Mixed Messages About Overseas Property Investors’ Confidence

Since 2007 when property markets around the world really began to take a nosedive, the media has struggled to put across a coherent message about how property investors have coped with falling values of homes overseas.  This issue continues to this day with two recent reports in different publications highlighting the very real problem.

For example, Homes Overseas magazine – which naturally has a vested interested in the positive promotion of property abroad as an ongoing viable opportunity – recently reported that investor confidence was on the increase.

This message is sharply contrasted by a hard hitting piece in the Irish Independent that investigates how many Irish citizens have been forced to literally walk away from their properties abroad and give up the money they had invested in them because of a string of issues relating to everything from financing to corrupt builders.  These mixed messages about overseas property investors’ confidence do nothing to help those wondering about whether now is a good time to buy in…so we thought we’d delve a little deeper in the pursuit of some truth!

The statement published in Homes Overseas magazine comes from a survey conducted on those attending the Property Investor Show in London towards the end of last month.  The survey revealed that confidence amongst investors was up some 43% - however, interestingly most of those with renewed and increased confidence in buying property abroad stated that they were buoyed up with confidence thanks to positive media reporting.

Surely it shouldn’t be enough for most investors to dip a toe back in the water if all they’re banking on is a positive media report about a given market.  They should know that most media reports are paid for at least in some small way by the product or location they’re reporting on and promoting?  Mind you, for those attending a property investment show to say they have confidence in investing in property is probably no surprise is it?

The report that should perhaps therefore be taken more seriously is the one in the Irish Independent that talks about those who have been burned by their experiences abroad.  The report focuses particularly on those who bought real estate overseas on the back of rental guarantees offered by the developers. 

The report mentions what we have long told our readers – that rental guarantees are a rip of 99% of the time!  A developer increases the asking price of the property to factor in the ‘guaranteed rental returns’ that he will then pay you back over the duration of the so-called ‘guarantee!’  Meanwhile, you bank on the rent to pay your mortgage or loan and he uses the capital you pay him to fund ongoing building work.  Then, when a market crashes the builder gets into difficulty, he has spent your money, cannot pay you back the rental returns that were apparently ‘guaranteed’ – and because you bought the property off the back of these guarantees, secure in the knowledge the rent would pay your mortgage debt on the property abroad, you’re now stuffed!

This is what has reportedly happened to many in Ireland – particularly those who bought in Bulgaria, Dubai, Turkey, Portugal and Spain according to Charlie Weston from the Irish Independent.  However, is this any fairer a picture of the state of the property market abroad when the piece is written based on the findings of one John Mulligan who has written a book called ‘No Place in the Sun’ that is promoted through the article?

Perhaps what we should figure from this is that actually, popular media is not the best way to gauge what property markets abroad are doing and how investors supposedly feel about a market opportunity.  After all, there are those who are positively promoting the British market for investment right about now – yet if you take a trip anywhere in the UK you will see shop after commercial unit boarded up, you will see ‘to let’ and ‘for sale’ signs on more commercial property that you thought possible, and the commercial market is a direct indicator of the health – or, in this case, otherwise – of a given nation’s property market.

So, if you were wondering whether now is a good time to buy property abroad, the answer depends fully on the market you’re looking at, the type of buyer or investor you are, and the long-term plans you hold for your investment.  For example, if you’re a cash buyer who is a serious investor, someone who can sniff out a bargain and a good investment, then now could be a great time to wade in, buy up prime stock at less than prime prices and sit on it for the long-term.

If on the other hand you’re a one off investor who will have to remortgage your primary residence to gain the cash needed to put down on a single unit overseas – perhaps you should be thinking long and hard before you venture any further than the internet to see what’s for sale within your price range abroad.  In other words, yes there are bargains to be bagged and there are those investors who will make a fortune out of the world’s struggling markets at the moment – but at the same time, if you do not know what you’re doing and you’re unsure, it’s perhaps not the time to make any move whatsoever.