Foreign property dreams crash: dismal reading from today's Sunday Indo 21-10-07

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Murt10

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Very dismal reading from todays Sunday Indo. Looks like a lot of people are going to lose their shirts. Apparently the crash is not confined to the new resorts, Grand Canaria etc are also experiencing a major slump.

Also, not mentioned in the article, is the fact that if oil prices continue to rise then airfares will also have to rise making holidays in less affordable especially for families. Therefore less people will travel, looking for accomodation for short breaks, leaving the properties vacant for much longer periods outside the peak season. Remember that a lot of the new destinations where investors bought Bulgaria ,Turkey Dubai etc., are all very far away, therefore the amount of fuel needed to reach them is much greather, making them less attractive as a holiday destination.

There's nothing but dark clouds on the horizon




Murt
 
Re: Foreign property dreams crash

a welcome cautionary tale for anyone still considering investing abroad, or looking at the weakness as a buying opportunity.
 
Re: Foreign property dreams crash: dismal reading from todays Sunday Indo 21-10-07

How do they say Cape Verde is doing?
 
Re: Foreign property dreams crash: dismal reading from todays Sunday Indo 21-10-07

Any market with FDI being the primary driver and local market being secondary if at all, is bound to end in tears. Only buy holiday accommodation for your own enjoyment for holidays etc.

Serious OP Investments should be concentrated in cities where there are stronger factors. Doom and gloom is not in all markets. Look East to Singapore and Tokyo, prime office space up 24% YTD and rents up 12% from July to July 2007 according to UBS. Borrowing in this market is 0.5% only - so if leveraged as many funds have done to 80% LTV the returns for the year would be close to 120%. The subprime mess has knocked 20% of J-Retis, good buying opportunity. Prices in these markets in real terms are same as 1970's.

Anyone buying in Albania, Hungary, Romania or any of these other relatively poor countries compared to Ireland & UK and calling it the next big play because they're joining the Euro Club, needs their heads examined. Do people park their brains when looking at OPI?

Also Germany down -6.9% from 2006 to 2007, I'd welcome the buying opportunity - investors should only consider it because it’s at the bottom, according to Liam Bailey head of research at Knight Frank who compile the index.

Add-on Don King - I've been to all three, wonderful as there are with excellent infrastructure etc. However wages are to low relative to residential property prices, that is being feed by FDI. Consider it against the cheap costs of commerical in comparison, that has to work in the real world.
 
Re: Foreign property dreams crash: dismal reading from todays Sunday Indo 21-10-07

MichaelDes said:
Anyone calling Albania, Hungary, Romania or any of these other poor countries the next big play because they're joining the Euro Club needs their heads examined. Do people park their brains when looking at OPI?
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Have you been to these places? I have never had the pleasure of going to Albainia or Romania but I've been to Budapest a couple of times. Beautiful historic City with a fantastic infrastructure. They have a metro/underground and light rail tram system that we in Dublin can only dream of.

I don't know exactly what the Hungarian GDP is possibly around 1/3 of Ireland. I don't know what your definition of poor is, but I certainly wouldn't class it a poor country.
 
Murt10 said:
Very dismal reading from todays Sunday Indo.
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Nice to see Ms McBride is checking out Askaboutmoney........
One Irish investor is facing losses of about €30,000 after buying a Budapest property for about €79,855 three years ago. The investor, who is now trying to sell his property, was advised that the best sale price he can secure now is €69,000. By the time he sells the apartment, he will have paid about €20,000 in fees, taxes and renovations.
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Spot the post?
 
Dear doomsayers,

I ask you this simple question - what sells papers - truth or hysteria? Human nature dictates that we are fascinated by sensationalist journalism, interspersed with elements of truth to lend weight. For every negative experience story in news press how may positive stories do you read?

Right now the key criteria that a lot of investors neglect to consider is native buying power. If the locals can not afford the prices you are paying for your overseas property, then you are investing in a FDI bubble! Fact! History consistently teaches us that property investors who can afford not to panic sell and plan for a 5 to 10 year period ALWAYS prosper!

