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PROPERTY Make the most of the credit crunch plus UK property news.
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Time to take advantage of the Credit Crunch?
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Personal Finance – by Terry Vaughan of The Mortgage Shop Plus CdL and Henley Financial, Jersey
With news of property prices tumbling across Europe, lack of availability of mortgage finance for those still keen to buy, as European banks lick the wounds created by over exposure at the height of the market and the lack of trust between banks - which ultimately results in the lack of available credit in the market, you would be forgiven for thinking that the property market and, by association, the mortgage market in Portugal is in a parlous state. From our experience, and that of a number of the banks with whom we deal in Portugal, this is not the case. Yes there has been some levelling off of prices, but transactions are
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For your Portuguese mortgage, international pensions (QROPS) and straight forward financial advice in Western Costa de la Luz and Eastern Algarve Call Terry Vaughan on (0034) 637 118 199 or email Terry@mortgageshopplus.com
NB. If you have recently looked in to QROPS based in the Isle of Man you need to talk to us!
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still happening and the banks are still keen to lend. Let us have a look at the main differences between the Portuguese market and that of other European countries, most notably its nearest neighbour and closest competitor for non-resident buyers and purchasers seeking a second home or retirement home – Spain.
Maturity versus speculation?
Firstly, the Portuguese market is more mature, certainly The Algarve. It has long-standing and prestigious developments in first class locations, with the infrastructure in place. The banks involved in these developments have tried and tested methods for financing and the staff able to deal with your queries. At a recent UK property exhibition attended by a colleague, enquiries for properties in The Algarve outnumbered those of the Spanish Costas by two to one. Secondly, the Portuguese banks have not over-committed themselves to the extent of their Spanish and UK counterparts. Some very loose lending on poor quality developments and to some pretty poor developers, creditwise, has lead to widespread problems in the Spanish market – some of this now resulting in fire sales of properties – perhaps a great time to buy if you believe in the long-term viability of the Spanish market. Take my advice, choose your location carefully! Leading on from the above point, the Portuguese banks, by and large, still have the same lending terms of 12 months or even 2 years ago. This is dramatically opposed to other areas of Europe, where the banks have all but closed for business. In Spain for example, with the majority of banks, maximum lending is now down to 50% or 60% of the value of the property, plus they will demand far more extensive documentation, proof of affordability and verification. Whilst the Portuguese banks have tightened their lending criteria to a degree, it is in sympathy with the current global credit crisis – not a knee jerk reaction to it. So, for non-residents, loans of up to 80% of property value are still readily available and for residents - up to 100%. Interest only loans are also freely available – which can assist in some circumstances where purchasers are looking to keep costs down in the early years – perhaps pending the sale of a property in the UK or pending retirement. If you meet this lending criteria, then the rates are at all time lows. Even with “spreads” (the rate above Euribor – the main benchmark lending rate in Europe) of between 0.75% and 1.5%, depending on the lender, your mortgage rate could be less than 2%, if it is linked to 3 month Euribor. This rate stood at 1.237% on 19th May – an all time low and probably signals the low point in this cycle. The rate has
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Covering the whole of the Algarve as independant real estate agents, we can provide you with unbiased advice when you decide to purchase a property and can introduce you to a wide choice of reputable mortgage banks, architects, lawyers, builders, chartered surveyors and interior designers. We have been in business for over 12 years, finding the right property for countless satisfied clients. We currently have over 700 properties available online and would be very pleased to help you find your ideal home.
If you are the owner of a good quality property and wish to sell, please contact us to arrange an appointment 18
Contact us today: 281 320 281 www.landandhousesalgarve.com
TAVIRA VILAMOURA
By the sea, in the mountains or in the city... enjoy your stay with us. We’ll take care of you and your house as we would our own.
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Ângela Dias Tel (+351) 969 459 200 Rua José Pires Padinha, No 44, Escrit.13, 8800, Tavira eapr@iol.pt • eapm@iol.pt www.east-algarve-property-rentals.com • www.east-algarve-property-management.com
started to creep up over the last few trading days. With property prices as they are – and rates at the low point in the cycle - now is definitely a great time to buy!
