And what this means for property investors…

Anyone of 20 countries could have made it into our most distressed world property markets shortlist this year, but our selection stands out more than any of the others at the moment.

So before we give you a rundown, what does this mean for you the property investor?

In a nutshell it means low prices and banks turning their attention from the developers to those who can actually afford to buy property from them. This means some fantastic mortgage deals in excess of 100% LTV in some areas and unbelievably low prices on property offered by developers or in many cases the banks themselves.

Of course all this distressed property piling (mostly in Europe) can be bad news for unwary property investors who might stray off the beaten track into areas that are unlikely to see growth for the next 20 years or so. These are the ghost towns where supply far outstrips demand, tourists are conspicuous by their absence and the buildings themselves are built on shaky foundations, which has been hinted at in some areas of Cyprus for example.

So with this in mind it is now more important than ever to choose your market wisely, or better still choose an expert to guide you to where the best deals are in terms of:

•    The quality of the development  
•    The availability of finance
•    Location
•    Capital growth prospects
•    Rental market

If any of the above are lacking you can safely say that no matter what your heart is telling you, the property is a no go from an investment point of view. Local knowledge is vital to assessing each of the above particularly when we look at the world’s most distressed property markets:

1. Ireland – Plummeting property prices continue in Ireland and if anything the pace of price falls has quickened this year as prices nationally declined by 8.5% in the first 6 months of this year which means that prices even in Dublin are more than 50% below their peak in 2007. Falling rental yields and distressed sale auctions now commonplace in the Ireland so now could be the time to pick up some real bargains, but how low can property prices go in a background of such deep economic uncertainty?
   
   Verdict: Some bargains to be snapped up in auctions. 
   
   
2. United States – The USA property market is where the sub-prime crisis began and there appears to be no end in sight in states such as Florida. Though there are signs that this market has reached rock bottom and prices are beginning to pick up.
   
   Verdict: A market only for the experienced.
   
   
3. Hungary – Moody’s have just downgraded Hungary’s rating to Junk status. This comes on top of rising interest rates with the base rate now standing at 6.5%. The first signs of the impact of these higher interest rates on mortgages is now being felt in a rise in the supply of distressed property. 
   
   Verdict: Even in the good times the market in this country was uncertain.
   
   
4. Greece – Flirting with bankruptcy and may become the first country to exit the EU. Uncertainty and a high risk gamble for anyone but the most experienced property investor. Buying property in Greece could get your fingers severely burnt by a return to the Drachma and a subsequent halving of current property value.
   
   Verdict: Not worth the risk.
   
   
5. Bulgaria – Property prices remain in freefall in the capital, in the ski resorts and even on the coast where many British and Irish investors are trapped in a market where tenants are hard to come by and there are even issues surrounding ownership of properties with tales of unfortunate investors sitting outside the gates of properties they once owned.
   
   Verdict: This market has further to fall in 2012.
   
   
6. Cyprus – Falling property prices, lack of clear data, transparency and corruption, oversupply and poor quality developments. Unfortunately banks appear to be unwilling to offer any incentives to overseas investors to take property off their hands, one to avoid for now.
   
   Verdict: Things will get worse before they get better
   
   
7. Spain – Oversupply and an economy on the brink of needing a bailout has put huge pressure on this nation’s property market with prices plummeting since 2008, even in fashionable resorts like Marbella. It is now possible to buy a property at 60% below market value with 100% finance. If the banks are willing to lend at this amount with no deposit then they must be confident that this market has finally reached bottom in the more desirable coastal areas.
   
   Verdict: Invest now if you want to grab a bargain in coastal areas. Properties are unlikely to get cheaper but you need to know this market well to get the best deals.
   
   
8. Portugal – Portugal’s property market like most others in Europe has been hit hard by the sovereign debt crisis. While Portugal’s cities are a definite no no as the population struggles with austerity measures, the government is actively encouraging overseas investors to come and invest in prime coastal resorts such as Vilamoura. Compared to Spain the gap between supply and demand is less pronounced meaning that when economic conditions improve, property investors could make a nice return by investing in discounted property. 
   
   Verdict: Can be difficult to secure mortgage finance, but not impossible and there are some good opportunities to invest in some high spec coastal properties.   
   

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