Property Market Turbulence - What is happening overseas?

Property Venture^®

The current climate in the UK property market is at best uncertain, brought on mainly by seismic changes in the mortgage market. The much talked about sub-prime mortgage market in the US, where banks have had to write off significant losses owing to poor arrears experience, has had a knock-on effect here in the UK.

Banks are now finding it difficult to acquire the funds to lend out at the levels they have been used to. This in turn, has made it difficult for some property investors to continue acquiring property in the same way they had been able to until fairly recently, as indeed is also the case for homebuyers.

However overseas, beyond the USA, the property markets do not all appear to have been affected in quite the same way. In some markets such as Poland, where overseas property investors are still a relatively new phenomenon (in comparison), the financial markets are at a different stage of development.

The local banks are still honing their skills at how to assess the risk and credit worthiness of a foreign national, buying a property in Poland. Polish banks’  risk assessment, as a result, can tend to be more conservative than some institutions in other more established financial markets. This is turn means they are unlikely to have been exposed to the same bad debts that some of the more international, or UK based banks have experienced. They are therefore not necessarily experiencing the same funding constraints.

Whilst the Polish financial market is not as sophisticated as the UK lending market, for example buy to let mortgages are not yet widely offered, they are nevertheless catching up and some banks are prepared to lend on properties where there is already a proven rental income stream. Useful for those looking to invest second time around, as they can then remortgage their first Polish property. 100% mortgages are now starting to see there way to the market, just as UK lenders are shying away from these kind of mortgage loan to values.

The ability to get a mortgage in Poland is based therefore on the risk profile posed by a potential property investor and the risk profiling of the Polish Bank in question. Local Polish brokers can often provide a useful insight and guidance on how to work through this situation.

Even in countries such as Montenegro, local banks are willing to lend to foreign nationals for Montenegro property investment and holiday home purchase, however here the market is slightly more unsophisticated than in Poland. A strong characteristic of the local lending criteria in Montenegro, is the level of knowledge they have of the individual or company involved. Here local contacts are useful and the importance of dealing with a reputable developer helps, as they can often help facilitate the mortgage process by virtue of their good standing in the community.

Louise Reynolds runs Property Venture^® an overseas property agent that supports individuals making investment decisions appropriate for them and their circumstances.

Article written 22^nd May 2008 ^© Copyright of Property Venture^®