World Wide Buy-to-Let Crash?

World Wide Buy-to-Let Crash?

The Irish Independent had an article this Sunday that attracted our attention. With the massive increase in property values in Ireland recently, many Irish home-owners have jumped on the worldwide buy-to-let market abroad. Particular favourites have been the USA, Spain and Bulgaria.

All these markets are taking a beating at the moment, particularly the American market. GE Money Home Lending subsidiary “British Mortgages Abroad” recently pulled out of the Florida market and are not accepting any more mortgage applications on properties in Florida

The latest data from the OFHEO reveals that 18 of the largest 20 urban price falls have been experienced in Florida and California. House prices in Punta Gorda have dropped 7.12 per cent this year, with Sarasota and West Palm Beach also falling by up to 6 per cent. Property values in New York are also down by a half per cent in the last quarter.

Combined with the dropping value of the dollar, this is putting some strain on Irish investors. Of course, the same can be said of the smaller English investor and the problem is not solely an Irish one.

Many eastern European markets have come crashing to a stop in recent months with as much as 20% price drops, particularly in areas that were relying on unrealistic rental guarantees. Once the guarantee runs out, you’re on your own and with average wages in Romania around 10% of the rest of the E.U, it’s hard to imagine a scenario where the typical Romanian meets a western European’s rental expectations.

The article estimates that as many as 150,000 Irish investors have bought property in Spain recently, where the Costa del Sol has seen price drops as much as 20% in the last few months and the words “Reduced Price” are now as common as “For Sale,” and more likely than not, uttered in the same sentence.

With the larger investment firms moving their attention away from the US and eastern Europe and taking a strong interest in Russia and Singapore, we think that perhaps the smaller investor should be doing the same?

The original article: