International News

A few snippets of news from around the worlds property markets.

Pain In Spain

As Britains economy grew, so did Spains housing boom. For almost 10 years, coastal Spain saw demand for property increase, and Spanish developers were happy to oblige, with new builds averaging about 800,000 a year. Today, the result is thousands of empty property, with few buyers willing to pay the inflated prices.

The Costas are suffering more than most, now the global credit crunch is biting. Estate Agents are reporting price falls of 30% over the past 2 years and still no end in sight. Rumours of ´bargains´ have alerted some potential buyers but only those desperate to sell, willing to reduce their price, by up to 50% in some cases, are finding buyers.

So what went wrong?

Part of the blame has been aimed at the ´Global Credit Squeeze´, which not only made mortgages hard to get, but expensive too. But that´s not the whole story.

Spains´ over-supply started years ago, the rapid increase in prices made Spanish property less affordable and encouraged other markets to open to UK buyers, and canny investors started to look at new areas where there was still potential of price growth. Yet Spanish developers continued to increase their prices.

Add to this the increasing strength of the Euro Vs the £pound, and prices have simply got out of control.

So what can we learn from this? Property Markets all go through periods of strong growth and then either plateau or fall. It has been this way throughout the modern history. 

The ´secret´ is to not jump on the ´band-wagon´ and buy in an area just because everyone else is doing so. Research the market, why are values rising, who is buying, what are the Supply-Demand ratios like, it´s not simple, but essential if you want to avoid another ´White Elephant´.

Spain will continue to be a popular choice for Northern Europeans to visit, retire and own a second home. But the price of that is likely to fall before it recovers. next on the list for falling property Values? .....Bulgaria anyone?

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Turkey - To Buy or Not to Buy

With recent rumours suggesting ´foreigners´ will no longer be allowed to buy property in Turkey, would it be a good idea to invest their?

Even if the Turkish Government perform a U-turn and allow ownership in an indirect way, would this be enough to satisfy would-be investors? Or if they simply change their mind, would you be confident they won´t simply change it again?

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Sub-prime chaos cost global markets $7.7trn - Bank of America

Joseph Quinlan, the Bank of America’s chief market strategist, describes the mortgage-led meltdown as “one of the most vicious in financial history”.

The report follows a similarly gloomy announcement from Standard & Poors last week, which showed global stock markets were hit with a $5.2trn collective loss in January alone.

Quinlan says the sub-prime losses are greater than those experienced after the 11 September 2001 terror attacks, the 1997 Asian financial crisis and Wall Street’s ‘Black Monday’ of 1987.

“While sub-prime loans were once thought to be relatively small in scale and contained to just one segment of the US financial sector, the opposite has become painfully evident over the past few months,” Quinlan says.

“It could take months or even years before Wall Street and others get a handle on the true cost of the US sub-prime meltdown and the attendant global credit crunch.”

A Tale Of Woe To Take Notice of

NEW YORK - The name Harry Macklowe doesn´t mean much in the UK, but in Manhattan he´s known as one of the ´Faces´ of Property development and investment. Through ups & downs he´s managed to make $billions, in 2003 he purchased the GM building for $1.4bil. Restructured and now famous for it´s Apple Store, it doubled in Value. A great success! But just because something worked once it doesn´t follow that it a recipe for success.

In Feb 2007, Macklowe bought 7 Manhattan Skyscrapers for $6.8bil. Leveraging almost $7bil. in debt and personally underwriting much of it himself. Not just debt, but short term debt. Since then the ´Sub-prime´ fiasco has emerged and Banks simply aren´t lending in the same way they were. Now that short term loan is coming to a end and either new finance has to be found or the assets need to be realised. Which given the change in the market would probably lose more than 20% of the value.

So what will happen? Will Houdini find a way out? It´s not clear, but it is a situation to be considered.

Investing Tip of the Day: Pay Attention to what else is happening

KOREA - In 2002/03 the Korean property market was booming, with demand for centrally located apartments at an all-time high. Developers quickly recognised the potential and started new projects to meet the demand.

According to Real Estate Serve, an online real estate information provider, the number of unsold apartments totaled 112,254 at the end of 2007, 4.7 times more than the 23,568 in March 2003.

The Metropolitan area has seen a ten fold increase of unsold apartments in the same period.

Why the stockpile of units?

The Korean Government is intending to institute a ´price cap´ to slow inflation, plus using higher taxes and limiting home loans has led to a fall in transactions and now some developers holding large stock are facing bankruptcy.

The lesson here is to watch what others are doing and don´t jump on a bandwagon just because others are. (Are you listening Dubai, Turkey & Bulgaria?)

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