The world is not going to stop turning, all econmoies do not perform the same, and boom and boost cycles will exist in parallel. In the very same paper that you draw on for your Chicken Licken post, did you miss the article by Brendan O'Connor "Tide ebbs for dismal scientists"
(http://www.independent.ie/opinion/analysis/tide-ebbs-for-dismal-scientists-1200443.html)? I draw on the following quote
- "Someone should sit George Lee and the rest of them (including Murt10) down and slowly and calmly explain to them that these things go in cycles, like seasons, or womenfolk. Always have done, always will. George is like a man standing on Sandymount strand watching the tide going out, roaring into his microphone "The tide is going out! The tide is going out! If things continue like this, we'll soon be able to walk to England! The end is nigh!" And equally then standing there just hours later watching the tide coming in say "The tide is coming in! The tide is coming in! If it continues like this O'Connell Street will be flooded by Tuesday."

Furthermore, has one considered the fact that America does not wield as much global economic clout as some commentators mistakenly think. Consider the Sept 29th Economist cover article "How China Powers the World Economy" (http://www.economist.com/opinion/displaystory.cfm?story_id=9867004). Other nations are playing an increasingly important role also going forward such as Brazil. Not surprising really for those who study history and recall the rise and fall of empires from the Romans to the Ottomans - anyone sensing another cycle?
 
While I don't disagree with some of the above, is this yet another head of the dreaded BI Hydra? :(
 
Apologies, I neglected to address Murt's concern over rising oil prices. Has one considered the following:
- who controls oil prices, the consumer or the seller?
- Deep drilling technologies are only beginning to tap resources as yet untouched
- more importantly, given enough economic and political self-interest, alternative fueld technologies will come to the fore.
- Finally, do you not watch Top Gear :) - http://www.youtube.com/watch?v=GOFbsaNeZps

I refuse to accept that the demise of fossil fuels (when? 50 or 200 years from now) will consign us back to the Stone Ages. Where there is a will there is a way!

>"There's nothing but dark clouds on the horizon"
Do you forget what they say about Irish weather - "if you do not like it, wait 5 minutes!"
 
Folks, what we need to look at, and seriously so, is that a lot of people have bought their properties for their own pleasure. They see it as a long term investment in the future, to pass onto kids etc. If some invest to make a living, or to "flip", then they have a right to do so, and if they gamble and lose, then they always knew going into the deal that they might not come out winning.

That said, such articles are so up and down that it's ridiculous. Price of oil rising, cost of wheat going up, Ireland not qualifying from their group in the World Cup, any vast number of reasons can be given. But think of it in this way. Since Thursday last, the Indo in particular and one journo who ought to be wholly ashamed of himself, have been writing obituaries for the irish soccer manager. That meetings were being called, brought forward, organised etc to get rid of the existing boss. Now, whether this may or may not be true, it whips up sensation and feelings that those in control have to consider.

But will Mr. O'Leary worry about an Indo journo? Will he......
 
IFT said:
Yeah when I read the article i immediately came to the same conclusion. She should have cited her source (lets face it it was a poster on a public forum) but it had more credibility not to. I do believe the poster myself but it is not a hard fact and to report it as fact by Ms McBride is a testament to bad reporting. I cannot feel that she should have done her own research (which would have probably came to the same conclusions) rather than take the easy,lazy and cheap option and rely on an anonymous poster from a public forum for her research.
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sadly it happens quite a lot, i have seen posts on boards.ie and other sites that have become "sources"
 
bodhran said:
Apologies, I neglected to address Murt's concern over rising oil prices. Has one considered the following:
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Bodhran, you are so on the money. There are always negatives abound in newspapers, it sells better than good news. But let’s look at the good news of oil and its reality. It's at around $85 a barrel that's 185 litres (Yep it's that much taxes). Doomsayers mention it’s the highest ever - in 1864 however according to the Times it was $8.64 a barrel or in real terms today $100, or in 1974 at $31 a barrel or in real terms today $88, or in 1980 during the Iran/Iraq war in real terms $90 a barrel. What is driving the price in the last week, geopolitics of Turkey flexing its muscle on Kurdistan and winter is approaching. Yes that's what the oil traders are factoring. But no, it is much simpler. Oil is traded in dollars, as the dollar slides the oil price goes up to equalise. The rest of Bodhran for the most part is bang on the money.

The other side of journalism is the hypocrisy. Look at Al Gore winning the Noble Peace Prize. Lauded by everyone in journalism for his efforts. Let's turn back the clock... (Warning - I have a Michael Moore rant about to begin)...Was'nt he the same man in that owned farmland that was leased to a zinc mining company called Union Zinc, whom in 2002 was listed as one of America's worst facilities by scorecard. Or, that he had oil interests through a $500,000 inheritance in Occidental Petroleum, whom with his help drilled in Elk Hills, California - destroying over 100 Indian holy sites . In 1993 he was paid $175,000 as vice president, but now as eco spokesman he made $1.1m in royalties from his book "Earth in the Balance", and he now gets $175,000 per event for speaking fees excluding expenses. Does a leopard really change their spots or does cash motivate more?

