Economic gloom, falling overseas property prices, increasingly non-existent mortgage finance and a sliding pound have left many overseas property investors wishing they hadn’t bothered. And those who paid deposits to buy off-plan properties when prices were booming are becoming increasingly desperate to back out before they are forced to cough up the remainder of the purchase price.
Michael Begg is typical, says Emma Wells in The Sunday Times. He paid a deposit for an off-plan studio-cottage in Grenada in April last year that isn’t due to be completed until December 2009. Begg wants out now. “I’ve been looking for cash to invest in other things, such as a bottle of whisky and a revolver.”
So given that for many what was once a dream holiday home now looks “more like a millstone than an asset”, as Wells puts it, what are the options for an off-plan buyer? Some investors are simply walking away from deals and abandoning both properties and, in many cases, deposits of anywhere between 10% and 30% of the purchase price as cash-strapped developers refuse refunds. But for those who have already handed over bigger sums that’s an expensive solution.
An alternative is selling on the contract. Begg, for example, who has already paid a deposit of £50,000 on a property valued at £175,000 at the time, is offering to sell on his right to buy the property for just £30,000 with the buyer paying a balance of £125,000 on completion. It’s a nice idea, but finding someone who wants to buy is far from easy. And even then contractual small print may stop you from selling on, so ideally “always make sure you can sell on when you sign”, says Fiona Frost at Property Frontiers. Better still, think before you sign at all as anyone thinking of buying and flipping a property for a quick buck isn’t “living in the real world”.
So how to find a buyer? Drop the price, for starters. Then for £175 a firm such as Sellmyholidayhome.com will list your property for six months and market it globally to individuals, developers and estate agents. “As always, one person’s loss can be another’s gain,” says Wells.
A week in the property market
• Nationwide has reported that house prices fell 1.4% in October. This means prices have fallen 14.6% over the year, according to its data, leaving the average house price at £158,872. It is the sharpest drop since 1952. The average house has fallen by £27,000 in value in the past year, meaning the average owner is losing more money on their property each day than they earn at work – the average salary is £24,000.
• Waiting lists for affordable housing have risen by two-thirds over the past five years in England in areas that are popular with second homeowners, says Channel 4. They rose by 115% in the City of London between 2002 and 2007. Waiting lists grew by 80% in North Cornwall and South Lakeland in the Lake District, according to the figures from the National Housing Federation. Nearly 240,000 properties in England are registered as second homes and demand has caused prices to rise to unaffordable levels for those living locally.
• Prime residential house prices fell by 3.9% in central London in October, according to estate agent Knight Frank. This means prices fell by around £5,000 a day as prime London houses are classed as those selling for over £1m. It is the fastest rate of decline on record. Prices have fallen 13.4% since the peak of the market in March.
• Figures from the Bank of Scotland have revealed that 101,019 properties are currently vacant, representing 4.1% of Scotland’s housing stock. The bank has called for the Scottish government to reduce VAT on renovating vacant properties.
• Repossessions are on the rise across the country and millionaires’ row, Sandbanks, isn’t immune. Two properties have been repossessed in the world’s fourth-most expensive postcode location. A five-bedroom £1.1m house and a £2m property are the first to be repossessed in the area for 14 years, according to a local estate agent.