Second Home Owners Abroad In Trouble As Bubble Burst

[Realistbear]

http://www.citywire.co.uk/News/NewsArticle...rsionID%3d96938

Second properties abroad head for a bubble

Published: 07:00 Monday 01 October 2007

By: Richard "Dick" Lander, Director

I do have a friend of a friend who, a couple of years ago bought two flats in Bulgaria, off plan, site unseen, as her ‘pension plan’.

I thought it was barmy then and there now seems to be a growing prospect of it ending in tears, much like the British buy to let story – and pretty much for the same reasons.

Cue Michael Ball, professor of property at Reading University, in the FT:

‘The price of second homes in the Mediterranean and eastern Europe could fall as a result of the credit crisis. [Prof Ball] said holiday homes in many parts of Europe were exposed to a correction.

‘The professor cited, as an example, Estonia, where house prices had dropped by an estimated 10 per cent in the past 12 months. “That will probably trickle through to other countries,’ he said.’

Think for a moment of the tens of thousands of Brits and Irish who bought into the idea that a second, third or even fourth home in the sun would be a good investment. With Great Crash 2 now going worldwide not even cheap destinations such as Estonia will escape the carnage. Sentiment is turning rapidly and property will be the curse of the generation. Those who stayed on the sidelines to rent must be beginning to smile like TB now.

Exciting times ahead bears!

[Guest Shedfish]

It’s hard enough buying a property in a country with long established supply and demand factors and property law. But Estonia? Bulgaria? Who’ll look after you there when they jack the service charges up 10 fold?

probably fair to say he doesn't enjoy 'A Place In The Sun' too much

[Kurt Barlow]

http://www.citywire.co.uk/News/NewsArticle...rsionID%3d96938

Second properties abroad head for a bubble

Published: 07:00 Monday 01 October 2007

By: Richard "Dick" Lander, Director

I do have a friend of a friend who, a couple of years ago bought two flats in Bulgaria, off plan, site unseen, as her ‘pension plan’.

I thought it was barmy then and there now seems to be a growing prospect of it ending in tears, much like the British buy to let story – and pretty much for the same reasons.

Cue Michael Ball, professor of property at Reading University, in the FT:

‘The price of second homes in the Mediterranean and eastern Europe could fall as a result of the credit crisis. [Prof Ball] said holiday homes in many parts of Europe were exposed to a correction.

‘The professor cited, as an example, Estonia, where house prices had dropped by an estimated 10 per cent in the past 12 months. “That will probably trickle through to other countries,’ he said.’

Think for a moment of the tens of thousands of Brits and Irish who bought into the idea that a second, third or even fourth home in the sun would be a good investment. With Great Crash 2 now going worldwide not even cheap destinations such as Estonia will escape the carnage. Sentiment is turning rapidly and property will be the curse of the generation. Those who stayed on the sidelines to rent must be beginning to smile like TB now.

Exciting times ahead bears!

Good - I have friends in tallin and Tartu who have been priced out of the market by 'Place in the Sun' cunit speculators

[alabala]

...go on hurry

http://www.totallyproperty.com/other-regio...stment-20k.html

http://www.propertastic.com/index.php?page...c=International

Albania has an abundance of character to offer, from the bustling capital city of Tirana with the majestic Mount Dajti dominating the surrounding landscape to the stunning historic port of Vlores. Tirana is currently experiencing huge investment in infrastructure, with millions of euros being invested by the EU. A new international airport opened this year, accepting flights from worldwide destinations. New roads are being constructed to allow faster access to and from the business hubs of the country and entirely new districts are being constructed in the capital city to supply the demand for city centre apartments.

[margesimpson]

...go on hurry

http://www.totallyproperty.com/other-regio...stment-20k.html

http://www.propertastic.com/index.php?page...c=International

Albania has an abundance of character to offer, from the bustling capital city of Tirana with the majestic Mount Dajti dominating the surrounding landscape to the stunning historic port of Vlores. Tirana is currently experiencing huge investment in infrastructure, with millions of euros being invested by the EU. A new international airport opened this year, accepting flights from worldwide destinations. New roads are being constructed to allow faster access to and from the business hubs of the country and entirely new districts are being constructed in the capital city to supply the demand for city centre apartments.

A place In The Sun is right up there with Krusty the clown in the ramping stakes - especially the last series which bordered on the unbelievable.

[killerbee]

Exciting times ahead bears!

Exciting? What is there to get excited about? I have good friends and family who will be caught in the blood bath that is about to unfold, no sorry I cannot get excited by other peoples misery.

kb

[vfr]

The british/irish have been madly buying 'a place in the cold', Prague.

