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General: Overseas property greed - Alex Evans, OPP

Why noughties greed has no place in the tighter teens

In recent weeks, with murmurings that people are starting to buy overseas homes again and even whispers of fractional mortgages on the near horizon, I've been contemplating a question about the origin of the property recession: what came first, the desire for credit, or the creation of credit?

The more you delve into it the more an uncomfortable realisation occurs. It doesn't matter which came first, what matters is that the collective desire escalated. It became a basic human right to have as much credit as you could get, and a lot of people abused that right.

As someone who's written about overseas property for those that buy it and sell it for about six years, I've seen how cheap mortgages 'empowered' amateur landlord investors to build their own pension pot and made it easier for agents and developers to sell the 'property as a pension' dream.

But the dream wasn't a nightmare for everyone.

Now, if you're the type of person who batters the laptop when you read something that annoys you, maybe you should stop reading - especially if you or someone you know suffered the 'property nightmare'.

For every unscrupulous agent or developer, there are usually several more greedy and reckless buyers. On the other hand, the stories you're unlikely to hear much about on blogs are from the quiet ones who did it right and got what they paid for.

Some people didn't over-extend themselves, bought at the right time and for the right reasons, asked the right questions about the developer, the planning, title, and payment options and got independent legal advice. These people have nice little portfolios of buy to let and jet to let homes, working their way toward a mortgage free pension pot, or homes in the UK and overseas they can use for holidays, retire into, or give to their children to help them get on the property ladder.

Of course, the recession has delayed the plan somewhat, but what of those who claim they did all of the above and found themselves bought into a failed project? The horrifying answer is that there was a key question you simply didn't ask or a major consideration that you didn't check. Harsh perhaps, but due diligence has to be thorough.

The ones who get it right, who see the recession as an opportunity, simply possess the right combination of confidence and caution; and they make their money work for them. They're making a killing at the moment. One developer in Cyprus is selling finished homes at 40% below peak pricing, and prices in Dubai are currently 35% below peak. This is the age of the distressed developer and the canny ones are taking advantage.

Now some properties are cheap for a reason, of course, and properties in the massively over-developed parts of Spain and Bulgaria and only good for social housing - and if you're looking to invest in that, Brazil is a better bet.

Greedy developers hoping to cash in as quickly as possible literally couldn't build fast enough because buyers were desperate to buy. But the legacy of greed lives on in the new vendors, woith some markets stagnating because of people who see a 200k profit instead of a 300k profit as an unacceptable loss - and they're blaming the agent for not doing enough to sell. There's no excuse for greed in the teens, and the legacy of the noughties is a third off everything.

Everyone quotes the world's most successful investor, Warren Buffett, but the quotes would be empty if he wasn't so successful. Mature investors know that when the man on the street is buying, you sell, and when they're all selling, you buy - but you still have buy with your eyes open and for the right reasons.
Today's investment is in quality, and savvy buyers are making their money go further.

Now here's another revelation. A lot of unscrupulous agents and developers have gone out of business, but so have some really good companies - and some that helped to mature the overseas property industry. Some developers are helping buyers who lost deposits on some projects transfer mortgages to upgraded finished properties on their own schemes - allowing them to rescue their equity in many cases. How often do you here about that in the consumer media?

Last year tested the best and worst in overseas property, and some of both survived. The price is right, but is the developer? Now really is the best time to buy an overseas home, but there's no excuse for not asking the basic questions when there are some very easy ways to minimise risk. If you can't get a convincing or satisfactory answer to the following questions, don't buy:

• Does the development have the full and correct planning permission - and can they produce documentary proof immediately on request?

• Will your deposit be held in escrow until completion - and if not, why not?

• What is the developer's track record on delivery - and are their timeframes realistic?

• How is the construction being funded - and are there any guarantees in place to ensure project completion?

• What exit strategy is in place - and how easy would it be to sell or let?

• Is your contract with a UK company or one overseas - and wouldn't you prefer to know before you commit?

If you can get straight answers on all of these, and the property ticks all the boxes, get the best deal you can. If you don't, and the deal turns sour, there's only one person to blame.

Alex Evans

Having edited mainly B2B magazines for a variety of industries, Alex has been focused on the UK and overseas property markets since 2003. In 2004, he launched two dedicated business to consumer titles for UK property investors – Property Investment and International Property Investor. Alex sets the editorial strategy for content across print, online and conference platforms for the Overseas Property Professional (OPP) and is also the chair for the OPP Industry Awards.

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