The holiday homes you can afford
It is still possible to get a good deal - if you know where to look. The search starts here ...
The Guardian 8.9.07 http://www.guardian.co.uk/money/2007/sep/08/moneysupplement.buyingpropertyabroad2
The following correction was printed in the Guardian's Corrections and clarifications column, Saturday September 29 2007
The subheading in the Italy section of the following article was inconsistent with the text. It listed Umbria as one of the regions to avoid, but the article recommended Castiglione del Lago (misspelled as Largo) in the province of Perugia, in Umbria. The spelling error has been corrected.
After this year's miserable summer the British - already the biggest buyers of second homes in France and Spain - are keener than ever to invest in a dream property overseas. But amid soaring prices, have all the bargains gone`? Guardian Money this week examined the major destinations - Spain, France and Italy - and found that you can still, just about, bag a bargain, but you have to look hard and avoid the usual destinations favoured by Brits.
One of the fastest-growing - but now fastest-falling - property markets in the world is Florida, writes Patrick Collinson. The sub-prime mortgage crisis gripping Wall Street and the City has its origins in states such as Florida, where easy lending spurred a house price and building boom that is moving sharply into reverse. But amid the misery of "foreclosures" are the first signs of investors buying at rock-bottom prices. We report from Clearwater Beach on the Gulf coast, where prices have tumbled as much as 40%.
The pain in Spain is not that different. A glut of developments has pushed prices on the Costas down - but take a short drive from the coast, to the "pueblos blancos", and you can still find properties below £100,000.
France
Many of us will have returned from our summer holiday harbouring dreams of buying our own place in France. But after years of rising prices, finding bargains is harder than ever.
Price rise: Last year 15%, Over five years 73%
Good value: Champagne-Ardennes, Poitou-Charente, Pyrenees-Atlantiques, Limousin
Don't go there: Cote d'Azur, Provence, Dordogne
The British love affair with French property shows no signs of abating. Many of us will have returned from our summer holiday harbouring dreams of buying our own place in France. But after years of rising prices, finding bargains is harder than ever.
Regions such as Normandy and Brittany have long been popular with Brits, but during the past few years the low-cost flights revolution has dramatically boosted demand for property in other parts of the country. Ryanair now flies to a staggering 20 destinations in France.
If you prefer to let the train take the strain, Eurostar is set to become the fastest way to travel from central London to central Paris. The revamped St Pancras station opens for international passengers on November 14, and the company has promised scheduled journey times of two hours and 15 minutes to Gare du Nord.
France's property market has been vibrant for a number of years; prices have risen 15% in the past year and by 73% over the past five years, according to recent research from the Halifax. However, the Royal Institution of Chartered Surveyors warns: "House price behaviour [in France] is quite volatile over the long term.".
However, if you choose wisely, you can still get an awful lot for your money. "France is still very good value," says Liz Oliver. Properties on the coast tend to be expensive, "but if you are prepared to go inland a little bit, prices drop significantly".
Most buyers tend to be looking to spend between €150,000 (£101,000) and €250,000 (£169,000), says Ms Oliver. Generally speaking, three-bedroom properties start at around €150,000. Needless to say, if you're after something cheap, somewhere like Provence isn't the place to look. "It's absolutely beautiful but it's expensive. You are unlikely to find a bargain."
When buying a property in France, you should expect to pay about 6.5% to 8% on top of the purchase price in legal fees.
While surveys have suggested that Spain remains the most popular destination overall for overseas second home buyers, France is often close behind, and tends to be particularly popular among the over-40s.
Florida
The US mortgage crisis has resulted in a huge number of repossessions - and that's attracting the bargain-hunters.
Welcome to the world of foreclosure. One in every 80 homes in Florida is currently being repossessed by banks, as the sub-prime mortgage crisis rips through the Sunshine State.
While this means misery for evicted home owners, it spells opportunity to others - and many of the buyers are British, taking advantage of the best dollar exchange rates for a decade.
At Beloise Realty (belloiserealty.com), owner-manager Sal Beloise is a realtor (estate agent) in Clearwater Beach, which is regarded as one of the best beaches in the US. He says: "We've just put a property on the market that 22 months ago we got $1.8m (£889,000) for. Even though it's on the bay front, we'll probably end up with a sale price around $1.1m (£544,000).
"At the top end, the properties selling for $2.5m-$2.8m (£1.2m-£1.4m) are now going for $2.1m-$2.2m (£1m-£1.1m), while properties in the interior which had gone for $600,000-$900,000 (£296,000-£445,000) are going for $450,000 (£222,500)."
House prices in holiday centres such as Miami, Orlando and Clearwater boomed in the years running up to 2005, stalled in 2006 and are now falling fast as the foreclosures work through.
"It was bizarre how it came to a halt at the end of 2005," says Mr Beloise. "For the past 23 months it has been like someone flicked a switch and said 'no more sales'."
Initially Mr Beloise blamed it on overbuilding of condos (apartment blocks) and media reports (he cites CNN) predicting that the boom couldn't last. His guess was that cheap condos bought by investors - those priced around $300,000 (£148,000) - would be hit, but family homes would remain unaffected.
