France increasingly eclipsing Spain as the favorite destination for UK property buyers to invest - Essay Example

INTRODUCTION If you thought the overseas property market is dying due to the recent financial upheavals, thenthink again. The most-recent and the biggest-ever study of overseas holiday homeowners has revealed that in spite of price falls ranging from ten percent in France to fifty percent in Spain, the number of Britons purchasing homes in other European countries has actually increased in course of the recent recession. In 2006 for instance, some 385,000 Britons owned holiday homes in other European countries, a figure that has since increased tremendously to as high as 430,000 by 2010 (Avella, 2004). Reflecting travel and tourism trends, investments in long haul holiday destinations like Caribbean, Asia, and Africa, which generally offers warm climates enable holiday home owners to benefit from longer visiting seasons and therefore, longer rental periods. Correspondingly, holiday homeowners have been taking advantage of the short-term letting in the year-round city-break market (Keller, & Bieger, 2008). However, compared to inland nation and urban locations, it is beach holiday destinations that seem to attract most second home investment. Motivated both by the letting potential and their own holiday plans, over half of UK overseas properties owners have bought homes in coastal areas as can be demonstrated by the graph below. Due to this changing environment in the property market in Europe, we are going to explore the attractiveness of a number of countries in terms of overseas property investment. In this case, we will focus on three European countries namely; France, Italy, and Spain. METHODOLOGY Research design In this research study the researcher will make use of the quantitative techniques to get information that will be helpful in advising clients in Italy, France, and Spain on whether they should sell their property investment in any of those three countries or continue holding on to them. Theoretical Model: The main objective of the study is to identify which among Italy, France, and Spain is more attractive as a home holiday investment destination to the UK property investor. By answering the question on whether on which among Italy, France, and Spain is a better home holiday destination currently, we will be able to advice our clients on those countries (Italy, France, and Spain) on whether to continue holding on to their property investment or to sell them. Sample Framework: In coming up with appropriate information to help ascertain which among France, Italy, and Spain is a better property investment destination at the moment, we will be required to ask property investor in UK a number of a question on each of these countries and score them on a 5-point Likert Scale before using a Frequency distribution as a quantitative technique to draw a conclusion. Sample Size and Technique: The sample of this research will be a total of ten property investors residing in UK. The research will make use a number of sampling techniques namely; a. Random sampling; questionnaires will be issued at random to people who have properties in all or any of the three countries (Italy, France, and Spain), something that is expected to ensure that each property investor residing in the UK is accorded an equal chance of participating in the research. b. Convenient sampling; because of the difficulty that might be involved in identifying a UK citizen who is not only conversant but also up-to-date with overseas property investment, it might be a bit difficult to achieve randomness in this research. However, in order to bypass this handicap it therefore becomes necessary to issue a questionnaire or hold an interview with any UK property investor that the researcher bumps on, which is a measure that will help the researcher achieve randomness in this research. c. Purposive sampling; because of the complexity of some of the issues, reaction of some research questions will require the input of particular property investor. This therefore calls for an approach that will see to it that these property investors are specifically interviewed without inconveniencing others who might not be in a position to answer such questions. Data collection: The questionnaire will be distributed to ten potential overseas property investors. The researcher will also used open-ended interview just as is recommended by Yin (1984) to broaden the depth of the data gathering, as well as increase the sources of information. Sources of data The data that will be used in this research study will come from two major sources namely; primary and secondary data (steward, 1999). The primary data will essentially involve; Interview: in this case the researcher will interview the ten respondents (UK overseas property investors) from where capturing the information they provide in his/her questionnaire. The research expect that the response of the ten UK overseas property investors will enable his/her clients in Italy, France, and Spain in making investment decision on selling their holiday properties in any of those countries (Italy, France, and Spain) or continue renting them. The source of secondary quantitative data will be the various records on overseas, and especially Italy, Spain, and France, holiday homes investment in the ministry and the collection of periodicals containing information on the same. Permission will be sort from the respective ministry for the use of these documents. A number of academic reports that might be informative and are easily available in the library will be used, not to mention several travel and tourism reports on these three countries that are scattered in the Internet. Data recording The data recording methods that will be used by the researcher is that of capturing the interview with a respondent with a tape recorder. The rationale of using