Sorry for the diversion but my point is you can not believe what papers tell you as negatives sell, and in sometime in the future on the above "perceived good news stories for now" will turn sour. Some vulture in the Washington Post or LA Times will get hacked off with Gore and will unfortunately tear him apart (same as celebs but they deserve it). P.S. I like Gore.

On properties...as I said why invest in countries with poor incomes relative to the west who are near the top of their cycle (property proportionate to wages) instead of rich countries that are in the doldrums, facing into a possible bull run or up cycle. The position is obvious. Is it not?

The Indo article is right to warn others fools off about certain oversea property investment areas and what to look out for, but in this regard not all markets are doomed.

Finally MaxIII you earlier comment about 40% increase in costs out of China what is you source?? (admittedly there is exported inflation but not signifigant as RMB so undervalued and not likely to increase soon). I work extensively in this market and can categorically say that Hungary can not and never will compete with China. Are you in a parallel existence to me?
 
IFT said:
Yeah when I read the article i immediately came to the same conclusion. She should have cited her source (lets face it it was a poster on a public forum) but it had more credibility not to. I do believe the poster myself but it is not a hard fact and to report it as fact by Ms McBride is a testament to bad reporting. I cannot feel that she should have done her own research (which would have probably came to the same conclusions) rather than take the easy,lazy and cheap option and rely on an anonymous poster from a public forum for her research.
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To be fair, it was my original post, and there was PM contact made by the paper, and while I declined to be interviewed, I did confirm that I was satisfied for the salient points to be used in her article if she wished. should have made that clear earlier.

At the end of the day, hysteria apart, it is about time that the property sections highlighted the downside of rushing into overseas investment, it might make some novices (as I was) take a step back before risking a lot of money on a market they do not understand
 
I have moved the posts on the discussion of prices in Hungary to here


It's hard for journalists to get it right. When they predict price rises, they get accused of having vested interests and puffing prices on behalf of their advertisers.

When they report actual price falls, as Louise McBride has done, they get accused of doom and gloom.

For the record, Louise contacted me about the article in advance, but I declined to participate.

Brendan
 
Brendan you are right. No matter how journalists report a story especially on property, it will be castigated by many. People have strong opinions about their investments and ego sometimes will prevail more than logic when defending any argument.

In my above comments, I have tried to de-myth a couple of the concepts mentioned through the post. But sticking to the thread, Louise is wholly right in my opinion to de-camp all the investment areas she mentioned. However on balance, rather than castigating OPI's generally, she could have given the other side of the coin in terms of hotspots people fail to notice. Finally and in general the article is just common sense and accurate information on the area's she tore apart but unfortunately others will disagree entirely. A poster once mentioned ages ago "Cheerleaders for their own investments", we had our disagreements but he is correct in this assertion.
 
I'm glad that articles like these can be published in the property sections of Irish newspapers - particularly the Sunday Independent, which does not have the best reputation for unbiased analysis of overseas property. It's a very sweeping account which doesn't take into consideration the complexity of many international markets. It also uses figures from internet sources such as the 'Global Property Guide', which seems to be very hit or miss in relation to its accuracy. Sensationalised terms like 'crash' 'freefall' and 'meltdown' are great in journalism, but cover up the reality, which is much more complicated and difficult to sum up in a few hundred words. However, I imagine that the heading alone will compel certain smaller investors to spend more time researching their overseas property decisions, which can only be a good thing.
 
Camry said:
You'll have to wait a little longer for that epiphany. This was front page of the business section.

Of course, the front of the property section was reserved for "invest in the Foxrock of Poland", or some such tripe.
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Ya - that would be john o'keefe of the sunday indo spouting on again about how great larionovo are.

In fact - that guy john o'keefe is a disaster in my book.

Every development he writes about is a so called no-brainer and he normally finishes his artcles with a line suggesting he's off to get the next flight to whatever destination he's just after spouting on about.

As a property editor of teh biggest selling sunday newspaper in the country he gives ZERO balanced reporting in my book.

And as for the way he tries to begin articles i.e. by starting off with someything completely off the point and then 'cleverly' bringing it around to the location in question is quite frankly VERY annoying.
 
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