Undervalued Property and Where you Can Grab a Bargain

Purchasing a property abroad was already an exciting prospect but with the increased stamp duty rate being introduced in April it could become and even more inviting proposition.

Purchasing a second home in the UK will mean that the buyer will have to pay stamp duty plus an additional 3% on top while the fees involved with purchasing abroad will not alter. This means that there is a potential for bargains overseas.

Analysis carried out suggests that Southern and Eastern Europe have the lowest priced property and this includes property in Italy, Spain and Portugal.

These are now classed as some of the most undervalued property markets throughout the world according the Organisation for Economic Development which compares property prices against local income.

This research has been carried out over a period of ten years and it takes local prices and plots them against local wages and then puts this alongside the long-term average.

A figure of 100 would mean that it is in line with the average figure but at 110 it would mean that local property is over-priced by 10% against the long-term average.

What this means for Britain is that property prices are over-priced by 7% and in Sweden property prices are over-priced by 114% due to a housing shortage. However, even the long-term measurements that relate to value are not likely to indicate how prices are going to move even in the short term. In the case of Britain and even Sweden it proves that where there is a shortage of property, price rises can still occur even if property is already over-priced.

Even those property markets that took a hard hit during the economic downturn are not expected to recover due to the fact that there is still an over-supply issue. Many construction projects were started before the crash in 2008 but developers could not afford to complete them and buyers are being told to avoid these properties.

The OECF regards property in Spain to be undervalued by 26% and prices rose by just 1.3% in the last year because of over-supply.

Before purchasing a property it is worth finding out what the healthcare is like as well as education and travel. If this infrastructure is not in place then it is likely that properties will only be used as holiday homes, which means that capital growth could slow down.

Many Spanish banks that offered large loans to developers before the economic downturn still have a large number of properties on their books and they are keen to get rid of them. A number of banks are now offering overseas buyers mortgages of up to 113% of the purchase price which could suggest that these properties are being sold at low prices.

When it comes to purchasing an overseas home with a long-term plan you have to consider whether people will still want to live there in five or even ten years’ time. However, many of the worst hit property markets are now showing a rise in property prices and those that experienced massive declines in prices are now seeing the strongest growth.

Those cities that have strong planning laws in place are also an attractive prospect because there is a chance that demand will rise above supply which will lead to increased prices.

With all of this in mind, is it still possible to pick up a bargain? The Algarve experience a 40-50% drop in prices compared to prices before the crisis and buyers have been careful. The market is showing signs of improvement thanks to the pound’s rise against the euro and this has led to many buyers looking to purchase in the Eurozone regions.

Author Bio

The Overseas Investor are experts in international property investment, with a large portfolio of holiday homes and overseas investments in places such as Spain, Italy, Turkey and Egypt.

Sign up for regular property updates & receive investments in your inbox

Daniel Peacock