Tips For Those Caught In The Worldwide Property Slump
Thursday, May 1st, 2008 Subscribe To Our Feed
While it lasted, the property boom boosted the wealth of many people worldwide. Fuelled by a plentiful supply of money money which led to mortgages being offered to almost anyone just for the asking, property prices rose exponentially and, with stocks and shares in a sideways to down trend since 2000, property became the new get-rich-quick scheme as owners used spare cash in their homes to buy property to rent property to rent to those who could not get on the housing ladder.
Holiday homes too became a ‘must-have’ and these apartments and villas apartments and villas were let to holidaymakers when not in use by the owner, thus producing rental income which helped fund any ongoing costs.
However, as with so many get-rich-schemes, the property boom has ended in tears. The credit crunch may have started in the USA but its effects are being felt worldwide as both property prices and sales have plunged. The move from easy to tight money has been swift and, whilst in many countries there are buyers wanting to get on board the housing ladder now that prices are lower, the cheap and plentiful mortgages to enable them to do so is hard to find. In the UK mortgages that provided a ridiculous 125% of the price of the property were common place during the boom but now buyers have to come up with at least a 20% deposit and interest rates are higher. Around one third third of sales are falling through because of lack of finance and the number of agreed mortgages has fallen to an all-time low.
Elsewhere in Europe there are similar tales of woe. Spain has suffered the worst. Here the boom peaked in 2004. Prices started to fall due to overbuilding of villas and apartments on Spain’s Costas apartments and villas on the Spanish coast and the falls have been exacerbated by the credit crunch and the rise in the Euro. Most newly built villas and apartments on the coasts in the last few years have been bought by the British but a combination of falling prices at home, more expensive credit, and a rise in the Euro of 15% against the pound have resulted in the British withdrawing from the Spanish market.
Other European countries have suffered falls in property prices but not to the same extent. The falls have been mitigated by the fact that fewer people own their homes in countries like Germany and Switzerland. In Germany only about half of the housing stock is owner occupied, whereas in Switzerland, it is much less than half with the majority happy to rent.
Many property investors would like to sell but, because of the absence of buyers, are unable to do so. For them the only answer is to try to let their properties. Foreign holidays have yet to feel the draft and continue to grow, albeit slowly. The routes covered by the low fare airlines continue to grow and the number of people taking self catering holidays now outnumbers those on all-in package holidays. So if your holiday home is located in an area that attracts visitors for most of the year, you should be able to ride out the downturn without too much pain. If you bought nearer home, those unable to buy now must rent; so make your property as attractive as possible and hope that rental income does not fall as a result of over-supply.
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