As governments prepare to introduce new taxes to combat global warming, and in particular the relentless rise in air travel, one international property agency predicts that property prices in some areas popular with second home buyers could fall.
The call for new taxes on flights to reduce carbon emissions could impact the prices of properties, according to Tribune Properties, who specialise in the sale of overseas property to second home buyers.
‘There has been more discussion and calls for action recently over the impact that air travel is having on the environment,’ say Tribune, ‘And one of the most obvious ways to cut air travel is to raise the price of travelling through taxes. It’s a win-win situation for governments, more tax revenue and being seen combating global warming at the same time. It’s only a matter of time before cheap air fares on the scale we see it today comes to an end’.
Owning a second home and a property abroad has shown to be an aspiration for the majority of UK residents by recent surveys, and low cost carriers have opened up new overseas property markets by flying to destinations not covered by other airlines, or forcing flight prices down where they compete directly with more established carriers.
Property prices within a one hour drive of regional airports served by the low cost airlines have tended to escalate in recent years, and it is these areas that would be hardest hit by any increased taxes on flying.
The areas which would feel least impact according to Tribune Properties would be northern France, which many UK second home owners access via ferry and the Channel Tunnel, and areas where owning a property abroad was in vogue long before the new airlines started, and when air fares were proportionately higher than they are today. Access to France from the UK has improved recently with Eurotunnel cutting the journey time by twenty minutes.
‘The Costa del Sol for example we feel wouldn’t be impacted much by increased air taxes – although over development could bring prices down there anyway’.
But there is a warning that the lower priced end of the market could be hit more than the top end.
‘There has been a significant increase in second home ownership in the last decade’, say Tribune. ‘Gone are the days when it was just the wealthy who owned an overseas property. Developers in Spain, Greece and Cyprus have built apartment blocks with units of two and three bedrooms that are affordable for a lot of middle income families. Given that mortgages are readily available and it’s often just twenty per cent of the asking price that needs to be found an overseas home has become reality for millions of Europeans. But if air fares increase significantly and the holiday makers who rent the owners apartments and villas declines, quite a few will need to sell as the rental income pays the mortgage. There could be a glut of properties come to the market which will send prices downwards.’
Exceptions to the rule could be in the two European tax havens of Monaco and Andorra, where there is no income tax for residents.
‘Historically tax havens have been popular no matter how the economy is. When someone buys a property in Monaco it often doesn’t matter to them if it’s a few million Euros as they’re going to save more than that in tax during the time they stay there. Andorra is slightly different as it’s a tax haven but also people buy ski apartments there, adding to demand’.
Andorra property prices have risen an average of ten per cent a year in the last decade, and some predictions are for that figure to be closer to fifteen per cent for 2006.
If governments do start introducing new air fare taxes to slow and possibly reverse the rise in air travel there could be good news for some property buyers though.
‘In some areas the second home market has increased prices significantly, with many of the younger local population being forced to move away from their towns and villages’, say Tribune Properties.
‘The UK and US populations are quite mobile, but in some countries popular with holiday home buyers there are three or four generations of the same family in a village or town. But as overseas property buyers have moved in and pushed prices up, the younger generations ahave been forced to look away from these popular areas because they cannot afford a property in their home town anymore, and a lot of the local employment has become seasonal. If real estate prices come down they might be able to afford to live in the villages where they were brought up if they choose to do so. Some will still move away but at least they will have a choice.’
Conversely, far from changing traditional towns and villages into holiday resorts, overseas property buyers can sometimes have a positive affect on preserving traditional village life.
‘In France for example, many of the rural villages were dying a slow death as the younger generations moved away to the bigger towns and cities to find work. British second home buyers have revived the villages by buying run down properties and renovated them, breathing new life into the communities. The property market is nothing if it isn’t adaptable,’ conclude Tribune, ‘And while there will be regions that will suffer as a result of a declining market, there will be winners too.’