this method is to avoid time-wasting and the inconveniency that might be occasioned by the interruption from the researcher that will undoubtedly occur as he/she tries to scribe short notes on the answers that have been provided by the respondent. Target group The target group in this research study will be Britons owning or intending to own holiday homes in Italy, France, or Spain. The target group of therefore research appears to be high-end citizen who are conversant with the overseas property market. Limitations of the study The study will obviously have to contend with a number of bottlenecks. Some of these limitations that the research is likely to encounter include; Inadequate fund: the fact that this research seek to get response from UK holiday home owners in Italy, Spain, and France shows the high-end respondents that it will be targeting. Getting access to this kind of people is not very easy, and at times might involve travelling long distance just to have them fill a questionnaire. Lack of cooperation from respondents: There is a very high probability that the potential respondents might not entirely be willing to fill the questionnaires with proper information. They might even lack enough time to do the same and therefore end-up providing answers that are partially factual. Distorted responses: Every research study carry with itself the risk of its respondents providing responses that are wrong either unintentionally or even at times intentionally with a purpose of distorting the information (Fatt, 2002. Pg. 28). This is a serious challenge to the researcher because it has the effect of collecting data which ultimately leads to wrong conclusion, interpretations and hence recommendations. The research personnel: this is a high numerical and analytical research study that will require research assistants who are endowed with superb numerical and analytical skills. Hiring such a workforce is obviously an expensive venture, which is the same case with outsourcing them. Training the research assistant that the researcher already has in order to equip them with the requisite skills to handle this task is also an expensive undertaking. Confidentiality: Some respondents will definitely not be comfortable sharing information that they give with third parties (Green, & Salkind, 2005). This therefore calls for the researcher to assure all respondents that whatever information that they divulge will not be shared with any third party whatsoever. Anonymity: The researcher will be required to first assure potential respondents that their detail will not be divulged to a third party under whatever circumstance. And if such information has to be shared with any other third party, the researcher has to seek clarification and consent from the Consent: The researcher will have to secure consent from the relevant authorities before embarking on carrying on with this research study. The researcher will also be required to seek the consent of potential respondents before issuing them with questionnaires or even interviewing them. Willingness: It is incumbent upon the research to make it clear to the respondents that their reaction to the questions in the questionnaire will be solely at their free will and no coercion of whatever nature will be applied whatsoever. This essentially means that they are free to decide not to answer certain questions if in their opinion it is not proper to answer such questions. It also means that they can withdraw answers that they might have provided as long as it is within reasonable time before the research is concluded (Leech, et al, 2005). RESULT AND ANALYSIS In this research we will use a questionnaire to assist us in capturing the data that will enable us assess the respective attractiveness as holiday home investment of the three countries Let’s have an illustration of how this questionnaire will assist us in our research in order to make the point clear. If for instance the researcher want to see whether the France property provides an all-year round income of over ?400 per week, 1 will mean that the respondent approve overwhelmingly the opinion that France property provides an all-year round income of over ?400 per week (Weinstein, 2010). If on the other hand 5 carries the day, then that will mean that that particular person disapprove of the opinion that France property provides an all-year round income of over ?400 per week. In this research study, a total of 10 copies of questionnaires will be issued randomly to various prospective overseas home owners across UK. All this questions in the questionnaire are meant to assess the attractiveness of each of the three states (Italy, France, and Spain) to a UK citizen as an attractive overseas property investment destination. In fact, one of the reasons why an interview was necessary was because an outright, I agree or I disagree cannot be enough to make us come up with proper findings. It is only through an interview that we can get more valuable information on our research that will greatly assists us in drawing conclusion (Classon, & Dormody, 2001). After the interview and the filling of the questionnaire below is a tabular format of the results that have been gotten; From this questionnaire, there are a total of 30 questions that will have choices ranging from 1 - strongly agree to 5 - strongly disagree or; Strongly agree (SA) – 5 Agree (A) – 4 Neutral (N) – 3 Disagree (D) – 2 Strongly Disagree (SD) - 1 Below is the questionnaire results that have been gotten from the research survey; Calculating Means and Standard Deviation: Example Question one: 0 people strongly disagreed, 1 disagreed, 1 had no opinion, 4 agreed, 4 strongly agreed Data set (1, 3, 4, 4, 4, 4, 5, 5, 5, 5) Therefore; Mean = 0(1) + 1(2) + 1(3) + 4(4) + 4(5) = 41/10 = 4.1 Standard deviation: question one: 1 – 4.1 = -3.12 = 9.61 3 – 4.1 = -1.12 = 1.21 4 – 4.1 = -0.12 = 0.01 4 – 4.1 = -0.12 = 0.01 