Over development, ramping up by VI's is common here, and it's just starting to work into the psycholgy. Unlike the UK which has been bloated through, immigration, HPI and Greed , property here has over inflated through foreign hype.

So as these 'I am so smug equity rich silverspooners (as I think they should become known) try to realise their sheer good fortune the market will bite back as it always does.

[BTLlivingthedream]

Welcome to the Eastern European home dream....

[stuckmojo]

...go on hurry

http://www.totallyproperty.com/other-regio...stment-20k.html

http://www.propertastic.com/index.php?page...c=International

Albania has an abundance of character to offer, from the bustling capital city of Tirana with the majestic Mount Dajti dominating the surrounding landscape to the stunning historic port of Vlores. Tirana is currently experiencing huge investment in infrastructure, with millions of euros being invested by the EU. A new international airport opened this year, accepting flights from worldwide destinations. New roads are being constructed to allow faster access to and from the business hubs of the country and entirely new districts are being constructed in the capital city to supply the demand for city centre apartments.

What, Albania? are they mad? Especially Tirana, they don't know what they are talking about.

Even Michael Palin described the place as "dangerous and Ghastly".

now, come on, what's next, "a place in Mogadishu"?

[otters]

Exciting? What is there to get excited about? I have good friends and family who will be caught in the blood bath that is about to unfold, no sorry I cannot get excited by other peoples misery.

kb

I don't think many local people will be shedding a tear, many have been out priced in their homeland by greed from foreign "investors". Screw up your own country first, when its played out go abroad and spread the disease.

[The Ayatollah Buggeri]

Slight editing needed:

"Albania has an abundance of character to offer, from the bustling capital city of Tirana with the majestic 24-chimney coal fired power station dominating the surrounding landscape, to the stunning historic crematorium located next door to the police station. Tirana is currently experiencing huge investment in infrastructure, with millions of euros being invested by naive speculators. A new international airport opened this year, accepting flights from such prestige destinations as Harare, Kandahar and Pyongyang, and will play a vital role in Albania's emerging economic role as Europe's key hub for international drug smuggling. New roads are being constructed to allow faster access to and from the secret police's torture chambers, and entirely new districts are being constructed in the capital city to supply the demand for luxury flats from the city's gangsters."

[margesimpson]

Slight editing needed:

"Albania has an abundance of character to offer, from the bustling capital city of Tirana with the majestic 24-chimney coal fired power station dominating the surrounding landscape, to the stunning historic crematorium located next door to the police station. Tirana is currently experiencing huge investment in infrastructure, with millions of euros being invested by naive speculators. A new international airport opened this year, accepting flights from such prestige destinations as Harare, Kandahar and Pyongyang, and will play a vital role in Albania's emerging economic role as Europe's key hub for international drug smuggling. New roads are being constructed to allow faster access to and from the secret police's torture chambers, and entirely new districts are being constructed in the capital city to supply the demand for luxury flats from the city's gangsters."

[The Bachelor of Arts]

I was gonna say. Albania is the most corrupt country in Europe and hence the poorest. I'm sure there is a nice coastline but I wouldn't want to live there.

A friend of mine was nearly lynched there. He had been clearing landmines there & then at the end of 1 year the funding ran out. He told the locals & ended up having to be escorted to the airport by the police due to the number of death threats he received.

Nothing like gratitude after spending a year of your life risking you life to help others! :angry:

[PropertyGuru]

So VERY predictable - as so many said here.

From now on, on this site, the phrase:

"a place in the sun"

should be replaced with

"big debts in the sun"

"big debts in the sun"????

you sir, have the wit and linguistical ability of a sloth, paralytic on absynthe.

Which is why your own crappy little forum has 2 regular posters, and you spend all your time here in the forlorn hope of poaching some HPC members.

[thefruits]

Sorry bears.. its not all doom and gloom. Selective investment may still prove profitable.

TF

http://search.ft.com/ftArticle?queryText=b...000163&ct=0

FT REPORT - WEEKEND MONEY: Try eastern Europe for better property value

By Ellen Kelleher in London, Financial Times

Published: Oct 06, 2007

Buy-to-let investing in this country does not look particularly appealing as property prices and mortgage rates are high. So, if you are keen to plough money into a second property for the purpose of letting, you might want to consider a flat in Estonia, Poland or Bulgaria as an alternative.

Growth in residential property prices is slowing in most parts of the world because of the rise in interest rates and the tightening of lending criteria. But there are still countries where sterling goes far and value can be found in property.

"It's not all bad news for the global market," says Liam Bailey, head of residential research at Knight Frank, the international estate agent. "The Baltics, for example, have seen incredible growth over the last two years. And prices there are still at least 50 per cent less than those of properties in western Europe. In Estonia, Poland, Romania and Hungary, the feeling is there's much more room for potential growth."

