Three reasons for cheer for overseas property investors
News Article Date: Thursday 11th of June 2009
When it comes to overseas property, it is not hard to find people talking down the international scene. After all, prices have fallen, so have the number of buyers and the state of the world economy may suggest that a recovery is some way off.
But is this a reliable picture? After all, while falling prices are not so good for short-termists who might wish to buy real estate in a booming market and then flip it, those with a longer term outlook may see things differently. This view, as well as accommodating the possibility that prices can fall for periods while rising overall over a period of several years, may also see a big opportunity in falling prices. For such a situation could enable bargain hunters to grab a cheap property now that will grow in value over the years.
So whenever the recovery may come, be it in the next few months, not until the end of the year or even well into 2010, the acquisition of something for a low price now may look like a very good deal in 2014 or 2015.
Evidence that affordability has improved and that buyers are responding to this has been provided by money exchange firm Currency Index. Its survey of eight countries has found that in several cases the affordability of overseas property has improved notably since 2008, the Press and Journal reports.
While the actual cash cost has varied recently, partly due to exchange rates adding to the cost of some eurozone locations compared to last year, the firm noted that many places have become cheaper overall.
Three reasons exist for this, the company commented. The first is that asking prices have fallen with the world downturn. The second is that central banks have slashed their base rates, making mortgages rates cheaper in all instances. Thirdly, there is renewed encouragement from exchange rates.
This third factor may have a patchier effect. In the case of the pound against the dollar, this has of course seen sterling stage a major recovery since January, when it dipped below $1.40, with the figure recently rising past $1.60. The fall against the euro has not been reversed as much, although this has not stopped places like the Spanish Costas becoming cheaper as prices have plunged there.
Commenting on the situation, official at Currency Index Robin Hayes said: "With property prices and mortgage repayments now significantly lower than in 2008 in many of the UK's favourite foreign holiday-home destinations, we are seeing a renewed demand for currency exchange as people pick up property bargains in Spain, Florida and elsewhere around the world."
The Florida situation may indeed be a notable opportunity, since this combines the three main factors of lower prices, an improved exchange rate and low base rates - the latter being set between zero and 0.25 per cent. Such a situation prompted chief executive of the Association of International Property Professionals Paul Owen to say it is a "great time" to buy there and in many other places.
Speaking to the Daily Mail, Mr Owen did, however, go on to warn that buyers "shouldn't lose their heads and forget the basic rules of safe buying abroad". Most importantly, he remarked, getting independent advice on the legal and financial aspects of any transaction is essential.
So it seems the message for overseas property buyers is clear: There are many bargains out there thanks to a combination of favourable trends. The key is to ensure that a wise approach is taken to buying them, to make the most of the current situation.