Look to the future
Beware of the spectre of rising interest rates predicted for later in the year (particularly in the UK which may recover quicker than mainland Europe) as economies recover and governments step in to tackle inflation. Both the UK Monetary Policy Committee (MPC) and the European Central Bank (ECB) have been quick to act to reduce rates to stimulate growth and they will react with equal vigour when the markets show sustained recovery. Borrowers should always build in a “buffer” for rising interest rates. You must be confident in the affordability of any borrowings should rates rise, to avoid a repeat of the pattern of past borrowers over the last 2-3 years - where rates in Europe rose and the value of Sterling plummeted against the Euro. As always, seek qualified professional independent financial advice.
Terry Vaughan is Director of The Mortgage Shop Plus CdL, based in Ayamonte, Henley Financial in Jersey, Channel Islands and its associated companies. He can be contacted on (0034) 637 118 199 or Terry.tms@hotmail.com
SOCIEDADE DE MED. IMOBILIÁRIA, LDA LICENCA No 764-AMI REAL ESTATE AGENCY
Rua 1° de Maio, 30-A, 8800-360 Tavira, Portugal Tel. +351 281 324 684 Fax: +351 281 324 685 Website: www.imo90.com Email: imo_tavira@hotmail.com
MANTA ROTA
Ref: V 2477 TAVIRA
Ref: V 3179
250 000€
Townhouse, 200m to beach. Basement (34 m2), hall, wc, kitchenette / breakfast bar, dining/lounge, sliding windows to patio/garden, 2 beds, s/room, b/room, attic, r/terrace, sea views. Use of Pool and club available.
STA CATARINA Ref: F 0400
165 000€
Quiet development, near town centre, Ideal for first time buyer. Fully fitted kitchen, bathroom , lounge with fireplace, doors to a patio with BBQ. 2 beds, full bathroom. Pre installation for air conditioning and central heating.
TAVIRA
Ref: A 3183
210 000€
Renovated farmhouse, peaceful countryside, 5 kms from a local village. Plot 2 280 m2, south facing with sitting / dining room, kitchen, bathroom, 3 beds and terrace. Cisterna of 25k litre with pump, mains electricity, drainage.
65 000€
Studio in a complex with restaurant, 2 pools, tennis, café/bar, reception. Kitchenette/lounge / bedroom, hall, bathroom & balcony. Just outside Tavira, easy walk to shops and facilities. It is for sale furnished. Good rental potential.
Company AMI 7673 CONTACTS Office: Tel/Fax 281 952 820 Mobile: 00351 911 041 861/2
Ref:803 €185.000 Tavira - One bedroom apartment sold off plan on luxury Five Star Complex near to Tavira, fantastic finishes, wonderful facilities check the website for more information and plans. http://algarvemanta.palmeirasresort.com
Ref:832 €265.000 Conceição de Tavira Very large three bedroom townhouse on a complex with a shared pool, air conditioned, fireplace, garage, close to popular golf course and Cabanas beach resort.
Ref:858 €150.000 Manta Rota Three bedroom ground floor apartment, one of four only 300m from the beach, fully furnished and equipped, fireplace, patio large enough for private pool.
SALES: www.algarvemantaproperties.com RENTALS: www.algarvemanta.pt EMAIL: sarah@algarvemanta.pt
UK property news
Rightmove.co.uk reports a lack of new sellers is pushing up average prices.