A decade ago, when British property investors suffered a bout of wanderlust, they tended to buy villas in southern Spain. These days, however, more property investors are flocking to France, Portugal, eastern Europe and the coast of southern Turkey, where property prices have jumped 40 per cent in the past three years.

"Investors seem to be steering clear of Spain as they feel that the relentless modernisation along the coast has robbed the country of its rustic charm and that the volume of property to let has now reached its saturation point," says Matthew Weston, manager of overseas mortgages at Blevins Franks, the financial services group.

This year, the average value of a two-bedroom villa in Mallorca fell 20.5 per cent from 2006 while the value of a three-bedroom home dropped 12 per cent, according to Kyero, a Spanish property group. Prices also fell in Valencia and showed only a slight rise in Murcia.

Analysts claim Praia da Luz in Portugal, Nice, Cannes and even Paris are now far more attractive to Brits, with the price of properties in these areas ranging from €250,000 (£173,300) to €1m. The wealthy are also increasingly drawn to French ski resorts in Les Trois Vallées. While the price of a property in Courchevel is as much as €20,000 sq m, demand remains high as yields on properties hover between 5 and 7 per cent per year. Capital appreciation on homes in Chamonix ranged from 5 to 10 per cent over the past decade, according to Blevins Franks.

For many, the Baltics and eastern Europe - where prices tend to be a quarter of the price of UK properties - are even more enticing. In Poland, scores of new developments are sprouting up in Warsaw and Krakow, for example. A two-bedroom flat in the centre of Warsaw costs £75,000. Annual yields on properties in the city range from 6 per cent for more expensive developments to 8 per cent for starter flats.

In Tallinn, Estonia, the average price of a twobedroom apartment jumped 10 per cent this year from the same period in 2006, reports Blevins Franks. Rental prices rose almost 16 per cent in the city's centre.

"There's always an element of speculation in markets like Estonia and you've got to do your research. But if you buy a quality product near a centre of employment, it should be relatively easy to let," advises Weston.

One point to consider before investing overseas is the cost: buyers need more money upfront - about 35 per cent of the purchase price in cash for a deposit and expenses, according to Ray Boulger of John Charcol, the mortgage adviser. Also, securing a mortgage may pose more problems outside the UK as lending requirements tend to be stricter (mortgage brokers advise taking out a mortgage in the country's currency to hedge risk). Mortgage rates vary widely from one country to another, but there are still good deals around, according to Conti Financial Services.

In France, a five-year fixed mortgage and interest repayment can be secured at a rate of 4.30 per cent with a maximum loan-to-value (LTV) ratio of 80 per cent. Variable rate, interest-only mortgages are available for 6.15 per cent with a maximum LTV of 80 per cent.

In Croatia, rates for variable mortgages are much higher and investors face a minimum rate of 8.5 per cent. In Bulgaria, rates for variable mortgages are also high at 7.5 per cent

[Goldfinger]

Sorry bears.. its not all doom and gloom. Selective investment may still prove profitable.

TF

Sorry, but IMO the meltdown in Eastern Europe might be even more devastating than in the UK. There has been an unprecedented property boom, often fuelled by 'cheap' mortgages taken out in Swiss Francs. When the Swiss Franc recovers from the depression it is presently locked up in, combine this with a crashing property market and you have the recipe for a desaster. Some Eastern Europe currency could easily lose 30% against the Franc, a historically rock-solid currency. On top of this a local crash in the property market of 50%, and most will be wiped out.

I fear the absolute worst for Eastern Europe.

[margesimpson]

Sorry bears.. its not all doom and gloom. Selective investment may still prove profitable.

TF

http://search.ft.com/ftArticle?queryText=b...000163&ct=0

In Tallinn, Estonia, the average price of a twobedroom apartment jumped 10 per cent this year from the same period in 2006, reports Blevins Franks.

Interesting because the FT recently reported that prices were DOWN 10% in Estonia over the last 12 months.

http://www.ft.com/cms/s/0/f8c0c580-6e63-11...00779fd2ac.html

Selective investment will always prove profitable - even in falling markets. The point is that speculation is not always the best form of investing especially when you have little understanding of the market you are speculating on.

I'm with Goldfinger on this one. The Swiss have financed a great deal of the building boom in Eastern Europe and it will end in tears.

