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The Foreign Property Dream Now Turns Nasty

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Bejesus!

The foreign property dream now turns nasty

Thousands of Irish investors who bought at the height of the boom now face financial ruin, writes Louise McBride

THE plight of the embattled developer Liam Carroll -- who owes eight banks €1.2bn -- took another turn for the worse last week when the Supreme Court decided to withdraw protection for his companies.

The threat of insolvency now hangs over Carroll. But Carroll and the other developers in dire straits are not the only ones up to their eyes in debt. Tens of thousands of Irish investors are in financial meltdown after snapping up hyped overseas property investments at the height of the boom.

About 150,000 Irish investors are thought to have bought properties in Spain, while thousands more punters flocked to Portugal, Florida, Dubai, Bulgaria, Turkey and elsewhere.

As the price of many of these properties has collapsed -- some by as much as 80 per cent -- many don't have the option of selling their holiday homes to pay off the massive loans thrown at them by Irish and foreign banks. The difference between the current market value of their holiday home -- and the amount of money borrowed a few years ago to buy it -- has become so marked that many owners of overseas property are facing financial ruin.

"At the very least, thousands of Irish people are in trouble with overseas property," said Tom McGrath, a senior partner with Dublin law firm Tom McGrath & Associates.

"There's a huge amount of people falling behind on the mortgage repayments for their holiday home. A lot of them want to walk away from the property and hand back the keys -- but it's not that simple anymore. The borrower has to do a deal with the bank.

"Many borrowers are adopting an ostrich approach to the problem -- and that doesn't work. Banks are entitled to repossess a foreign property, and they have even set up their own websites to sell such properties."

In a desperate bid to offload repossessed holiday homes, foreign banks and estate agents have slashed the price of such properties.

The Spanish bank, Caixa Catalunya, owns Procam, a website offering discounts of up to 40 per cent on chalets and villas in Spain. The price of four-bed chalets in Arroyomolinos has been knocked back to €277,500 -- down from €462,500. A villa in Girona, Catalonia, is advertised on Procam for €483,300 -- that's down from €537,000.

Another sales website, www.llavetex.com, is managed by the Spanish bank, Caja Murcia. Last Thursday, 243 flats were listed for sale on the website for the region of Murcia alone. About 127 flats were listed for Alicante.

Caja Madrid, one of the biggest savings banks in Spain, has its own official auction agents, Reser. Some of the properties on the Reser website are selling for about 40 per cent below their market value. One property in Alicante was for sale last week for €210,000 -- that's €125,000 below its market value.

Spain isn't the only country where the value of holiday homes has collapsed.

With 1.5 million homes repossessed in the United States in the first six months of this year, house prices there have taken a hammering. And Florida -- where thousands of Irish people snapped up retirement homes -- is no exception.

Two years ago, a two-bed, two-bath condo in the Ibis complex in Naples sold for between US$370,000 and $450,000, according to the Cork broker, Jack French & Associates. The condos are now selling for $84,000 -- a massive price drop of over 80 per cent. In Orlando, two-bed, two-bath condos in the Tradewinds complex have been reduced to $68,420 from $200,000.

One Dublin financial adviser, who did not wish to be named, said its clients "had lost a lot of money" in Florida. "In one case, a site was bought for €1m and €2m was then spent building a property on the site. That entire property is now priced at only €1m -- so the client has lost €2m."

Price drops in Dubai have also been staggering. The United Arab Emirates city, which witnessed rapid growth in recent years, recorded the most dramatic drop in house prices in the first three months of this year, according to the latest Knight Frank Global House Price Survey.

The price drop of 40 per cent was 10 times worse than that recorded by Knight Frank for Ireland. About six years ago, the Dubai property market was opened up to foreigners -- a move which attracted a flood of Irish, British and other overseas investors. But many of those investors, lured by Dubai's low taxes and glittering skyline, are now licking their wounds.

In some cases, the price of the properties snapped up has halved. Last September, prices of water homes in the luxury Palm Jebel Ali resort started at €1,018,519. They are now selling for €526,882 -- almost half last year's price.

The starting price of town homes in Palm Jebel Ali has dropped by about 43 per cent -- from €833,333 last September to €473,118 today.

In Portugal, the price of properties based outside resorts has fallen by between 25 and 30 per cent, while resorts have seen a price drop of about 5 per cent, according to Martin Date, director with the overseas property company, Oceanico.

"The downturn in the Irish economy has inevitably had an impact [on the Portuguese property market]," said Date. "Some people are trying to offload their properties. In the first six months of this year, there was very little appetite for Portuguese property from the Irish market."

Bulgaria was another country plugged as a 'property hotspot' about four or five years ago. Back then, the now disgraced solicitor Michael Lynn was still at large.

Among the properties promoted by Lynn were apartments in the All Seasons ski resort in Bansko, Bulgaria. In summer 2006, one-bed apartments in this resort sold for €55,000. The price has since dropped by over a tenth to €49,146.

Whether these apartments would actually fetch that price on the open market is another question.

Jack French, the owner of Jack French & Associates, said that price drops of properties in the Sunny Beach resort in Bulgaria have been "awful".

