Should I buy a house in the troubled eurozone countries





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17.10.2012 09:45
Real Estate Market Analysis | Should I buy a house in the troubled eurozone countries According to Knight Frank, the II quarter 2011 II quarter of 2012 among the countries of the euro zone real estate prices dropped the most in Ireland, Greece, Spain and Portugal. Lack of funding, unemployment, low consumer confidence - all of this has a negative effect on demand. According to Forbes, Greece, Portugal and Spain are among the five countries with the largest share of government debt relative GDP: 163, 114, and 90% respectively.

Since the beginning of the last decade, governments have spent too much money. Then it's not a problem as banks and investors willingly donated money for the development of the public sector. When the crisis hit, the debt increased, and even fees from higher taxes could not cover them. Ireland, Greece, Spain and Portugal still can not cope with the problems, despite the fact that they receive in aid to billions of euros from the European Commission, the International Monetary Fund and the European Central Bank.

The main difficulties in the housing market in the troubled countries:

low demand for real estate;
excess supply;
fall in prices;
low demand for mortgage and / or difficulty in obtaining it.

Ireland: uncontrolled price drop

The cost of housing in the city center: 3200 EUR / m ²

Dynamics of prices for the year: -14.4%

Perhaps no other country in the world is not so affected by the crisis as Ireland. Reaching a peak in 2006, prices have stabilized in 2010, and then began to fall. Over the past year, real estate prices dropped by an average of 14%. According to the Central Statistics Office of Ireland, in Dublin for 12 months, home prices have fallen by nearly 17%, in the apartment - about 20%.

In the boom in Ireland was built so many objects that require more than a decade to sell them. Today, the house in the capital cost is 56% cheaper than in 2007, the apartments depreciated by 63%. Demand for housing has fallen: the total amount of loans was reduced by 30% compared to last year.

Investors interested in rental income or increase in value, of course, to buy property in Ireland is unprofitable. But those who move to the country to permanently live and work there, the local market may be interested. The more that the property is sold at deep discounts. For example, in Wicklow, in the east of the country, over 8 million sold property Victorian Humewood Castle, situated on 170 acres of land. Initially he asked for 25 million euros.

The local media reported that the economic indicators across the country indicate an improvement, however, according to experts, there is no certainty that there will come a new jump down.

In the future, the case for the Irish market can go up the hill, if the banks can sell property seized for debt, or if by some miracle the economy starts to recover. However, many experts agree that demand for mortgages remains low, the number of items seized for debts will continue to rise, and prices - all fall rapidly.

Greece: the prospect of leaving the euro zone

The cost of housing in the city center: 2000 Euro / m ²

Dynamics of prices for the year: -10.3%

Greece has been out of work for more than 20% of the population, half of them - young people. To save the country, the government increase the tax burden, fight corruption and reduce the government. Perhaps these measures will increase the competitiveness of the economy, yet the consequences of the crisis will be felt for a long time.

Since the crisis in 2009 real estate prices dropped by 20% in most parts of Greece. Hardest hit city of Thessaloniki, where prices fell by 26%. Over the past year, prices have dropped by 10%. Sales fell by half. Analysts predict that if the country will come out of the euro zone, the decline would be even more significant. Thus, according to the rating agency Fitch Ratings, 2014 cheaper housing for another 17%, and the objects seized by banks for debt, will lose in value 46-49%.

Falling prices contribute to the rumors of Greek exit from the eurozone, as well as suspension of auction sales of real estate debtors.

Today Greeks get rid of any object - from beachfront villas to whole villages. Among the proposals is and island. For example, over 36 million euros available chorus land area of ​​350 thousand m ² in the Aegean Sea. Over 5 million sold the island to an area of ​​1 million m ² in the Ionian Sea.

With the purchase of a property in Greece is better to wait a little: if the country still does not leave the euro zone, we should wait two to three years before the market reaches bottom, buying a home at the lowest price, and then watch as it increases the cost to a few years later resell and get the difference. If Greece return to the drachma, it would be difficult even to say when exactly the market will revive.

Spain: a huge oversupply

The cost of housing in the city center: 5000 Euro / m ²

Dynamics of prices for the year: -8.3%

In Spain, the situation is especially severe in the market. Being among the most popular countries for the purchase of real estate, it experienced a construction boom, which led to a surplus of supply. "Bubble" burst, prices began to plummet, and now the company does not know how to sell unnecessary objects. The bank Caixa Catalunya, 818 thousand new homes in the country can not find buyers. Unclaimed remains about 7% of the units.

Moreover, in Spain, the highest unemployment rate in the European Union - 24%. For comparison, in Germany - less than 7%.

According Tinsa, the general index of real estate prices, reflecting the situation in the whole of Spain, in August 2012 decreased by 11.6%, slightly higher than the previous month. Cumulative decline since December 2007, when the market reached its highest point, was 32.4%.

Record drop in prices year on year demonstrated the Mediterranean coast. There's housing in August 2012 became cheaper by 14.7% year on year. House by the sea today are 39.5% lower than five years ago. Most real estate prices dropped in Catalonia - by 16.5%.

Some sites offer huge discounts, such as villas and apartments Polaris World now stand at 40-65% less than the original price.

According to forecasts, in 2012 the number of unsold homes in Spain fall by 23.6%. Experts believe that excess supply will be reduced mainly due to foreign buyers.

Experts believe that this year the market will receive 6.6% less expensive than in 2011: to be sold 100 thousand houses and the same in the next year. However, from the end of 2013 the volume of investments will grow. Next year will begin recovery in the construction sector. Today, the share of constructed buildings is only 20% of the 2007 level.

Portugal's weak economy

The cost of housing in the city center: 2000 Euro / m ²

Dynamics of prices for the year: -7.9%

Financial difficulties in Portugal are not related to the budget deficit, as in Greece, or the bursting "bubble" in the property market, such as Spain and Ireland. Problems emerged because of a chronic lack of competitiveness of the Portuguese economy amid growing global markets. As for the real estate market, the boom of 2001-2007 has affected him less than Ireland, Greece and Spain.

For the year housing cheaper by almost 8%. While continuing crisis in the eurozone, it is unlikely that the market will grow. The situation worsens adverse credit conditions: since 2011 banks have reduced the volume of the grant of loans and increased interest rates.

Unlike the locals, foreigners enjoy the moment to buy property on the cheap. Many of those who dreamed of a house in Spain, are now looking towards Portugal. More and more tourists, including Russian, discovering the country.

Someone who is new to Portugal will likely scare off news of lagging economic development. But anyone who has studied it and had grown to love, repeatedly relaxing resort of Algarve and Lisbon Riviera, will not pay attention to the crisis.

As a measure to boost the economy with the October 2012 home buyers value of EUR 500 thousand were allowed to obtain a residence permit. Previously, on the basis of purchasing property in Portugal, this document has not been issued. Authorities hope to revive the market by foreigners - Russians, Brazilians, Angolans and Chinese. That foreign buyers often buy luxury property.

According to experts, Portugal recovered from the crisis of 2015, and prices start to rise again. If the banks ease mortgage terms, the property market may recover earlier.

When you select a real estate plays an important role location. Quality expensive items in the developed cities with good infrastructure are the best buy, and buy them almost no risk, even in troubled countries. However, the impact in the short term count is not worth it.

Julia Kozhevnikov, Tranio.Ru
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