APRIL 2010 | www.opp.org.uk
WORDS | Alex Evans
Motivated to sell
Discounted may sound better than distressed, but the distinction between the two determines which destinations off er the best below market value deals – and whether agents should be selling there
BMV market analysis | 41
After a stagnant year in the overseas homes market, the only real activity came from
distressed or BMV (below market value) sales in 2009; but sourcing good product isn’t easy and fi nding good partners is even harder. For those looking for a route into such a potentially lucrative market, OPP presents its guide to what is selling and who is buying.
Discount for confi dence
Despite concerns last year that discounts and BMV deals would negatively impact local markets, they have helped to restore confi dence in some areas, as reduced stock levels have resulted in a general uplift in prices.
Spanish developer Taylor Wimpey de España saw an increase in international sales in the fi rst quarter of this year, with buyers responding well to discounts of up to 40%. “Our stock situation is about 40 or 50 units left,” said market development manager Mark Pritchard in February, who said its strategy was to shift stock as quickly as possible to move on to new developments. “We’ve got a large land bank and now we can start building again at prices that are
competitive for the current market.” Pritchard added that high turnover
of stock has helped instil confi dence in potential buyers. “We’ve sold out several resorts in Mallorca and the Costa del Sol. If you can say to a client that you’ve sold out they usually can’t believe it, especially with some of the horror stories in the press.” Assetz Group CEO Stuart Law echoes this view. Having helped developers clear a backlog of 1,000 unsold homes in the UK, and currently working with a Cypriot developer to sell at 40% below peak price, he told OPP: “By clearing stock we help everybody, because data has shown that prices revert upwards by typically 25% overnight on some schemes, once the stock overhang is cleared.” Reducing inventory is good news
for everyone, but BMV has had other impacts. Discounts of up to 40% have certainly suff ocated growth in Europe’s fractional ownership market by making whole ownership so cheap, with Taylor Wimpey’s sales director, Victor Sague, telling OPP earlier this year that it’s fractional experiment was “a disaster” because it competed with its discount deals. BMV deals have also forced lenders to withdraw mortgages on
uncompleted deals because of new lower market valuations, with UK developers like Berkeley Homes taking buyers to court for trying to walk away from negative equity. Yet this part of the market has seen
some interesting innovations over the last few months, with developers introducing new deposit schemes and payment plans to help existing clients to complete or source replacement buyers. UK-based Marcus James Recovery,
for example, is helping lifestyle buyers with no deposits buy from
outright,” explains director Tony Barker. From a model where buyers lose deposits to one where they recover them and regain equity, Portuguese developer Leisure Launch is helping distressed buyers who have lost deposits on failed competitor schemes to complete on larger properties at its own projects, sourcing 80% LTV mortgages to help them upgrade.
Where are the deals?
There may be some good discounted deals to found in most markets, but there are only a few BMV destinations.
By clearing stock we help everybody, because data has shown that prices revert upwards by typically 25% overnight on some schemes, once the stock overhang is cleared.
Stuart Law, Assetz
those seeking a way out of property investments in Cyprus. Essentially a ‘No Money Down’ (NMD) deal, except for the £5,000 fee, all rights are assigned to the new buyer. “There is no deposit to pay, and as the mortgage is already in place under the fi rst purchaser’s name, there is no new mortgage to be underwritten, so it makes it very easy for an investor to come in with a very minimal outlay and own a property
“The UK continues to be excellent,
US for cash buyers, Portugal for second home backed by reasonable fi nance and for well-priced fractional (cash buyers), and Cape Verde for discounted SIPP-able products,” says Luis da Silva, a director of InvestCV who specialises in BMV deals in Portugal, Cape Verde, Spain, UK and the US. “Others that are questionable are Dubai (huge discount but where’s
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