Words: Ashley Rigg
Published: 4th November 2010
*The Snickers overseas property model
One of the characteristics of fast moving consumer goods is people buy on impulse.
Distribution is king. If your chocolate bars are in more shops and in better positions than your competitors, you win. That is providing people know and trust your brand.
Overseas property has never been a fast moving consumer good but there seems to be an element of this logic in the decision by Connells, the third largest UK estate agency chain, to sells thousands of properties owned by Spanish savings bank CAM.
I’m not suggesting that people will pop to the high street for a pint of milk and come back with an overseas property. That would just be careless! However, the model relies on great distribution, trust in the Connells brand and low costs (in terms of cheap mortgage finance).
Buying a snickers bar is a mindless purchase. Buying an overseas property is not, but here’s the rub. For the deal to be an outstanding commercial success it relies on purchasers not questioning the banks property valuations.
The properties are cheap and have been reduced significantly from their peak valuations but cheap does not always equal good value for money.
The Spanish property market is not famous for its transparency. There are no official figures on actual sales prices and the banks have an incentive to price on the basis of historical valuations rather than the prices that are actually being achieved by agents selling on the front line.
For example,
is this flat in beautiful historical town of Rhonda worth €71,500? It’s small with no outside space and next to an industrial estate.
I am sure there are some great deals on offer by Connells and CAM Bank and many customers buying for lifestyle should be satisfied with their purchase over the long term.
However, there is a significant risk with some of the properties that British consumers could be buying straight into negative equity.
It is all very well to make a mindless purchase when buying a snickers bar but that’s because you know the market price.
The single most important factor when purchasing an investment is the price you purchase at and when buying overseas property in Spain the only way to be sure you are paying fair value is to canvass the opinion of local agents.
It is a great deal for Connells and for CAM Bank but if British buyers aren’t careful to undertake due diligence it may not be a good deal for everyone.
Source: Global edge
User Comments
In addition to a price that's greater than the present market many properties have title problems. There are many legal risks in buying in Spain. Get independent legal advice. In the likely event that Spain leaves the euro property will probably depreciate another 50%.
Owen Swaine,
Title check
Peter
The problem with that is that you don't actually have valuers, apart from the banks own valuer who is guided by the bank in any case so you would be better asking a local agent if they thought it was good value for money. The chances are that it won't be because the banks are still massively over valuing. You are better sticking with a re-sale to be honest.
Colin Scriven,
Hamiltons of London S.L.
The days are gone when it's the cost of borrowing the money that determines the price of the property and the Great British overseas property buyers knows that better than anyone.
Sean Weatherburn,
Keith Pattinson Ltd
I could not agree more.
We are finding that once a bank repossess a property it is being sold at a higher figure compared to the price the local agent would have negotiated for a buyer. Plus if you take into account that in Spain the ex-owner is still liable to repay all and any outstanding debts/mortgages that he had borrowed from the bank thus the bank is earning double + interest on all the properties they repossess.
I suggest if you are looking for a bargain you should avoid the foreign banks and go direct to the developer, builder or local agent.
Good luck and good bargain hunting.
Derek Charles Denham,
Monde Exclusive Homes
It would be worth paying for an independent valuation from a Valuer other than the one employed by the bank. Valuers look at other properties of a similar profile in the immediate area and prepare a full report with plans and photos, and, most importantly, they quote prices achieved for similar properties in the same area in recent months.
Peter Mitry,
Egypt Real