4 – 4.1 = -0.12 = 0.01 4 – 4.1 = -0.12 = 0.01 5 – 4.1 = 0.92 = 0.81 5 – 4.1 = 0.92 = 0.81 5 – 4.1 = 0.92 = 0.81 5 – 4.1 = 0.92 = 0.81 Therefore: 9.61 + 1.21 + 0.01 + 0.01 + 0.01 + 0.01 + 0.81 + 0.81 + 0.81 + 0.81 = 14.1 We divide with 9 (one less than our data set) 14.1/9 = 1.6 Variance: Standard deviation squared or S2 i.e question one: 1.62 = 2.56 Range: the difference between the minimum and the maximum i.e question one range = (2, 3, 4, 4, 4, 4, 5, 5, 5, 5) = 2 – 5 = 3 Median: the centrally place number i.e question one; (2, 3, 4, 4, 4, 4, 5, 5, 5, 5) = 4+4=8/2 = 4 Mode: the most frequent number i.e question one: (2, 3, 4, 4, 4, 4, 5, 5, 5, 5) = 4 and 5 By using the percentages of the modes of the numbers we can get to know distribution of the responses according to each country. Below is a table showing the modal percentages of the number France Italy Spain Strongly Agree (5) 60% 40% 50% Agree (4) 20% 10% 20% No opinion (3) 0 10% 10% Disagree (2) 10% 20% 10% Strongly Disagree (1) 10% 20% 0 We can group the percentages of group modes into two categories namely; Agree and Disagree. This we can do by combining strongly agree with agree to get agree and strongly disagree with disagree to get disagree France Italy Spain Agree 80% 50% 70% Disagree 20% 50% 30% Above is graphical distribution of the responses according to the three countries (France, Italy and Spain) Findings: From the graphs there is no doubt that a higher percentage agreed that France was a better overseas property destination than both Italy and Spain. Closely following France is Spain which on its part scored better than Italy. Analyzing this results and the information provided by the respondents in course of the interview a number of finding can be derived from the research. Over half of the respondents in the research stated that income generated from letting their properties holiday homes partly covered costs, thereby assisting them to mitigate against the aftershocks of the recent recession. Interestingly, almost a third of the respondents stated that rental income covered completely their costs while 13% indicated that it made them a comfortable profit. At least one in every twenty holiday homes generated over ?30,000 per annum. There is no doubt that UK home investors are mostly influenced by factors like a place proximity to bars and restaurants, beaches, and its accessibility to airport probably to reduce travel time. From the answers provided in the interview there is strong evidence to suggest that holiday home owner are influenced by a location’s proximity to extensive tourism infrastructure like golf courses, beaches, children’s entertainment, and historical attractions. In France and Italy, holiday home owner have tended to buy older, traditional styles holiday homes, while in Spain, investors have opted to buy more contemporary holiday homes. This essentially reflects the new build development that has been witnessed in recent times in these locations. The research has also revealed that holiday home owners prefer outdoor living as can be demonstrated by their strong preference for terraces and balconies in their holiday homes. Internet connection is another feature that is increasingly finding favor with home overseas home owner in these foreign lands, and especially in long haul destinations. The interview has also found that air conditioning has a common feature in over half of the properties while 80% of these properties have been found to have access to a private swimming or one which is shared between or among a number of neighboring holiday home owners. Analysis: There are a number of factors that can be used to explain the reaction of respondents in this research study. First, investment in holiday home not only in this three countries but all majority of other countries depend to a great extent on their respective travel and tourism industry (Barrow, 2011). From the tour and travel periodicals and other secondary sources that have been used by the researcher in evaluating the market trend and market growth of the travel and tourism industry in Italy, Spain, and France, there is unanimity to the effect that the three destinations are some of destination topping the list of the most preferred tourist destinations. France is particularly a preferred summer destination, with almost 80% of its rentals occurring in the months of April to September, with peaks between July and August. In areas like a number of locations in Italy where prices are believed to have bottomed-up, investors are now looking at high yield potential and capital appreciation opportunities that will come with recovery (Gallent, Mace, & Tewdwr,-Jones, 2005). This clearly demonstrates that the appetite for property investment has not disappeared. There are investment opportunities where low holiday home prices and high rental income can produce a strong yield potential, especially in selected locations in France and Spanish island. This demonstrate further that in spite of the comparably low capital values in all these areas, holiday home rental demand coupled with strong tourism fundamentals, continue to be strong. This reinforces Rebecca’s, an analyst at Savills international, assertion to the effect that “tourists and holiday home owners share similar preferences for overseas properties. Strong underlying “lifestyle demand” for a holiday helps to support an investment case (Gallent, Mace, & Tewdwr,-Jones, 2005). According to her, it is these fundamentals that drive long term capital appreciation while attracting rental income. Other factors that probably make France a better overseas property investment is probably due to the ease with which one can obtain local financing to buy such a property (Hampshire, 1996). If particularly you can have your regular salary channel into a French bank account then accessing a mortgage from a French bank is an easy as a French citizen. It is even