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Ten years ago, Chris McCarthy, a Briton living in Marbella, set up Viva
Estates, an estate agency aimed at selling property to the hordes of his
fellow countrymen keen to buy on the Costa del Sol. At its peak, the company
had 15 offices across southern Spain and was selling 2,000 properties a
year.
Now, Viva is down to one office and sells 200 homes a year if it is lucky.
“It’s as if we’ve been hit by a tsunami,” says McCarthy, who is focusing on
Hot Properties, a magazine he has set up to help people sell privately. “The
property boom was over by 2004.
Last year, it was oversupplied, overpriced and illegal, then came the Spanish
property market collapse, the US sub-prime crisis, Northern Rock, followed
by UK house prices falling, rate increases, the mortgage freeze and the
stock market collapse. It’s been like wave after wave hitting us.” Spain –
and especially the south coast – consistently tops the list of the most
popular overseas buying destinations for Britons, with an estimated 65% of
the properties sold each year on the Costas going to UK buyers.
With the British market in trouble, the Costa del Sol is feeling the draught.
While the value of their own houses in Guildford and Birmingham is at a
standstill or even falling, people are less willing to invest in a holiday
home abroad. Other places popular with Brits, such as Florida and the
Caribbean, are also beginning to hurt.
Even in the south of France and Italy, markets are taking a knock, thanks to
the strength of the euro, which has risen 15% against the pound since
September, adding to the cost of buying. Couple this with tighter mortgage
conditions for borrowers at home and abroad, and the picture is far from
rosy.
“There has definitely been a slowdown in the normal sales rates that one might
expect,” says James Price, head of international residential development at
Knight Frank. “It’s taking longer to get people to commit. There needs to be
a compelling reason for them to buy abroad.”
In its latest report on the global market, the agency says the credit crunch
is having an impact, but finds it is affecting markets differently according
to location and sector.
“Super-prime property appears to be relatively unaffected by the tightening of
lending conditions,” says Price, although he thinks even the top end of the
market in most countries will begin to slow as turmoil in the financial
world hits confidence. He warns: “The next 12 months will see a gradual
slowing of price growth in the main international buying destinations,
especially France, Italy and the Caribbean.” So what is really happening in
the six most popular overseas destinations, and what should you do?
THE COSTA DEL SOL
“British demand in Spain has slowed dramatically,” says Mark Stucklin, founder
of spanishpropertyinsight.com, an independent online consul-tancy. “The
latest nail in the coffin is the exchange rate, and prices have dropped 20%
in some parts of the Costas since last summer.” Viva Estates (0800 298 9594, www.vivaestates.com)
is selling a two-bed flat in Elvira near Malaga for £240,000, although it is
possible to pick one up elsewhere on the Costa del Sol for less than
£200,000. In higher-end areas such as Mallorca, prices have stagnated, so
vendors who need to sell are having to accept offers.
Strategy: If you’re an owner, hang on if you can. “Now is not a good
time to sell,” says Stucklin. “There are just no buyers out there.” If you
must sell, then be prepared to cut the price sharply. Those bringing the
proceeds back to Britain can console themselves with the fact they are
getting 10p more for each euro than at the beginning of the year. If you’re
a buyer, you have a lot of choice, so shop around and haggle hard.
THE DORDOGNE
Despite more than a decade of strong growth, property prices in France are
still rising – and were up 3.3% year on year during the first quarter of
2008, according to FNAIM, the federation of French estate agents. In the
Dordogne, an old favourite with British buyers, the rise was just 1.9%.
Overseas Home- search (0800 652 0769, www.overseashomesearch.co.uk)
is selling a fourbed conversion with a pool and two cottages near the
medieval town of Sainte-Foy-la-Grande for £540,000.The number of properties
changing hands has dropped here, too. VEF, an English-speaking estate
agency, with 30 offices across France, says its sales in February were down
38% on the same month last year. “We have had fewer buyers this year,” says
Trisha Mason, VEF’s director. The slowdown is concentrated on the middle of
the market, with the top and bottom ends doing well. “At the lower end,
people are downscaling their expectations and buying property that needs
work, rather than postponing their purchase,” she says. “At the higher end,
it’s the people with money who understand the markets and know when, what
and how to buy.” She expects things to pick up over the next few months,
which is traditionally when the French buy.