But the truth was that every mortgaged household was being affected by a sustained rise in interest rates, which saw the Federal Reserve raise borrowing costs 17 times in succession between 2004 and 2006. "People who had adjustable [variable] rate mortgages saw their payments doubled or even tripled," says Mr Beloise.
The financial pain didn't stop there. It is two years since Hurricane Katrina wrecked New Orleans, but its impact still reverberates around the Gulf; home insurance costs have rocketed. A typical household in Clearwater now faces an annual hurricane and flood insurance bill of $4,000 (£2,000), while for waterfront properties the premium can be as high as $10,000 (£4,900) a year.
Hard-pressed mortgage payers also face fast-escalating property taxes. Mr Beloise says: "Taxes are levied on assessment, not on what you paid for the property." In his area they are charged at 2% on the value of the home, and after the boom it meant that an owner with a property valued at $1m (£494,000) was having to pay $20,000 (£9,900) a year. "The number one issue at the last election here was about lowering property taxes, and the next biggest issue was about insurance costs."
Given the combination of oversupply, stretched affordability, rising interest rates and soaring insurance and property taxes, it is hardly surprising that Florida's property market went into freefall. But what has made this downturn different to others is that the foreclosures are turning up in every neighbourhood, not just in low-income communities.
The victims may not like it, but there is now a small industry growing and feasting on the fall in prices. US real estate expert Danielle Babb has just published a book entitled Finding Foreclosure: The Insider's Guide To Cashing In On This Hidden Market.
She says: "In the 'old days' the foreclosures were usually in bad neighbourhoods, sub prime and in bad condition. Today one in every 143 households in America is in foreclosure. This means that a lot of families who took really good care of their homes - even upgraded (especially in Southern Florida) - are now in foreclosure. These are where the bargains are because the neighbourhood value is still strong."
She adds: "To get some really good values, your readers need to find home owners in distress - and they can do that by using a site I use to find my own investments called Realtytrac.com. Once they search a zip code, they should look up the pre-foreclosure stage."
Ms Babb's other recommendation is to seek out distressed home owners before foreclosure. "If the buyer contacts the home owner directly, they can often work out a bargain deal and then jointly take that deal to the bank - the bank, not wanting to pay a 6% broker [estate agent] fee plus go through the hassles of foreclosure, will often accept the offer if it's reasonable (around 20% to 40% below appraised value)."
A large number of websites have sprung up offering to find foreclosures across the US, although as most charge for access and are keen to find users, some of the claims they make can be far-fetched. The US Mortgage News Daily says recent shocking Realtytrac foreclosure figures, reported across all the major news networks in the US, paint a misleading picture of the "crisis".
A different reading of the figures suggest arrears and repossession figures are stable in most areas, and would have fallen were it not for sharp rises in just four states. But it acknowledges that one of the states with soaring foreclosures is Florida; the others are Arizona, Nevada and California.
In an odd way, the realtors are happy that at least the foreclosures are prompting activity after two years in which sales came to a halt. Joanne Hiller of Island Estates in Clearwater Beach (islandestatesrealty.com) says: "There are now a lot of properties to choose from and we are starting to see investors come back to the table. We are also seeing some foreign investment; just last weekend I was dealing with British buyers."
Ms Hiller believes the market in her area bottomed in June, although she's not predicting a rapid recovery across the state. "Miami was the hardest hit area in Florida, because it built so many condos. It will be the last to recover. Around Clearwater I would say there is excellent value in condos and I think single family homes will come back."
However, Mr Beloise predicts a bumpy ride ahead. He says the banks are pushing through a lot of "short sale" foreclosures, which could depress prices in the short term. "There's going to be a bumpy time as the foreclosures go through. You are going to see 10-15 foreclosures in one area, and that will affect the neighbourhood. But this isn't going to go on for years."
Over the longer term, he's confident of a full recovery. "It really is worth buying here. I've been all round the world and the beach is unparalleled."
Spain
Prices in parts of Spain have begun falling after frenzied development of two-bed "urbanizacion" resorts now blighting large parts of the Mediterranean coast.
Price rise: Last year 14%, over five years 100%
Good value: Non-coastal areas outside the cities of Granada, Cordoba and Jerez
Don't go there: Virtually the entire Costa del Sol and Costa Brava
Don't be fooled by the "official" price rise figure for the past year of 14%. Prices in parts of Spain have begun falling after frenzied development of two-bed "urbanizacion" resorts now blighting large parts of the Mediterranean coast. Last year, more houses and flats were built in Spain than in France, Italy and Germany combined - and 600,000 more will be completed this year. The result is a glut that is proving extremely difficult to shift.
The price fall comes after years of soaring values in Spain which made even Britain's booming housing market look feeble. Worst hit are the two-bed flats favoured by developers, although agents report price drops of 10%-20% across all classes of property.
