heating.
Wherever you are buying within the international property market in 2024, Property Guides and Your Overseas Home will be there to help you.