A worrying trend appears to be emerging in Ireland “overseas property investors” seem to be walking away from their foreign property investments in their droves.
People who bought during the boom years are now finding the value of their properties has slumped to the point that they are having to simply hand their keys back to the bank and walk away. Some of these individuals have not even been able to enjoy a single day in their foreign homes because they were bought off-plan, meaning they paid their money on the basis of a projected building yet to be built on a certain plot of land. Now these projects are nearing completion and the final staged payments are becoming due, property owners are realising they have already paid two or three times what their investment is now worth, without even adding in this final payment.
Many Irish investors had to re-mortgage their Irish homes to make their dream home in the sun a reality, and foreign property lawyer Tom McGrath has said his firm is being bombarded with enquiries from people in financial difficulties. These investors are now unable to complete their purchases and are not able to secure the return of any deposits already paid.
One of the places worst-hit is Bulgaria, where many investors were duped by the promise of rental guarantees for the first two years of ownership, little realising that this amount had been added into the purchase price. Thus, builders received above the odds for their properties and would simply have had to pay back that excess to the customer in the first two years following completion.
John Mulligan, who was formerly involved in selling overseas property, has written a book on the subject called ‘No Place In The Sun’. He says that between 50,000 and 100,000 Irish people bought properties in Bulgaria between 2000 and 2008, typically paying â‚¬120,000 for apartments that are only worth €40,000.
This same situation is happening in other parts of the world. Dubai, Turkey, Portugal and Spain are all seeing similar problems, where investors were caught up in the overseas property frenzy. Even where investors have the funds to complete the deal, there can still be problems because many building companies have had to fold, meaning construction projects have been halted. This leaves property owners with nothing more to show for their money than a building site sitting quietly in the sun.