Assessment of distressed property markets compiled by website IPS
Many European property markets which have seen prices plummet in recent years could be good bets for overseas buyers but others should be left well alone, according to a new report from below market value specialists.
Local knowledge is vital to assessing a market before investing so international property investment website IPS has assessed the world’s most distressed real estate markets.
It says that plummeting property prices currently characterises the real estate market in Ireland. Prices nationally having declined by 8.5% in the first six months of this year. Even in the capital city Dublin prices are more than 50% below their peak in 2007.
‘Falling rental yields and distressed sale auctions are now commonplace in the Ireland so now could be the time to pick up some real bargains,’ it suggests.
The United States, and Florida in particular, could be reaching the bottom of the market as prices are picking up in some areas. But IPS reckons it is a market only for experienced investors as prices vary so much depending on location.
Hungary is described as uncertain.
‘Moody’s have just downgraded Hungary’s rating to Junk status. This comes on top of rising interest rates with the base rate now standing at 6.5%. The first signs of the impact of these higher interest rates on mortgages are now being felt in a rise in the supply of distressed property. Even in the good times the market in this country was uncertain,’ says the report.
Greece is a high risk market at present even for experienced real estate investors, it points out.
‘Flirting with bankruptcy and the fact it may become the first country to exit the euro, it has uncertainty and is a high risk gamble for anyone but the most experienced property investor. Buying property in Greece could get your fingers severely burnt by a return to the Drachma and a subsequent halving of current property value. Not worth the risk,’ the report explains.
Bulgaria, once the darling of overseas property investors has seen prices plummet in the capital, in the ski resorts and even on the coast where many British and Irish investors are trapped unable to sell.
‘Tenants are hard to come by and there are even issues surrounding ownership of properties with tales of unfortunate investors sitting outside the gates of properties they once owned. This market has further to fall in 2012,’ says the report.
‘Falling property prices, lack of clear data, transparency and corruption, oversupply and poor quality developments,’ is how the report sums up Cyprus. ‘Unfortunately banks appear to be unwilling to offer any incentives to overseas investors to take property off their hands, one to avoid for now. Things will get worse before they get better,’ it adds.
Oversupply and an economy on the brink of needing a bailout have put huge pressure on Spain’s property market, according to IPS.
‘It is now possible to buy a property at 60% below market value with 100% finance. If the banks are willing to lend at this amount with no deposit then they must be confident that this market has finally reached bottom in the more desirable coastal areas. Invest now if you want to grab a bargain in coastal areas. Properties are unlikely to get cheaper,’ says the report.
It says that Portugal’s property market has been hit hard by the sovereign debt crisis.
‘While Portugal’s cities are a definite no no as the population struggles with austerity measures, the government is actively encouraging overseas investors to come and invest in prime coastal resorts,’ it explains.
‘Compared to Spain the gap between supply and demand is less pronounced meaning that when economic conditions improve, property investors could make a nice return by investing in discounted property. It can be difficult to secure mortgage finance, but not impossible and there are some good opportunities to invest in some high spec coastal properties,’ it concludes.