Britons spending record amounts on foreign property investment

The Family Spending Report has found that Britons are now spending £6 billion each year on second homes, reflecting the growing trend in property investment abroad.

The report was based on figures gathered by the Office for National Statistics survey, which pointed to an increase of £4 billion since 2002. Although it also includes second houses bought within the UK, the dramatic rise has largely been attributed to the increased popularity of holiday homes and buy-to-let properties in mainland Europe.

For the individual household, the £4 billion increase indicates an average of around £4 extra being paid each week on second homes, and the pattern has been seized upon by a number of commercial banks.

Abbey has established the Spanish Home Finance Team which will specialise in providing advice and guidance to the growing number of Britons seeking to buy property in Spain. Jeff Scott, Abbey's head of specialist lending, has acknowledged that Spain is one of the most popular choices with the English market and has referred to the move as the "logical next step" in this trend.

"By taking advantage of cost synergies across Abbey and Banco Santander, we have been able to offer overseas mortgages at very attractive rates. Increasing numbers of UK residents are buying properties abroad, whether it is retiring overseas, investing in holiday homes or even first-time buyers priced out of the market here," he said.

With the government preparing to allow investment in residential property through tax-efficient self invested personal pensions (Sipps), it is anticipated that there will soon be a renewed surge in the interest in the foreign housing market, and it is expected that even more UK residents will look to property in mainland Europe as a way of remaining self-sufficient in old age.

Alex Wright, director of foreign exchange specialists HIFX, revealed to MyFinances.co.uk that because of the relatively flat UK housing market, many investors have been seeking to make a profit on holiday homes and buy-to-let properties and he suggested that the situation is about to intensify.

"It could get even busier with Sipps covering overseas property from April 2006. There is so much activity that December sees the launch of a specific Overseas Property Industry trade show (OPP Live) at Alexandra Palace on eighth and ninth," said Mr Wright.