RealtorMarketingInfo Blog

The worldwide property boom was responsible for increasing the wealth of many people. Fuelled by a plentiful supply of money money which led to mortgages being available 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 investment of choice as owners used equity in their main property to buy houses and flats to let houses and flats to let to those who could not get on the housing ladder.

Holiday homes too became a ‘must-have’ and these apartments and villas condos and villas were let to holidaymakers when not in use by the owner, thereby producing rental income which helped fund the purchase cost.

But as so often happens with any investment bubble the property boom has ended in tears. The credit crunch may have originated in America 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 preposterous 125% of the price of the property were common place during the boom but today buyers have to provide at least a 20% deposit and interest rates are higher. One third of sales are falling through because of lack of finance and the number of agreed mortgages has fallen to an all-time low.

Other countries in the EU are experiencing similar tales of woe. Worst hit has been Spain where the boom peaked in 2004. Prices started to fall due to overbuilding of villas and apartments on Spain’s Costas villas and apartments on Spain’s Costas 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 owning property has not been so fashionable 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. Fortunately, the number of people taking foreign holidays continues to grow, albeit at a slow pace. Cheap air travel continues to grow and the number of people taking self catering holidays now outnumbers those on all-in package holidays. Consequently, if you were fortunate enough to buy your holiday home in a part of the world that attracts visitors all-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.