Editor’s note: This item is republished with permission from Global Edge Marketing Ltd. The original post can be viewed here.
After the dark days of 2009, the market for overseas property seems positively buoyant. However, a recent editorial poll by Global Edge revealed a mixed picture with many agents and developers still struggling to keep their heads above water.
The companies with the best news tended to be in more traditional overseas buying locations like Spain, France and Italy. The responses from Florida were also overwhelmingly positive where foreign cash buyers seem to be taking advantage of prices that have declined more steeply and rapidly than in almost any other developed market.
However, it would be foolhardy to predict any quick return to the good old days of 2007. The boom was built on the back of equity release from rising property prices in the United Kingdom (and to an extent from other rich, cold countries like Sweden, Norway, Holland, etc.), but if you believe MoneyWeek, U.K. house prices are about to take a tumble. They make three compelling arguments:
- After an initial bout of deflation, interest rates will rise as inflation kicks in as a result of the government’s quantitative easing (printing money). This will serve to both increase housing supply as repossessions increase and reduce demand as mortgages become less affordable.
- The unemployment that results from upcoming government spending cuts will force thousands more people to default on mortgages, exacerbating the problem above.
- Finally, rises in capital gains tax will force thousands of buy-to-let landlords to sell up, flooding the market with property and forcing prices down further.
MoneyWeek makes a living from being contrarian and there is no mention of the rising population, immigration pressure and a chronic shortage of housing that affects many areas.
However, what is certain is that the overseas property market will not recover to its previous peaks without a buoyant U.K. property market, which could be many years away.
Retirees, high-net-worth individuals and serious investors may be the only serious segments of the market buying overseas for some time to come. The casual second-home buyers and speculative amateur investors won’t be back any time soon. They won’t have the money or inclination to look abroad.
We are on the road to recovery, but the journey looks like being anything but smooth.
Copyright © 2010 Global Edge Marketing Ltd.
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