Highlights

• Spanish banks poised with new lending conundrum
• Chinese property buyers taking international market by storm
• Irish property shows long term potential

Commentary

According to Global Property Guide’s (GPG) survey of house prices, which covers the world’s main price indices, the downturn in prices is gathering pace. For investors this is definitely a classic buyer’s market. House prices fell in 22 countries in 2011, of the 35 countries for which Q4 house price statistics are available, and rose in only 13. With the world economy still struggling to recover GPG lists high unemployment, worries over sovereign debt levels and weak consumer confidence as the major reasons for the continued pressure on house prices worldwide.

Carrying on from last month’s report where we highlighted the problems Spain was having in balancing its books, a recent report from the National Institute of Statistics (INE) claims unsurprisingly that property prices in Spain fell in 2011. The overall adjusted weighted figure was 11.2% across both new build and property for resale. January 2012 sales figures also make grim reading when compared to the same time last year with a fall of 26.3%. January’s figures represent the 11th month in a row where house prices have fallen. Audited figures for the first quarter of 2012 are likely to show a drop over the corresponding period in 2011.The upshot continues to favour buyers over the medium term as the Spanish government struggles to make headway in getting their major banks to take strong fiscal medicine and build up their reserves against the spectre of defaults on loans made to predominantly property companies and developers. The biggest problem facing Spanish banks at the moment is commiting to new mortgage lending over 25 year terms, as the ECB has only offered them access to cheap credit for the next 3 years and then the interest rates charged on this credit that they are lending out is unknown. Despite this mortgage rates for new foreign property buyers in Spain remains relatively low, at interest rates from 3.25%, with both tracker and fixed rate products still widely available.

We have already seen the gravity defying performance of central London property prices and while much of that is down to the attraction of international interest around London as a major worldwide financial hub, the phenomenon is showing little sign of abating. The economic powerhouse of South East Asia, particularly China, is seeing quite an emigration exodus among China’s wealthy, which is already being felt in the property markets around the world as new money looks to buy abroad. According to Savills, Hong Kong’s high end property is already the priciest in the world and more of that money is seeking purchases further afield, with Chinese buyers already accounting for over 20% of new home sales as far afield as Vancouver, Toronto, London and Singapore. The Chinese proclivity for buying at a discount will be good news in the longer term for property markets that have been particularly distressed during the current economic climate such as the USA and Europe. If the trend continues, buyers in these areas are likely to be very grateful when the Chinese come to town. Mortgages are currently availble foreign property investors in the UK at interest rates from 3.88%. Both fixed and variable rate mortgages are available requiring a mimum 25% deposit.

There has been better economic news from Ireland lately as it comes to terms with the austerity programme forced on it as a condition of the EU-IMF bailout, in the wake of its decision to support its ailing banking sector when the credit crunch really bit three years ago. However, although the government has shown admirable purpose in its attempts to reduce the deficit, the housing market is still in the doldrums with property prices still falling. Overall the value of housing fell by just less than 19% in 2011, after a fall of over 15% in 2010. Property prices show little sign of stabilising anytime soon, but there are slightly more encouraging signs of improvement in the rental market and with property prices in Dublin over 60% off their peak level and over 50% across the rest of Ireland according to Ireland’s biggest property website Daft.ie, there is plenty of encouragement for investors with the nerve to hold for the upturn in value and the expected improvement in rental yields. Mortgages are currently availble foreign property investors in Ireland at interest rates from 3.95%. Both fixed and variable rate mortgages are available with property finance up to 75% of the purchase price.

Statistics

Buying Property Overseas? Click here for a mortgage quote now!