Overseas Property now Recovering on a Global Basis

A wealth of reports in the last few weeks have told us that, not only is overseas property an industry enjoying recovery, but also that it is a …

A wealth of reports in the last few weeks have told us that, not only is overseas property an industry enjoying recovery, but also that it is a recovery based on and growing out of the recovery seen into the second half of 2009 and into 2010; a recovery based on increasing buyer variety, awareness and knowledge making it more likely to become a stable and sustainable recovery.

In 2008 the predicted soft bounce became a hard crash for almost all of the big overseas property markets of the day. In 2006 America began its fall into one of the worst financial cataclysms in the history of mankind. In 2007 the UK began to feel the effects as both their banking systems had become heavily linked. At the same time other markets began to be affected as the number of toxic loans exploding within securities investments grew at an accelerating rate.

If the collapse of Lehman Brothers was the tipping point in America’s crisis, the fall of Northern Rock signalled the end of UK hopes of avoiding a full blown crisis. Before that Brits were still holidaying and buying overseas property, but they stopped dead. In the next few months most of the markets people believed would weather the storm succumbed to its devastating effects; Albania and Brazil are two prime examples for me.

But as we went into the second half of 2009 we were hearing the first reports of sales picking up, with agents like Knight Frank and Savills reporting increasing demand in the markets still enjoying stability, like Portugal, and picking up bargains in the Caribbean, which also still had a relatively stable economy.

The reports had two main things in common: Firstly the buyers were reportedly a "savvier" bunch who were conducting their own in-depth research. This is important because much of the money lost when the crisis hit could have been avoided if people had properly looked into what they were buying and who they were buying it from. And secondly the buyers were primarily wealthier, often using the fact that they were buying in cash to secure the best prices in a mortgage starved world.

The world is still starved of mortgages, and cash-buyers are still getting the best prices. But a lot has changed since the middle of 2009. If it had continued in 2010 as it had started in 2009 then we would have fully recovered by now. Unfortunately it didn’t. As many predicted the wave of liquidity instilled by government intervention came back to bite us. Many governments didn’t just have to turn the money tap off, but had to bring in tough austerity measures, increasing taxes etc to get back on track. In short most countries fell into a double dip.

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However, overseas property did not have a double dip. During the last 12 months, when reports have talked of austerity, misery and double dips, overseas property sales have continued to build on the same firm basis.

Buyers are conducting a world of research into markets and properties, buying the right properties for the right prices. Prices have collapsed and buyers with substantial deposits or the funds to buy outright are picking up some incredible bargains. And buyers are coming from a much wider variety of countries; whereas before Brits were dominant in most leading European markets, now they are fighting a much tighter battle with Russian buyers, and Asians are becoming dominant in London and in Florida and in other parts of the states as well.

A good example of how the recovery has proceeded came this week in the press release for the opening of the completed Tortuga Beach and Spa in Cape Verde’s Sal Island. I remember when the development first came out in 2007 (if I’m not mistaken) being sold off plan. As the crash blasted off plan buyers in 2008 sales were obviously crippled. But apparently as the building work continued sales picked up again, because the development is now 100% sold out on completion. The developer also unveiled a new development, Dunas Beach, which is twice as big and 50% sold.

This is a good example of people buying quality, as units in the development went into the middle range of what overseas property buyers pay on average. Dunas Beach being 50% sold as it is launched off plan would seem to indicate that appetite is once again growing for off plan property, but in fact it shows the aforementioned trend of increasing research as well, because we are looking into a developer that now has a proven track record.

Another example of the savvier bunch is also contained in the report, because the developer reports that 50% of the units sold at Tortuga Beach were bought as part of UK Self Invested Pension Plans. 80% of the units sold at Dunas Beach have been SIPPs as well.

The reports of such sales in high end resorts in top locations have been growing in frequency since the second half of 2009. Now we are also hearing that sales are finally increasing in volume on a market by market basis.

A few weeks ago we heard the massive report that sales of Turkey property to foreigners had grown 40% in 2010, with the total sales of $2.5 billion almost beating the $3 billion total achieved in the 2 years 2006-2008. We have also heard many reports of strong sales in Brazil as well.

Rightmove, the UK’s largest property website publishes figures based on the searches of its visitors, and according to it searches for Spanish and Portuguese property have been growing rapidly of late as well. France and Germany are also becoming very popular because of their economic standing in the new Europe.

So, 2011 looks set to be a good year, but more importantly a door way into the recovery proper.


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