Falling housing prices are a nightmare for those investors who have already bought dwelling property. They feel deceived after buying at the top when they could have bought it 30% or 40% cheaper…
Conversely, very few things can be more pleasant for them than seeing their assets (including the newly-bought dwelling property) increasing in price.
Therefore, we can conclude that during is necessary to be patient and wait for bargains if you want to be a successful investor, especially in crisis.
Market Leader and have published a rating of countries with declining housing markets in order to help those who want to invest in fixed property around the globe.
Let’s have a closer look at the rating…
Falling Housing Prices
All investors strive to have safe-haven assets in their portfolios. Some of them treat fixed property as such assets. Moreover, owning residential property in an EU country (Spain , Italy, France, Germany, Great Britain etc.) makes it easier for a foreigner to get a visa or even a residential permit. However, in today’s world, everything is changing fast. Yesterday’s winners often turn into today’s losers. It is especially, true of housing markets in various countries around the globe.
The following rating of weakening housing markets is represented mostly by European countries. These economies have been a major challenge to the global economy over the last 5 years. As you know, Greece, Ireland, Portugal , Spain and Italy (the so-called PIIGS) have suffered most of all EU economies. Higher unemployment, income and social benefit cuts, tax hikes and other unpopular austerity steps have resulted in the fact that people simply cannot afford to buy a house.
As a result we can see lower demand attended by higher supply. At the same time, gloomy prospects keep undermining local banking sectors.
1. Portugal . The housing prices in numerous regions (including popular resort areas) have dropped by 50%-60% on average. In Lisbon, the prices are down by 18%. However, foreign investors are interested in the fixed property located in resort areas, not an apartment in the capital.
2. Spain . The situation here is even more difficult. There are over 700 000 unsold units. 60% of them are located in coastal areas. It should be noted that several problems in the Spanish housing market emerged long before the global financial crisis broke out. These problems include uncontrolled construction in coastal areas and overpricing (excessive prices in some areas reached 17-30%).The situation in the French housing market is deteriorating as well. Taking into account, unclear monetary policies, multiple crisis issues, fragile Euro currency and some other factors, you don’t have to be a rocket scientists to figure out that most European housing markets will continue declining.
3. Norway. The current mortgage rates are relatively high (if to compare them with the rates in some neighboring states). Moreover, some experts expect them to double within the next 5 years. At the same time, they expect the current housing prices to drop by 20% more.
4. UAE. While the 5th place of the rating belongs to crisis-ridden eurozone economies, the 4th place belong to those housing markets that fell prey to some kind of a soap bubble. First of all it’s the UAE (Dubai, to be more precise). Dubai has quickly turned into one of the most luxurious resorts of the Middle East. When the local authorities opened the city for foreign investors in 2002, there was an army of investors willing to make good investments through buying fixed property there. Then a housing boom began. The prices went 300% up to collapse in 2008. Those who had invested in the local fixed property turned out to be major losers. 70% of them were Russian investors.
5. Italy. The local housing market also suffered from a price bubble. Prices were growing but local banks stopped mortgage lending (which should have alerted investors). Such artificial price growth can last for a couple (up to 5) years and eventually results in a major market collapse.
6. Israel. There are major risks present in the area (tensions with Palestine, Syria, Egypt, Iran).
7. Montenegro . Experts say that Montenegro ’s housing market is extremely overvalued. They say this is the most overpriced market in Western Europe. An apartment in Montenegro is sometimes costlier than a villa in Spain .
Obviously, we shouldn’t forget about the USA. This was the crisis starter. Moreover, it was the US housing bubble that started the global crisis.
Housing Indices
Vanguard REIT Index ETF (VNQ). This is an exchange-traded fund on the US housing index. It started declining before the global crisis broke out in late 2008. However, in 2009 it initiated a recovery, which later turned into a rally. It is still underway. In September 2012, the VNQ overcome the pre-crisis highs. There are several reasons for that. One of them is the Fed’s QE3. However, ’s expects say that the current data may be distorted.