Don't make the mistake of thinking this is a golden opportunity to pick up property on the cheap. Given the continuing excess supply, some experts are warning that prices will be flat or falling for many years to come. Construction companies on Madrid's stock exchange have collapsed in price and there are fears that those who have bought off plan in future developments could be left high and dry.
Another worry is widespread contravention of planning laws, particularly around the Marbella area. As many as 40,000 homes have gone up without proper planning permission, and while some may be granted retrospective permission, others may be bulldozed.
In a report earlier this year, the Royal Institution of Chartered Surveyors said the Spanish economy has become highly dependent on the residential market and its associated consumer boom. It added: "Unsurprisingly, a number of pundits are suggesting that 2007 will mark the end of the great Spanish market boom."
However, its pessimism is limited. "Acute housing shortages continue, despite all the building; demographic pressures still exist and there remains a seemingly insatiable demand among many Europeans for a place in the Spanish sun.
"Spanish real estate has for many been a source of effortless wealth in re cent years. Perhaps the most worrying thing is that so many people think it is going to stay that way for a long time to come."
It's not bad news everywhere, though. Mallorca has weathered the storm remarkably well, according to Kyero.com, which runs a Spanish property price index and claims that stories of a widespread crash are "scaremongering". But average prices in Mallorca - around euros 430,000 (pounds 291,000) - means the island is now the preserve of the well-heeled. Kyero instead recommends the Canary island of Fuerteventura - average price euros 229,000 (pounds 155,000).
Away from the overheated coastal markets, prices are less inflated and less prone to falls. Less developed areas include the Costa de la Luz and Jerez in southern Spain. Don't expect much in the way of capital gain; you need a 20% increase in house prices just to cover the cost of buying and selling.
Where? Medina Sidonia, Cadiz province.
Why? Medina Sidonia is an unspoilt, white-washed ancient hill-top town in Andalucia with both an Arab and medieval flavour. The village has a slightly shabby grandeur, with narrow cobbled streets leading off an elegant Plaza de Espana. Located just half an hour from Jerez with its cheap flight connections and half an hour from the beaches of the Costa de la Luz.
What do you get? One-bed apartments in the old town start at around euros 75,000 (pounds 50,731) while euros 220,000 (pounds 148,811) buys you a three-bed apartment with roof terrace.
Casa Cuesta is on offer from andaluzhomes.co.uk for euros 250,000 (pounds 169,097). A four-bed townhouse, it has two bathrooms and two living rooms, plus a 50sq m terrace.
Downsides? The village has been "discovered" by developers. In the countryside outside, a mega-development of 2,900 homes and attached golf course is under construction. And like other parts of Andalucia, it is unlikely to be totally insulated from the Spanish property market slowdown.
Italy
Although less popular than France and Spain, Italy has long been favoured by British buyers. Tuscany and Umbria have been joined by a host of new areas - most notably the south.
Price rise: One year 4%
Good value: Perugia
Don't go there: Venice, Tuscany, Umbria and the lakes
Although less popular than France and Spain, Italy has long been favoured by British buyers. Tuscany and Umbria have been joined by a host of new areas - most notably the south.
The Royal Institution of Chartered Surveyors says the overall market rose 4% in 2006 (the second homes market rose 5.5%) "and it continues to be fairly flat". Property tends to be kept in the family and sold as a last resort, or when a foreigner makes a crazy offer.
The vast majority of Italy is not cheap; if you have less than euros 100,000 (pounds 67,652) to spend you will not find much - unless you are prepared to throw caution to the wind and go for one of the new-builds appearing all over the south. It is now possible to buy a flat in a coastal town for as little as euros 40,000 (pounds 27,059).
Steve Emmett, managing director of Brian French Associates, advises caution. "The opening up of these areas is entirely down to the arrival of Ryanair but you have to wonder what these flats would be worth if the airline pulls out? I'd advise buyers to stick to the well-known areas even if it means buying a smaller house in a better area."
He suggests one of the best overall packages of value and desirability is the area one hour's drive from Perugia. When pressed he suggested buyrs looks at little-known Castiglione del Lago.
Buyers can expect to pay 10%-15% on top of the price in fees and taxes.
Where? Castiglione del Largo.
Why? A lovely town on the on the banks of Italy's fourth biggest lake Trasimeno - bang in central Italy. Good transport links: a choice of airports in easy reach, including Ryanair into Perugia, excellent local food and wonderful views of the lake. Top location.
What do you get? Prices in and around the town start at euros 75,000 (pounds 50,732) - but that is for an inhabitable shack. An option if you are able to do the work yourself, but be prepared for a serious challenge.
Reasonable done-up but small ish properties are closer to euros 150,000 (pounds 101,456) - most two and three bed homes are euros 300,000 (pounds 202,911) and above. However, some in the area cost as much as euros 1.1m (pounds 743,995) - and you're only getting three bedrooms.
The 75sq m two-bed cottage with garden restored 30 years ago, is in a hamlet near Castiglione and is on the market for euros 115,000 (pounds 77,781) through brianfrench.com.
Downsides? Prices, though not rising fast, are still steep. The area can be swamped by weekenders from Rome. At least the pizza and gelati are cheap.
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