British and Irish Easing Back Into Buyers' Market
There are signs that British and Irish buyers, once the leading foreign players in several hot property markets, are starting to invest again after a long spell on the sidelines.
But gone are the days of speculating in emerging markets like Bulgaria or Croatia.
Like many commercial real estate investors, who are spurning risky investments in favor of well-established markets, British and Irish buyers are focusing on locations where they have a long history.
"British buyers are playing it safe," said Charles Weston-Baker, managing director of global development at Savills International, the real estate agency in London. "They are keen to buy second homes in areas with which they have a long association, such as southern Spain and the Algarve in Portugal."
"Ultimately, they are looking for locations that are close to home with good infrastructure, including transport links," he said.
In challenging economic times, buyers are more likely to target locations closer to home than far-flung locations, said Ben May, an economist with Capital Economics, a research consultant based in London. "I think that most buyers will be cash-rich and confident about their job," he said. "And as prices have fallen in markets like southern Spain and Portugal — and may continue to fall — there is more of a feeling that there are some bargains out there."
The interest in Portugal is focused once again on the Algarve region of the southern coast, according to the Knight Frank real estate agency. Agency figures show prices in many parts of the Algarve have fallen by 25 percent since the end of last year and, according to Georgina Richards of the agency's London offices, Knight Frank has sold seven properties in the area to British buyers since April.
"British and Irish buyers tend to look at villas, because they offer more privacy," said Ms. Richards. "Close proximity to restaurants and the beach is also very important to them."
Typically, villas in the area sell for less than €1 million, or $1.5 million, although they occasionally come on the market for as much as €2.5 million, she said.
One man newly seduced by falling prices is Pierre Doyle, owner of the European pub chain O'Reilly's. Originally from County Kildare, on the east coast of Ireland, he bought a villa along Praia da Luz, a crescent-shaped beach in the Algarve, in August.
"I'd been down in the Algarve last summer for a month and had one of the best holidays I'd ever had. There seemed to be a lot of opportunities to enjoy outdoor activities," Mr. Doyle said. "However, the market was on a downward path and it didn't seem like the best time to buy.
"Earlier this year, though, I started to look again. I wanted a place that was dog-friendly — for my dog — with a garden," he said. "The cottage-like garden had so much character, it sold it to me immediately."
In a sign of just how much prices have fallen, Mr. Doyle paid €400,000 for the three-bedroom villa with a pool. The 186-square-meter, or 2,000-square-foot, property had been on the market last year for slightly less than €600,000. He now intends to move from Germany next month and plans to make the villa his primary residence.
Next year, prices in the Western Algarve are likely to remain stable but not increase, considering the sizeable correction that already has taken place, Ms. Richards said.
In the Central Algarve, particularly Vale do Lobo and Quinta do Lago, prices already have stabilized, largely due to the proximity to Faro airport, waterfront location and good facilities, she said. As of 2011, prices are likely to increase by 3 percent to 5 percent a year, and possibly more in the more sought-after locations, said Mr. Weston-Baker of Savills International.
Even along the Costas in southern Spain, which have been plagued in recent years with construction and corruption scandals, interest from British buyers is rising.
According to Louise Cant, director of Hudson International Properties in Marbella, inquiries from potential buyers for midrange to high-end homes in southern Spain have tripled since January, to just over 60 a month. And more than half the inquiries are from Britons, she said.
Ms. Cant declined to disclose specific sales numbers. But she said: "I think that people have started to realize that the market has probably bottomed out — or won't fall much further — and that there are some bargains to be had."
Prices at the top end of the area market have fallen by around 20 percent since mid-2007, and by as much as 40 percent at the lower end of the market. Now, homes cost around €3,500 per square meter, down from around €4,500 at the beginning of 2007, according to Hudson figures. Typically such homes are spread over about 400 square meters, with four bedrooms, a private pool and a garden.
The lower prices also are spurring rental tenants to buy, she said, describing a British client whose rental is being sold so "he has decided to buy and really doesn't care if the market drops further as his family is settled and wants a permanent home," she said.
According to Mr. May at Capital Economics, housing prices in Spain are not falling as sharply as they were at the beginning of the year but they could decline by as much as another 30 percent over the next three years. And while the drop at the top end may not be dramatic because demand is stronger, developers may be forced to discount sharply to get rid of the glut of newly built units at the lower end of the market that have not sold, Capital Economics has said.
Some property funds, including British-based funds, are interested in buying residential units to turn them into rentals, but there is less interest from private individuals in the buy-to-let market, Ms. Cant said.
Source
http://www.nytimes.com/2009/10/23/greathomesanddestinations/23iht-rebrit.html?_r=1
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