First it was the US. Then Britain. Now the holiday-home price boom may be
over
By Emily Dugan
The Independent
Thursday, 6 March 2008
When the property rush to the costas began, it seemed like a win-win bet
for
thousands of Britons: a low-cost investment promising great returns and a
place to escape the British gloom. But the attraction of owning a holiday
home in Europe has lost its allure, with continental property now heading
into freefall.
The value of property across Europe is set to take a dramatic downturn in
2008, according to the Royal Institution of Chartered Surveyors (RICS),
which claims the Continent's long-running housing boom is collapsing. In
2007, many European countries experienced either a dramatic drop in house
price inflation or actual falls, the RICS annual European housing markets
survey said.
About 300,000 Britons have a second home abroad, and many of these
properties are in countries hit by the latest inflation falls, such as
Spain
and France.
And as the market collapses in the costas, house values in the
once-buoyant
Eastern bloc countries have taken an even greater dive. Property prices in
Poland and Estonia took a severe tumble after price rises in early 2007.
In
Estonia, some properties fell by as much as 40 per cent.
The credit crunch is partly to blame, according to the RICS, but the
re****t
said rising interest rates were the chief cause of the slowdown, which is
much more severe than in the UK. Owners with variable rate mortgages
experienced a sharp rise in their rates after the European Central Bank
raised their rates from 2 per cent in 2005 to 4 per cent last year.
The author of the re****t, Professor Michael Ball, of Reading University,
said yesterday: "The big reason for the slowdown was rising mortgage
rates,
which were slowing demand." He believes the trend will continue into 2008
but will not be on the scale of the crash in the early 1990s.
Given the continued downturn, Professor Ball recommends that those
considering buying second homes should think carefully. "Unless you've
found
a bargain or the home you've always wanted, it would not be a good idea at
the moment," he said.
And for those who already have second homes, he said the best thing to do
is
hold on.
But Kenneth Taylor, from Inverness, is one of many Britons who cannot
afford
to wait. After being hit by ever escalating mortgage payments, Mr Taylor
is
hoping to sell his two bedroom apartment on the Costa Del Sol. But he is
concerned he may not cover his costs on the property, which he bought in
2005.
"It was lovely there but we took out quite a large mortgage on it, and now
it seems a bit over the top,"he said. He and his family are looking for a
quick sell, partly as a result of rising costs.
"We took out a Spanish mortgage in Euros to buy it and now the Euro has
strengthened against the pound, which has made the repayments much more
costly. We're hoping to make a 5 per cent profit on what we paid, but the
prices have stopped rising."
More than four million new homes have been built in Spain in the past
decade
and price growth for property has slowed to about 3 per cent. According to
Ian Cunningham, sales manager at the Costa Del Sol branch of Escape To
Spain, that is likely to cause problems for Britons trying to sell their
properties.
"There's been an oversupply of one type of accommodation, with developers
building lots of apartments in complexes with pools to target the tourist
market, and a lot of that hasn't sold," said Mr Cunningham. "It will take
a
long time to clear that backlog, and individuals trying to resell their
property are struggling because developers have a lot of stock to clear
and
can hold the prices."
The story for Britons with property in France is all too similar. French
house prices rose by about 3 per cent last year, less than half the
increase
of 2006.
It will come as alarming news for the many Brits with second homes there,
but Georgina Caldwell, deputy editor at French Property News insists that
things are not as bad as they seem. "I would be hesitant to describe this
as
a downturn," she said, "More this is a steadying of the market, a normal
state of affairs for the French market. Prices were low thanks to
over-supply and the fact that the locals were largely uninterested in the
old, dilapidated stone housing stock.
"Supply and demand have now evened-out [thanks to France's high birth rate
and immigration] and a high percentage of older properties have been
restored."
British homes look more secure, as the UK's housing market was described
as
"one of the strongest in Europe during most of 2007". Unlike many of its
European neighbours, Britain only experienced a slight slowing in the
market. Year end prices were up by about 8 per cent the highest of all
the
major EU economies.
In Ireland the situation looks much less stable. After one of Europe's
biggest housing booms of the 1990s, they had one of the worst performing
markets last year, falling by about 7 per cent.
http://www.independent.co.uk/life-style/house-and-home/property/first-it-was
-the-us-then-britain-now-the-holidayhome-price-boom-may-be-over-792072.html
|