Ajump in new sellers’ average asking prices more reminiscent of a boom market, and, at only 61,000 new sellers this month compared to 135,000 in May last year, a dearth of sellers is appearing; so says Miles Shipside, commercial director at Rightmove. Miles infers that this could be the effect of reduced equity in current owners’ homes, forcing them to either increase their selling price or stay where they are. This makes sense due to lenders’ stricter loan-tovalue ratios and premium rates on mortgages based on lower deposit percentages – if they can be found! Conclusion: Many prospective sellers have become effectively immobile and are stuck in the equity immobility trap and unable to reduce their prices further, without compromising their ability to move. We would add a couple of observations of our own: The jump in new seller’s asking price could be attributable to the balance shifting towards selling the more expensive homes and keeping the less expensive. Wealthier people are generally more sophisticated investors and are more likely to be trapped in leveraged investments that are under water and need to sell their holiday home. Also, who would want to move from the Algarve, and even then, why do it during a recession when we have a low cost of living and a great climate. Miles continues: While new stock
is in short supply, the existing inventory of unsold stock remains stubbornly high, dropping from 72 to 71 per estate agency branch, pointing to a high level of effectively unsalable stock. Lenders are short of funds and more sensitive to risk, and therefore denying movers access to their better mortgage deals unless there is a substantial deposit, often 25% plus. Our recent Consumer Confidence Survey, which canvassed the views of over 22,000 potential home movers reveals that “The outlook for house prices has turned positive with six in ten potential home movers now expecting prices to remain the same or increase over the next twelve months”. Just three months ago, 69% of respondents were expecting prices to fall further over the next twelve months. This has now turned around dramatically to only 35%.
As well as first-time buyers, there are three groups of existing property owners who are also affected by this squeeze on credit and thus are unable to sell in order to trade up or down. These are:
• ‘Equity releasers’ who habitually withdrew cash during the 2001-2008 re-mortgage spree. Encouraged by cheap and easy credit and rising property values they funded their lifestyles by regular re-mortgaging and equity release. Figures from the Council of Mortgage Lenders show that in the eight years from 2001 to 2008, the total value of remortgages increased by 460% compared with the period from 1993 to 2000. • ‘Recent buyers’ with no or low deposit, and now in or close to negative equity, Some would now be prospective trader uppers having outgrown their property, but they face a very difficult task to raise a higher deposit than they did when they last bought. • ‘Equity losers’, still with up to 25% equity but due to falling prices have lost their substantial equity cushion and are now borderline to get the best mortgage deals.
LICENÇA No 504-AMI
MAIN OFFICE – E.N.125, Cevadeiras, 8900-024 Vila Nova de Cacela TEL: 281-951165 FAX: 281-951438
CABANAS OFFICE – (Waterfront) Ava Ria Formosa, Centro Comercial Loja 2, 8800-591 Cabanas de Tavira TEL: 281-370277 FAX: 281-370761
APARTMENT - NEIGH. TAVIRA - Type T1, within 5 mins by car to Tavira. On ground-floor, in a very attractive holiday complex w/ bar / restaurant, 2 swimming pools, tennis court, reception. Air cond. Kitchenette / sitting room - terrace, bathroom, bedroom. Sold fully furnished and equipped.
Communal roof terrace. EUROS 119.000 HOUSE - TAVIRA - Very attractive house type T2 w/ 130m2, situated in the centre of Tavira in a pretty quiet square. Small patio (7m2). GROUND-FLOOR: Sitting room w/ fireplace, fully fitted kitchen, storeorom. FIRST-FLOOR: bedroom (16m2) - terrace(4m2), bathroom, 2nd bedroom. Large loft (33m2) - terrace, wc. EUROS 255.000
MICHAEL JULIAN PROPRIEDADES
SOC. MED. IMOBILIÁRIA LDA.
AMI 5027 Rua 1.o de Maio 23. 8800-360 Tavira, Algarve Telephone+ 351 281 324582 Fax+ 351 281 325787
E-mail m.julian@mail.telepac.pt Web Site www.michael-julian.com
€152.000 REF 1880A URB. MIRAMAR, TAVIRA
Two bedroom townhouse with courtyard and roof terrace with. Total area 195.54M2 Built in 2005, the property is in excellent condition
PRICE: €348.000 REF 1881A FUNDO
Newly built three bedroom villa with traditional features and terraces. Located in a quiet country area north of Luz Tavira. A brand new villa with a total covered area of 180M2 on a plot of 2000M2
€169.000 REF 1882A QUINTA DAS SALINAS, TAVIRA.
Three bedroom house 76M2 with garden and uninterupted views to the Ria Formosa wetland reserve and the coast
€245.000 REF 1733A TAVIRA
Four bedroom townhouse with front and back gardens and roof terrace. Located on the edge of town and only a 10 minute walk from the city centre. PROPERTY OF THE MONTH. Garage also available. EXCEPTIONAL VALUE