noteworthy that French mortgage lenders consider the income instead of the asset in question as majority of mortgage institutions in the two (Italy and Spain) other jurisdictions do. Spain which has only been eclipsed by France as a prime destination for overseas property investors has a readily available mortgage. However, non residents have to cough the remaining 30% purchase since these mortgages covers only 70% of the purchase price, making it less competitive to France which has institution that offers full mortgage to non-residents. Italy would be a better overseas property investment destination had its mortgage industry matured like those of Spain and France. Unfortunately it is in its infancy and therefore lacking in so many attractive features that can be found in mature jurisdictions like Spain and France. The financing bit is particularly tricky because UK banks offering mortgages to buy properties abroad have to have offices in those countries where one is intending to buy such a property. Looked carefully, this technically means that you are getting a mortgage in those countries where you are buying a property. When buying an overseas property you can also not forget to factor in buying cost like mortgage and lawyer fees, insurance and taxes. Normally, we estimate these cost as a percent of the purchase price, about 10% for France, 12% for Spain, and 15% for Italy. Normally, immediately once a purchase deal has been sealed one is required to pay a non-refundable deposit of at least 10% upfront in France, Spain and a number of other European countries. However, in Italy you are might be required to pay as much as a third of the purchase price upfront. CONCLUSION: From the evidence it is clear that France is increasingly eclipsing Spain as the favorite destination for UK property buyers to invest. This can be attributed particularly to its perception of being stable, ease of access and limited property price decline. However, traditional prime holiday homes hotpots which normally attract the rich, lifestyle home buyers have comparably been more resilient to the recession. They include, the Alp, selected locations in southern France, Italy, high-end stops in Spanish island like Mallorca, and Portugal’s Algarve region. There is also no doubt that wealthy, high-speed buyers have contributed greatly in maintained the strong property values that are normally synonymous with today’s top holiday home destinations. SELF EVALUATION REPORT: The research has generally been slightly complex especially bearing in mind the various perceptions and requirements that overseas properties investors have on various European countries and their respective holiday home markets. This complexity has particularly affected the technique that has been used in assessing the attractiveness of each of the three European countries as far as holiday home investment is concerned. Adding into the complexity is the thin line separating France and Spain attractiveness as ideal home holiday investment destinations, a line that has been further blurred by lack of an appropriate research technique. The findings of this study would have been more objective if the respondents’ answers to the questions that we posed in the interview were informed by the consideration of similar factors in assessing the attractiveness of any of these three top holiday home destinations (Italy, France, and Spain). Unfortunately, each of the respondents based his/her response on his/her individual considerations, considerations that can vary considerably. Achieving randomness in this research study as is supposed to be has particularly been an uphill task if not entirely impossible. This is largely because identifying the respondents that we targeted was in itself a bit hard, something that necessitated a situation where we interviewed any person we bumped on matching our idea of a holiday home investors in UK, the so-called convenient sampling. There is also a possibility that we could have gotten more competent person to answer our interview’s question more competently if only we had a large pool of prospective respondents to choose from. The sample size of ten respondents, tough informed by the fact that getting a larger number of respondents in a research of this nature is challenging, limiting and therefore unreliable to a larger extent. If anything, the smaller the sample size the less precise it is in representing the target population. It would also have been better if the ten respondents despite their small number were scattered across all the three countries (Italy, France, and Spain). In the context of fluctuating property price in the global property markets it would be extremely difficult to assume that one can get a precise value of similar properties in any of the three countries in a bid to compare their price and come up with the cheapest among them. If anything, there are other differing macro and micro economic factors in any of the three countries that might as well impact their prices separately. There is no doubt that a number of issues in this study makes it a bit academic, issues that might be hard to completely eliminate. References: Avella, N. (2004). The French Property Buyer’s Handbook. New York: Harriman House Limited. Barrow, C. (2011). Starting a Business from Home. New York: Kogan Page Publishers Classon, L., D., & Dormody, J., T. (2001). Analyzing Data Measured by individual Likert-Type Items. Journal of Agriculture Education. Vol. 35, no. 4 Fatt, J. (2002). Emotional Intelligence. Management Research News, 25 (11), 57- 74. Gallent, N., Mace, A., Tewdwr,-Jones, M. (2005). Second Homes: European Perspective and UK policies. London: Ashgate Publishing Green, B., S., & Salkind, J., N. (2005). Using SPSS for Window and Macinstosh. Boston: Pearson/Prentice hall Hampshire, D. (1996). Living and Working in France. 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