A recent article by Kate Palmer in the UK’s Daily Telegraph reveals that Spanish property is some of the most undervalued in the developed world, and could benefit from renewed British interest when stamp duty goes up on second homes in the UK.

“Dreaming of a holiday home in the sun?” asks Palmer. “If buying a holiday home overseas was not already an inviting proposition, it will become even more attractive from April when second properties bought in this country will attract a higher rate of stamp duty.”

Furthermore, “whatever your views on the British housing market, the evidence suggests the biggest bargains are overseas,” she says. “New analysis points towards southern and eastern Europe as offering the cheapest property – including popular holiday home markets of Italy, Portugal and Spain.”

Palmer digs into data from a decade-worth of research by the OECD measuring house prices in relation to local incomes, showing Spain as one of the most undervalued housing markets in the developed world with a price/income ratio of 74, compared to 116 in Germany and 107 in the UK. A ratio of below 100 suggests that housing is undervalued in relation to income, and overvalued if above 100.

But undervaluation doesn’t necessarily mean prices will rise soon, explains Palmer. Oversupply in Spain will keep a lid on prices for now. “Property in Spain, for example, which the OECD regards as undervalued by 26pc, grew just 1.2pc in the past year largely due to oversupply in the property market.”

Investors looking to take advantage of the undervaluation in Spain should focus on consolidated urban areas, the article suggests. Lifestyle buyers, on the other hand, are free to consider other areas, but “purely as a holiday home and not an investment” as returns could be disappointing.

Foreign investors may also find it easy to leverage up in Spain as major banks “still have properties on their books which they are eager to offload,” and the LTVs they are prepared to make suggest there are still bargains to be had, says Palmer. “Some banks are offering foreign buyers mortgages of up to 113pc of the purchase price – suggesting such properties are being sold at rock-bottom valuations.”

+ Read the original article: Place in the sun? Where to invest in undervalued property in 2016