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Reality check in progress

Much has been written about the overseas property markets in the past few months as the recession across the world has deepened and people who once thought they had significant amounts of disposable income are finding out they may struggle to meet all of their repayments.

Sometimes it is difficult to square what is being said in the editorials with what is happening out in the real world. As I read articles about how this or that destination is now in a perfect position for investors to make the most of falling prices and highly-motivated sellers, there are yet more stories coming in about job losses, a lack of financial security in the developed world and the perilous state in which most of our banks find themselves.

Now, I don’t want to start criticizing my follow journalists and the piece they write, and it is true that it is practically-impossible to write article which everyone finds informative and pertinent. There is little doubt that the overseas property market is a buyer’s paradise at the moment – agents and developers are offering some of the most attractive deals that I have ever seen, and are more flexible to negotiation than they have been in years.

Affordability

At the same time, the irony of the situation is that at the present time, despite the deals on offer, there are less people able to afford a property overseas than has been the case for years. Mortgage finance is now almost non-existent to the average customer without a substantial deposit; nets-eggs built up in the stock markets have been decimated. Even those who are lucky enough not to have been too badly affected by the credit crunch are hardly banging on estate agents’ doors to get to the bargains – such is the lack of confidence in the economy that people with cash are holding onto it for the rainy days ahead.

The changes in the overseas property markets do not rest there. In the past, the main selling point of the so-called emerging markets was that they offered a much cheaper alternative to the property available in the established overseas property destinations, with the potential for huge rises in the value of both land and property. While you could find a property in Central or Eastern Europe for the same price as a large family car a couple of years ago, you are now struggling to find anything below the price of a posh sports car – and agents and developers in the emerging markets are seeing a serious drop-off in trade.

While this has been going on, the housing crisis in the US has been taking its toll on buyers and asking prices alike. As the mortgage market has collapsed under the weight of sub-prime loans imprudently doled out by the banks, property prices have fallen through the floor under the twin pressures of foreclosure rates and a total lack of mortgage finance.

This all means that in some cases you can buy a property in Florida for less than you would pay for an apartment in Bulgaria. Although I am yet to see any evidence of it myself, anecdotal evidence from agents suggest that in some parts of the Sunshine State it is possible to get a decent family home for not much more than £30,000.

This recession really has turned the world on its head more than anyone could have predicted.

© BuyAssociation 2009

Paul Collins is Property Editor at BuyAssociation.co.uk - the one-stop shop for expert advice and consumer reviews

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