42 | BMV MARKET ANALYSIS
www.opp.org.uk | APRIL 2010
the exit?), Spain (finance terribly difficult still and glut of properties continues so no appreciation in sight), and any cheap markets such as Brazil where, due to price levels, discounts are not talked of.” The US is expected to be one of the most fruitful markets for distressed property in 2010 because foreclosures are predicted to reach a record 3.9 million, according to RealtyTrac. “There are those who have been
picked up bargain stock. But the type of distressed property on the market is likely to change, says Rayman, who observes that new build, short sales and property under $300,000 is already disappearing. “At the moment it’s mostly the middle market of between $500,000 and $900,000 that’s selling, where a lot of properties have significantly come down in price to the point where people are prepared to buy.”
The UK continues to be excellent, US for cash buyers, Portugal for second home backed by reasonable finance and for well- priced fractional (cash buyers), and Cape Verde for discounted SIPP-able products.
Luis da Silva, InvestCV
holding on for a while but have now lost their jobs and have to default on their mortgage,” said Carla Rayman, international business development director at Prudential Palms Realty in Florida. The speed at which the distressed
property is sold is likely to vary across the country. “There will be continuing pockets of distressed for a long time in places like Detroit, New Jersey and even California,” said Colin Murphy, director of Dublin-based investment agent Torcana. “But in Florida and New York it won’t last as long. Demand is high and banks are willing to sell at a low price, take the loss and move on.” In Florida, transaction rates have
risen steadily over the last six months as domestic and foreign buyers have
The end may be in sight for the UK
distressed market. With prices already rising due to under supply and pent up demand, particularly in London and the southeast of England, stock isn’t expected to remain on the market for very long. “The developer completed
distressed stock is reaching the end of the line and will only last a few months more,” says Assetz’ Law. “Bank stock will be on for longer because they’re not in any real rush to sell, especially with the support from the government.” Dominic Farrell, owner of agent
Distressed Assets, agrees, saying: “In terms of developer stock, unless they are in serious difficulties, a lot of them are renting their properties, holding
Streets apart | Investor expectations of bigger deposits in Florida are being met with refusals while in Cyprus developers are increasing their discounts to sell
on for a turnaround in the general market.” Murphy says there are “plenty
of deals” still in parts of the north and midlands, with demand from buyers, but lending is too restrictive. “Mortgages for foreigners are almost impossible,” he says. “I’ve been three months down the road of a sale to a foreign buyer only for the lender to say they don’t lend on anything above four storeys. Banks in the UK are nonsensical and anything under 140/150k is impossible, but there’s a huge amount of money chasing BMV at the moment though. We sold a £6 million property in Mayfair that had been valued at £10 million in 2008.” BMV is really a cash buyer market though according to Peter Parfait, owner of TheIdeasFactory.com and author of the Hot Property Alerts, which highlights BMV deals to an investor community of around 30,000. “Finance takes time, and time is not always a commodity afforded by developer’s cash-flow,” he says. “They’ll often take a proper hit for cash, because it’s pretty much hand- to-mouth out there and speed of sale rules.”
Pain still reigns in Spain
Spain has plenty of distressed product, and more competitive mortgages, but with varying pockets
of decline or miniscule growth it’s very difficult to determine a true market value – and therefore BMV. “Has it stabilised enough? I would say no way as the banks are holding too much product, there is massive unemployment and a dark cloud over Spain,” says Darren Carter, managing director of Goldberg & Partners Global Real Estate, an investment consultancy sourcing discount deals across Spain. “The best solution for Spain will be inflation and thus banks don’t lose too much value off their balance sheets.” Despite Metrovacesa’s reductions of
up to 50%, and Banesto’s one month only 40% discount last November, there is scepticism about whether such deals are genuine BMV, with discounts based on peak prices not current market value. “One has to interpret these discounts and ask what levels they are calculated from,” said Ernesto Tarazona, corporate recovery director at Knight Frank España at the end of 2009. However, the developers prepared
to discount heavily enough are among the only ones selling, according to Bob Callan, owner of Marbella- based Bargain Quality Homes. “One development we’re selling in Puerto Banus has reduced prices by 40% in the last year and there are only four units left out of 180,” he told OPP. “By taking on the developer’s mortgage,
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