In Hungary, prices have dropped by an average of 23 per cent, according to Jozsef Sztranyak, president of the Federation of Hungarian Real Estate Associations.

"Most overseas property has dropped in price over the last two years," said Ann Collins, auctioneer with PropertyAuction.ie, a website set up to help distressed property owners sell off their homes.

"Anyone who bought property in Bulgaria in the last two to three years will find it very hard to sell as these properties are worthless.

"I get phone calls every day of the week from people trying to sell on properties bought in Turkey. Prices in Turkey have dropped by between 30 and 50 per cent. England is another big concern. There's a huge amount of Irish who bought in England over the past 12 months -- but many of these properties are probably only worth half of what they paid for it back then."

Much of the overseas properties snapped up by over- eager buyers were bought on the back of promises of "guaranteed" rental income, which would supposedly cover the mortgage repayments on their property. Many of these guarantees never rang true -- or expired a lot earlier than expected.

"We have come across a number of instances whereby people would have purchased a property overseas, financed by a foreign mortgage and the hope or ideal situation was that the rental income, or the "guaranteed" rental income, would be sufficient to service the mortgage repayments," said David O'Donnell, partner with Tom McGrath & Associates.

"However, if the owner cannot rent the property, or is not receiving their "guaranteed" rental income, many are finding that they cannot afford to meet the monthly mortgage repayments, and instead of dealing with the problem, they choose to ignore the correspondence from the bank.

"In a lot of cases, the foreign bank sends the various notices, demands for payments and so on to the mortgaged property -- not to the owner's address in Ireland."

This inevitably leads to cases of overseas properties being repossessed -- and bought by local families -- without the knowledge of the Irish owner.

Mr O'Donnell said he knew of at least one instance where a foreign bank repossessed an Irish man's house in Spain.

And this is only the tip of the iceberg. Many of those who bought overseas property during the boom years are among the 423,400 people now on the dole queue. The chances of meeting repayments on the mortgage for their own home -- never mind an overpriced villa in the sun -- are already slim.

Thousands of overstretched Irish borrowers are struggling with the financial burden they took on to buy an overseas property. That struggle will continue for some time yet.

http://www.independent.ie/business/irish/t...ty-1861366.html

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Two years ago, a two-bed, two-bath condo in the Ibis complex in Naples sold for between US$370,000 and $450,000, according to the Cork broker, Jack French & Associates. The condos are now selling for $84,000 -- a massive price drop of over 80 per cent. In Orlando, two-bed, two-bath condos in the Tradewinds complex have been reduced to $68,420 from $200,000.

Blimey, and that's without any O/S taxes and maintenance fees.

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Two years ago, a two-bed, two-bath condo in the Ibis complex in Naples sold for between US$370,000 and $450,000, according to the Cork broker, Jack French & Associates. The condos are now selling for $84,000 -- a massive price drop of over 80 per cent. In Orlando, two-bed, two-bath condos in the Tradewinds complex have been reduced to $68,420 from $200,000.

Blimey, and that's without any O/S taxes and maintenance fees.

It's just eye poppingly mind boggling when you look at the figures.

What were they thinking at the time?

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"Some of the properties on the Reser website are selling for about 40 per cent below their market value"

Time to get in . before market value arrives and asks for it's money back as it's obviously being short-changed .

Poor Market Value , it was happy at the start , and now it's , so sad :-(

Sob !

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I said years back that holiday properties in Bulgaria would end up as derelict drug dens with weeds growing through the pan tiles - as the article says these are worthless unless you actually life in them.

Sad that so many got sucker'd into this - especially those that got disillusioned with UK property and bought abroad to /automaton voice/ "get ...on ....the ....ladder" /eyes roll to the top of yer skull/.

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It's just eye poppingly mind boggling when you look at the figures.

What were they thinking at the time?

Exactly. I would imagine that the average wage in Ireland would be a liitle bit less than the UK, so even with two incomes you're looking at 10 times mortgage in some cases! I wonder how many liar loans financed overseas property?

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Short version for those that haven't been following this closely:

Liam Carroll was the archetypal Irish pwoberdee developer, making huge overpriced purchases using borrowed money over the last decade. His company has naturally gone titsup; he recently went through the courts asking for examinership (bankruptcy protection from his creditors) claiming that everything would be OK once the market 'recovered,' and placing unrealistically high valuations on his assets.

This week the court surprisingly (given that the Irish Government's bad bank was supporting him) threw out his ridiculous claims, opening the door to a firesale of all his assets. This auctioning off will now reveal the true values of the property assets - which will have a knock-on effect to the rest of the property and financial sectors, as it is shown how little the collateral held by banks is really worth.

Edited by Little Professor

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massive loans thrown at them by Irish and foreign banks.

Yes it was those nasty Irish and foreign banks throwing money at poor innocent people. They did not even want the money, but it was THROWN at them.