Strategy: The market is generally in a much healthier state than in
Spain, without the huge problems of oversupply, but property is more
expensive. Again, the strong euro is crucial: if you are buying, you may be
able to persuade a fellow British vendor to take a hit since they will be
benefiting from the exchange rate.
TUSCANY
The Tuscan market is holding up fairly well, despite the gloom in Britain and
the parlous state of the Italian economy, long one of the worst-performing
in Europe. “It’s very much a lifestyle purchase – people are looking at the
long term, so are not concerned with immediate financial worries,” says
Rupert Fawcett, head of the Italian desk at Knight Frank, which has more
than 100 Tuscan properties on its books.“We haven’t seen a fall-off in the
number of Brits – they are still the majority of buyers.” There is a greater
realism among sellers, however, with some cutting prices by 2%-3% to
compensate for the strong euro. Knight Frank (020 7629 8171, www.knight
frank.com) has a large farmhouse set in 12 acres, east of Lucca, in need
of complete renovation, for sale for £1.2m. Those looking for value for
money should set their sights on southern Tuscany, with a new airport
opening in Viterbo.
Strategy: Owners looking to sell should do so now, while the market
is still relatively strong, suggests Fawcett. If you’re a buyer, don’t
expect to be able to go in and make a killing, but there is scope for some
flexibility. In the northern Tuscan borders, you can still find property for
less than £800,000.
THE ALGARVE
“The credit crunch has affected the market and there has been a noticeable
down-turn since September,” says Serge Cowan, director of Unique Living
(0845 430 0185, www.uniqueliving.com),
which sells all over Europe, including the Portuguese golfing mecca, the
Algarve. “We are all having to work a bit harder.” The number of inquiries
is fairly steady, but British buyers are waiting longer before they take the
plunge. The market is being supported, however, by buyers from Holland,
Scandinavia and Russia, especially for properties above £1.6m, which are in
short supply. Cowan, who is selling a two-bed townhouse in Vale do Lobo for
£310,000, sees scope for growth in traditionally less-popular areas such as
the eastern Algarve and the Silver Coast.
Strategy: Owners looking to sell shouldn’t accept ridiculous offers
– try letting instead. Rents in the “golden triangle”, around Vale de Lobo
and Quinta do Lago, are still good.
THE CARIBBEAN
“People are being more cautious about the lesser-known smaller islands and
going back to Barbados, where there’s an established resale market with
reasonably balanced supply and demand,” says Julian Cunningham, a senior
negotiator in Knight Frank’s international department. The weak dollar –
still languishing at close to two to the pound – also makes buying in the
Caribbean an attractive proposition for those feeling the pinch back in
Britain. Cunningham says buyers are looking increasingly at off-plan
new-build branded developments rather than resales. “As the market has been
slightly trickier, people are looking to the comfort of established brands –
that, coupled with the dollar, is seen as a safer investment,” he says.
“They want to be able to see their exit strategy.” The average spend in
Barbados is about £500,000, which will buy a new-build, two-bedroom,
sea-view flat in a gated community. Prices for off-plan flats at Brownes, a
boutique-style development under construction near Christchurch, range from
£165,000 to £340,000, through Chesterton International (020 7201 2070, www.chesterton-international.com).
Strategy: Sellers who can afford to hold out should put their homes
on the rental market, which is booming. “People want to holiday in dollar
areas,” says Cunningham. If you’re a buyer, research the rental and resale
markets, and go through a reputable developer.
FLORIDA
Like the rest of America, Florida has been hit hard by the sub-prime debacle,
with the property market in most of the Sunshine State in crisis – although
some areas have proved notable exceptions. “Palm Beach county has not gone
down one iota,” says David Vaughan, head of global resorts at Savills.
Chesterton International is selling three-bed flats at the Marina Grande,
just north of Palm Beach for £385,000. Elsewhere, prices have slid. Where
there has been overbuilding – in parts of the area around Orlando, for
example – prices are down by as much as 50% since last summer.
Condo-flippers and other speculative investors hoping to buy off-plan and
sell on for a profit have been especially hard hit.
Strategy: With the pound strong against the dollar, and developers
and speculators who have come unstuck desperate to sell, buyers are in a
good position. So do your research and drive a hard bargain. If you are
intending to let your property, focus on prime locations and those popular
with overseas visitors.
