Just because a property market has seen values fall by 60% or more it doesn’t necessarily mean that a market has reached its bottom.
Take Ireland for example, the market for apartments in Ireland has fallen 60% since the peak in 2007, but if we cast our minds back to the beginning of last year The Irish Times was telling us that the market had finally reached bottom quoting a report by ratings agency Standard & Poor’s.
IPS said that the assessment proved to be wide of the mark as Ireland’s housing market has fallen by 15% so far in 2011, even after a few pints of Guinness it’s hard to feel optimistic about the future of Ireland property in 2012.
So when is a good time to ignore the pessimism and take advantage of low prices in your chosen market?
IPS said we must look for positive early signals others fail to notice, like a slowing in the rate of price declines or even signs of growth.
As seen in Ireland, just because a market falls dramatically, it doesn’t mean that the bottom will be reached any time soon, the same rule applies to those markets that may have seen more modest falls in property prices.
Take Poland for example, Polish cities including the capital were once magnets for overseas investors, but despite the feel good factor of co-hosting the European Football Championship, the property market in Poland continues to slide at a faster rate in 2011 than it did in 2010, falling 3.83% in the second quarter of 2011 with the annual rate of decline being 6%.
So if overseas property markets are considered in this way, a clearer picture starts to emerge, which isn’t driven purely by media speculation. Spain is one market that has received a bad press due to the spectacular falls seen in its property market and the same applies to neighbouring Portugal. The sovereign debt crisis hasn’t helped and has left investors spooked by the consequences of those countries defaulting.
IPS said despite this, there were signs that in some areas of Spain, property prices may well have reached rock bottom and we are already beginning to see positive changes in the quarterly figures. Murcia, Malaga and Tenerife property prices have risen on the most recent quarterly data suggesting that confidence is beginning to return after nearly four years of falling prices averaging 7% per annum.
The Algarve in Portugal is also showing some promising signals with a rise in the demand for rental properties and a huge increase in the number of overseas investors looking to buy property. Mortgage rates are favourable and there are tangible signs that the banks may be loosening their purse strings. Portugal too hasn’t experienced the dramatic property price falls of its neighbour Spain because oversupply hasn’t really been an issue.
Add rising demand for rental property from the cash-strapped domestic market and Portugal Property could well see an improving outlook in 2012.
IPS: European property markets nearing the bottom in 2011:
Further to fall in 2012:
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