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Gamblers don't like losing after discovering their one way bet was anything but :-

http://www.guardian.co.uk/money/2009/aug/0...ortgage-deposit

Love the comments. :lol:

Robbert

I just lost £50,000 on the stock market. I put £5,000 down, borrowed the rest, and now the bank has the cheek to make me bankrupt. It's outrageous!. Will the Guardian please do a full page spread on my predicament?

Margin calls - that's exactly what I thought of when I read this piece.

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Gamblers don't like losing after discovering their one way bet was anything but :-

http://www.guardian.co.uk/money/2009/aug/0...ortgage-deposit

hmm... i remember getting really angry at William Hill after I'd spunked £100 betting on Inter Milan to beat Deportivo Alaves in the 2001 UEFA cup & they somehow conspired to lose... maybe I should have tried to play hardball with them.

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Be nice to see such drops here in the UK would it not?

At least, 70% would be most acceptable.

Then we could start again with the next cycle

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Guest sillybear2
hmm... i remember getting really angry at William Hill after I'd spunked £100 betting on Inter Milan to beat Deportivo Alaves in the 2001 UEFA cup & they somehow conspired to lose... maybe I should have tried to play hardball with them.

You should have found every other loser in the shop that day and formed an egalitarian, proactive collective; given that William Hill held a gun to all your heads and forced you to gamble with them :-

http://www.berkeleyhomescollective.com/

One could imagine the counter-factual headlines if their £450k flats now had a market price of £600k and Berkeley refused to complete at the lower contracted price.

It's rather like beef burgers really, if you don't flip them in time they become roasted and burnt to a crisp, leaving a nasty taste in the mouth.

Edited by sillybear2

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I love this bit: So Irish!! :rolleyes::P

"Caja Madrid, one of the biggest savings banks in Spain, has its own official auction agents, Reser. Some of the properties on the Reser website are selling for about 40 per cent below their market value. :lol::P One property in Alicante was for sale last week for £210,000 -- that's £125,000 below its market value."

:rolleyes: "Market Value" is what someone is ACTUALLY going to pay you RIGHT NOW. And, RIGHT NOW, it's "value" is JACK SHIT.

AND - I LOVED this line: :P

"England is another big concern. There's a huge amount of Irish who bought in England over the past 12 months -- but many of these properties are probably only worth half of what they paid for it back then."

FABULOUS :lol::P

Edited by eric pebble

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Sad that so many got sucker'd into this - especially those that got disillusioned with UK property and bought abroad to /automaton voice/ "get ...on ....the ....ladder" /eyes roll to the top of yer skull/.

:D:D:D

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Two years ago, a two-bed, two-bath condo in the Ibis complex in Naples sold for between US$370,000 and $450,000, according to the Cork broker, Jack French & Associates. The condos are now selling for $84,000 -- a massive price drop of over 80 per cent. In Orlando, two-bed, two-bath condos in the Tradewinds complex have been reduced to $68,420 from $200,000.

Blimey, and that's without any O/S taxes and maintenance fees.

NAPLES!!!!! What the hell where they thinkng? I need a lay down. Sh!t. Oh, Naples in Florida.

Edited by Tonkers

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Guest sillybear2
NAPLES!!!!! What the hell where they thinkng? I need a lay down. Sh!t. Oh, Naples in Florida.

Do you think their mortgages are under water?

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Do you think their mortgages are under water?

Martin Chuzzlewit. Many investors lost their lives in Florida then, as they will now.

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NAPLES!!!!! What the hell where they thinkng? I need a lay down. Sh!t. Oh, Naples in Florida.

That's what I thought first too. But then I realised that not even the daft Irish investors are stupid enough to go anywhere near the open sewer that Naples is. What a shithole. And don't get me started on the locals. :angry:

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That's what I thought first too. But then I realised that not even the daft Irish investors are stupid enough to go anywhere near the open sewer that Naples is. What a shithole. And don't get me started on the locals. :angry:

I dunno, if I was into organised crime and waste management, waste management includes humans doesn't it. Bum, depressed now.

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I dunno, if I was into organised crime and waste management, waste management includes humans doesn't it. Bum, depressed now.

Looks like you watched/read Gomorrah. Well, that doesn't even get close to representing how shit the place is and how the mafia/mob culture is embedded in the social structure.

Anyone fancies ripe tomatoes from Naples? Those that glow in the dark?

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Looks like you watched/read Gomorrah. Well, that doesn't even get close to representing how shit the place is and how the mafia/mob culture is embedded in the social structure.

Anyone fancies ripe tomatoes from Naples? Those that glow in the dark?

Both, I had no idea and it has set me off on a reading jag on European history and organised crime, MacMafia has been enlightening. Anyone reading this thread Gomorrah and MacMafia highly recommended! Oh and read Gomorrah with the film as mere visuals. working my way through Stalingrad, the fall of Berlin and then D-day now. I am quite pissed off that I did not get taught this at school, and as much as I learn, it will be many more years before I can make an educated reasoned assesment and arguement about it.

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That's what I thought first too. But then I realised that not even the daft Irish investors are stupid enough to go anywhere near the open sewer that Naples is. What a shithole. And don't get me started on the locals. :angry:

Naples - the Burnley of Italy.

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