Edited October 8, 2007 by margesimpson

[no_one]

Here in Spain, things will get very nasty ... Some people had their property on the market for over a year now, and not a flipping potential buyer ... The amount of flats, houses, villas and chalets which have been built in the last 10 years is real scary, especially along the Costa... I travelled the whole of the Costa Blanca, Costa Del Sol and saw sign after sign of SE VENDE .... the orange signs are turning yellow .. here in Madrid things are no different ... in the neighborhood, plenty of signs and not a single visitor ;-)

I was in El Campello where I lived for few months about a year ago, a very much sought after resort near alicante, in fact one of the best ... Things were looking very good last year, this year things are looking toooo bad .. I spoke to a friend who runs an agency there, and she was talking not about a slow down, but real recession ...

Those who will get hit hard are foreigner ... especially Latinos and some Moroccans ... plenty of them were, as in the UK, deceived by the banking system in lending them money they will have a lots of trouble paying back ... The reason I am saying latinos, is that if you go around the south of Madrid for example, massive areas have been built like concrete jungles using cheap material, a lots of them were bought by latinos and foreigners from eastern Europe... these will have a lot of trouble paying the high rates that have increased recently.

I am glade I did not buy

[Bloo Loo]

Never in History has a Foreign Invader been able to hold on to his newly gained territory over the locals for very long.

[stuckmojo]

Here in Spain, things will get very nasty ... Some people had their property on the market for over a year now, and not a flipping potential buyer ... The amount of flats, houses, villas and chalets which have been built in the last 10 years is real scary, especially along the Costa... I travelled the whole of the Costa Blanca, Costa Del Sol and saw sign after sign of SE VENDE .... the orange signs are turning yellow .. here in Madrid things are no different ... in the neighborhood, plenty of signs and not a single visitor ;-)

I was in El Campello where I lived for few months about a year ago, a very much sought after resort near alicante, in fact one of the best ... Things were looking very good last year, this year things are looking toooo bad .. I spoke to a friend who runs an agency there, and she was talking not about a slow down, but real recession ...

Those who will get hit hard are foreigner ... especially Latinos and some Moroccans ... plenty of them were, as in the UK, deceived by the banking system in lending them money they will have a lots of trouble paying back ... The reason I am saying latinos, is that if you go around the south of Madrid for example, massive areas have been built like concrete jungles using cheap material, a lots of them were bought by latinos and foreigners from eastern Europe... these will have a lot of trouble paying the high rates that have increased recently.

I am glade I did not buy

What you say is very true. I worked in Tres Cantos, north of Madrid, in an assigment for my former company for 2 months and the place not only is ghastly, it's bloody deserted. Hundreds of houses were already up for sale in Feb-Apr 2006, at silly prices.

And if you happen to travel by metro in Madrid, you'll spot only south americans (well, so to speak).

It will be bad down there.

[evictee]

FT REPORT - WEEKEND MONEY: Try eastern Europe for better property value

By Ellen Kelleher in London, Financial Times

Ha, nice one.

[newbie]

In Poland, scores of new developments are sprouting up in Warsaw and Krakow, for example. A two-bedroom flat in the centre of Warsaw costs £75,000. Annual yields on properties in the city range from 6 per cent for more expensive developments to 8 per cent for starter flats.

Err, how does 'scores of new investments' help if the BTLs are after capital gains???

Property is on the down in Eastern Europe, yes there is a pent up demand but for property at prices relative to the wage levels not at London/Dublin/Madrid prices. 8% yields, dream on unless you bought in 2004. I reckon they're 2-3% in Eastern Europe. There's a large oversupply of BTL. The peak has been passed. In Poland the agents admit that transaction prices are reaching 20% below asking prices - which haven't moved much since spring. When the countless developers panic and start openly reducing their prices, it will be game over.

[yellerkat]

I fear the absolute worst for Eastern Europe.

GF is right. EE currencies are long overdue for a major shake-out.

[Solvent Celt]

Albania FFS

The country is a basket case and I wouldn't be suprised to see another war in the Balkans before too long. I can't see Serbia accepting the loss of Kosovo to the Albanians. Could Albania proper stay out of another round of blood letting? I doubt it.

[margesimpson]

Those who will get hit hard are foreigner ... especially Latinos and some Moroccans ...

Don't forget the Eastern Europeans!

And it's not just Madrid. The character of lots of Costa towns has changed dramatically over the last few years with the arrival of countless poor immigrants from Africa, Europe and Latin America.

To give you a quick flavour of life in Spain for Eastern Europeans check out these random links:

Romanian couple arrested for selling baby

http://www.thinkspain.com/news-spain/13857

Romanian man sets himself on fire

http://www.euroresidentes.com/Blogs/2007/0...s-in-spain.html

Political corruption - 117 Romanian voters at same address

http://www.euroresidentes.com/Blogs/2007/0...-local-and.html

The real big worry for Spanish lenders is that these people will simply disappear - leaving them with unpaid debts and worthless properties. And with many now realising that Spain isn't El Dorado I think a lot will simply go home leaving their debts behind them.