The fall in UK’s property market is already beginning to have a significant effect on many of the favourite retire to the sun destinations of Brits. During the past boom bust property swings we’ve all become too familiar with the traditional property ladder and its dependence on first time buyers keeping the market buoyant and preventing property chains from posing threats of a potential property grid lock.
It appears that the recent surge in interest for property overseas may well have resulted in the creation of a new ladder equally prone to the grid lock effect when first time buyers disappear off the radar.
This new breed of overseas first time property buyer is ironically often the ‘last time’ buyer from UK. Not young career people about to give away a large percentage of their disposable income in order to become kings of their own castle, instead a silver market, affluent and well to put it bluntly every bit as stuck as their younger brethren.
Overseas property markets in countries such as Spain, Cyprus and Turkey have become more and more dependent on a steady influx of new ‘foreign’ business in order to keep the cogs of their own internal property market greased. The result in many cases is an all to familiar reflection of the UK market, resale properties sitting for months on end with no signs of interest, property developers falling over each other to produce ever more alluring deals that still don’t hit the ignite switch and lots of lots of estate agencies manned by a single person gazing out of their solitary confinement wondering if the couple across the road who have just finished their omelette and chips might just come inside for a peek.
It mirrors UK so closely, speaking to estate agents the dream of owning a property abroad doesn’t seem to have abated one bit any more than property ownership in UK where the market has most certainly never failed due to lack of interest. What has happened is that the process to make the overseas property dream a reality has started to fail. A large percentage of overseas homes were brought off of the back of growing equity pots, re-mortgages and a market that favoured the seller. Today we see the situation in reverse, a property buyer looking at an off plan villa where final payment is 18 months ahead is no longer chomping at the bit confident that his UK property will be worth at least 10% more and a breeze to sell, instead he’s looking at the very real possibility of a 15%-20% fall and even then no buyers rushing to get their hands on bargains.
Rational has taken over from lunacy and re-mortgages suddenly have to have some baring of reality, based on a realistic home valuation, plus there’s even consideration given as to how the borrower may find the means to pay back the debt. The result, the dream of overseas property ownership has suddenly become a lot less affordable, the overseas markets dependent on foreign buyers start to feel the pinch and suddenly it seems we might all be at the start of a far more elongated global property boom bust cycle.
Of course property professionals will point out that there are still places that show substantial growth, that can be for one of two reasons. They really are in a location with huge development potential or the boom to bust wave hasn’t reached their shores yet. He who guesses right stands to profit most!