Personal Finance

Barry McCall exposes the risks of overseas property investment and St. Patrick’s Credit Union gives the low down on home loans.

Irish people in their 10’s of thousands have invested in sun properties over the past decade or so, many of them in Spain. Indeed, it was partly the impact of this influx of new buyers that caused Spanish house prices to rise by 270% during that period.

This has certainly been good news for many of those who bought towards the end of the 1990s. They have seen their properties more than triple in value since then. For others though, their dreams of profits from hot properties may have been dashed by recent events.

Two significant events have rocked the Spanish property market in recent months. The first was the revelation of massive corruption among the local authorities along Spain’s “costas”. As a result of this corruption it is estimated that up to 70% of all new homes built along the south coast of Spain in the course of the past five years or so may have no planning permission. In fact, a large number of them are actually located in national park areas on land which the developers did not even own.

The Spanish central government is acting to address the situation in a reasonably equitable manner, however. In the first place they are bringing the perpetrators – corrupt local officials and developers – to book while in the second instance trying to give retrospective permission to as many properties as possible within the confines of normal good planning practice.

While this means that many innocent homeowners may not actually lose their properties, they will still have to go through some legal and planning hassles to regularise their situations. In the meantime many other developments have been held up pending investigations by the authorities.

No definite link has been established between these events and the scandal which hit Valencia based builder developer Astroc in April. Shares in the company took a nosedive when it was revealed that 2006 profits had been inflated by the sale of assets to the company chairman.

Many market observers are predicting that this is this could be the beginning of a chain reaction which will lead to major falls in the Spanish property market. After ten years of double digit growth, house prices in the Costa del Sol have actually fallen over the past 12 months and are predicted to continue to fall for the remainder of this year.

Part of the reason behind this is chronic oversupply. During 2006 alone some 800,000 new homes were built in Spain – more than the total for Ireland, Germany, France and Italy combined. In a country of 40 million people with one of the lowest birth rates in Europe this is far higher than domestic demand.

Add to that mix the problem of rising interest rates and you’ve got a pretty serious situation. And it is not exclusive to Spain. Many other holiday property markets around Europe are suffering from a similar malaise.

This is not necessarily a reason for owners of Spanish or other overseas property to panic. Only those investors who were contemplating selling up in the near future will be affected and even then just sitting tight for a while may be all that is required to ride out the storm. But it is certainly cause for potential buyers to hold off until the market settles down somewhat.

On the other hand, canny investors who know the area well might be able to pick up bargains. It is, after all, an ill wind that blows no one any good.

St. Patricks Credit Union - Home Improvement Loans

St. patrick’s credit Union should be your first port of call when you are looking to finance your house extension or major refurbishment.

Why? Well, if you go to a Bank or Building Society for a typical loan of €40,000 to €50,000 to fund the house extension, they will invariably approve the loan by topping up your mortgage. This will involve a lot of extra cost as a result of solicitor’s fees and extra mortgage protection cover being required.

It will also be very time consuming due to the inordinate amount of paperwork Banks and Building Societies get you to complete.

Borrowing the same amount from the Credit Union is much simpler and could save you a lot of money:

• The loan would be an ordinary term loan and not a mortgage (subject to normal lending terms and conditions.) Therefore there is no need to hire a solicitor and the paperwork can be completed in a matter of minutes with the loan cheque being in your hands within a few days.
• This is a major advantage in that you can give your builders the go-ahead to start work immediately, and not risk losing them due to the time delay with Banks and Building Societies.
• The Credit Union has FREE Loan Protection Insurance (Life Cover) on its loans for members who are under 70 years of age and in good health at the time the loan was taken out.