Property - Asking Prices

[shanagarry]

This morning a friend called me from the UK and asked me to have a look at a property he has seen on one of the Cvo agent's website. As my wife is in the UK and I hadn't planned on going out, I combined his request with a few things - I got some fuel using my Continente Galp voucher in Lagoa - then I went and washed the car at the Blue Elephant and came back to Cvo by way of the property I was asked to look at. After taking a good look at the property and speaking to my friend on the phone he told me the asking price - it was off the reality scale by at least €200K . He then asked me to look at some others he had seen and received details of - all in the same price bracket.

By this time I was in the village and as it is a very pleasant day - temperature at 19 - I decided to get a coffee and a sandwich in the little coffee bar close to The Square in Rua do Barranco. As I was sitting directly opposite one of the many agents premises in the village I went across to look in the window to see where prices are given the current Europe wide property debacle and as its been a while (12 months) since I last took any interest in the state of the market - I rekindled my interest. I saw properties I had seen over a year ago still for sale at prices that have been increased - all that had changed was the angles from which the photographs had been taken. As I had plenty of time, I decided to look in 6 other agent's windows - all the names you will all be familiar with and am amazed at the prices being asked for property in the current climate - especially in the €350K to €650K range.

One particular property that caught my attention was an average 3 bed apartment in the village centre with a 'Special Reduction' sticker of €50,000 bringing it down to €249,500 - a bargain! Are people really believing they are going to get that sort of money? As I went around looking in the 6 windows - I must have been conspicuous by the gasps of amazement at the asking prices being advertised. One agent I know very well met me for a drink recently and said to me that in his 38 years in Cvo he has never known it so bad - even during the revolution it was better than this. I'm not sure if sellers are really serious about selling - as the prices they are asking are totally unrealistic and they will be waiting a long time - I suspect.

From there I went and looked at the other properties my friend had asked me to take a look at - all nice looking properties with good specification but at hugely unrealistic price demands. It took me 3 years to sell our last property and I only managed that by doing something most unusual - which did not involve reducing the price. Anybody hoping to sell in the current climate using the conventional house selling methods is, to my mind, on a hiding to nothing. I have no desire to be a merchant of doom and gloom but unless I have missed something and Portugal is bucking the property trend - anybody with a property to sell needs a large dose of reality lotion

[martin]

you said "asking prices" and that is it. My mother has sold her place a month ago - 3 years ago the villas in her area were fetching 450.000, so they asked 399 then 349 then 325 - in the end it was sold for 280 less 17000 for the "hard work" by the agent - in the end by the time everything else was paid for all she got was 260.000

Another agent told me privately of one villa for sale near cvo for 1.6 million it has now been reduced to 850 and apparently if you offered 650 they would take it. Most buyers at moment are as the agent said to me only after "bargains" where people have to sell

Some of course cannot afford to sell for reduced prices as they would lose money on the deal. As the agent who sold my mothers place advised...only those who are desperate sellers should sell at moment, anyone else should sit it out for 3 years or more till hopefully things pick up

For those who have to sell and go back to uk are in a real problem, there are not many places
in the uk where as in the case of my mother the value has dropped by half

[shanagarry]

Martin,

only those who are desperate sellers should sell at moment,

That's a good response but on that basis is everybody with a property for sale at present is in the 'desperate' category? If they are and there are no buyers at the 'right' price or no buyers at all - what do they do? Advertising at ridiculous prices may massage their ego - but will harm their self esteem when the reality 'bites'.

anyone else should sit it out for 3 years

This was the situation suggested 3 years ago. I know, I was trying to sell then and was told just that.

For those who have to sell and go back to uk

I suppose that with values in the UK in freefall (forget all the media hype) - the amount a seller here in the Algarve gets might just meet the falling UK price somewhere along the 'drop'.

go back to uk

This is the part I need help with and I'm not saying it's right or wrong - but why is it when things don't work out here that returning to the UK is the solution? There are no jobs of any note - there won't be any handouts anymore (supposedly) - mortgages are few and far between - the cost of living is getting higher by the day. What's the logic for that?

[widge]

Very interesting observations but when all is said it's a market.

If you're in the market to buy or sell it's relevant to you - if you're not then it represents idle curiosity at best.

So if you want/have to sell then the prices are lower than 2 years ago. If you want/have to buy then the prices are lower than 2 years ago! So what as the Irish say it's immemorial !!!!!!!!!!

[mac]

I know when we bought our house in the UK, our Solicitor advised us that it was overpriced and not worth the money. But we liked the house and it came with 5 acres and we were thinking of having our horses at home, so we paid the money and took the house.

Now, we've been there just over 10 years and it's worth NOW, with all the downturns, more than double what we paid, in fact nearly triple. But we bought it as a home so it doesn't really matter to us that it's value has increased. I think people come to grief when they buy with the intention of making money on it, not that it will be their home.

[shanagarry]

I would suggest that the vast majority of the properties for sale here are not 'homes' - probably savings and or pensions - therein lies the problem (especially if they need the money now)

as the Irish say it's immemorial

That's a new one to me and while it may have originated in the distant past - it's now today's problem - in any language

[e-richard]

Here's an interesting take - for Brits only:

If you bought a Villa in say 2000 for lets say €200,000 and had to sell it now, 10 years later for only €200,000, you would have made a profit (before expenses) of some £43,000 GBP - and not need to pay any Portuguese CGT

[shanagarry]

I guess it's safe to say that currency fluctuations can have an up as well as a downside.

What you don't appear to have factored into your calculation is British CGT/Income - the £43K would have to be declared and then taxed at between 18% and 28% (CGT) or income 40% - depending on the way it's declared.

Anyway, the point is - would the property bought in 2000 for €200K sell in 2010/1 for the same money? If it did what is the cost of the lost opportunity had that money been invested elsewhere - assuming the property had not been rented and did not have a mortgage.

There is the opposite question as well - which I suspect would be interesting - showing an after tax position. In the days we rented, my P&L was healthy but it was not the panacea I envisaged it was going to be

[widge]

I guess it's safe to say that currency fluctuations can have an up as well as a downside.

What you don't appear to have factored into your calculation is British CGT - the £43K would have to be declared and then taxed at between 18% and 28%.

Anyway, the point is - would the property bought in 2000 for €200K sell in 2010/1 for the same money? If it did what is the cost of the lost opportunity had that money been invested elsewhere - assuming the property had not been rented and did not have a mortgage.

There is the opposite question as well - which I suspect would be interesting - showing an after tax position. In the days we rented, my P&L was healthy but it was not the panacea I envisaged it was going to be

According to the Guardian things look pretty grim in the UK too.

[color=#FFFF40]Demand for home loans dropped to a 19-month low last month as low wage increases, weak consumer confidence and the tough conditions imposed by lenders combined to keep Britain's housing market in the doldrums.

The British Bankers' Association said the total of 30,776 mortgage approvals last month was down by more than 25% on October 2009 and the lowest since the stock market hit its trough in the spring of last year.

Analysts said that with activity in the housing market running at only half the levels in the decade leading up to the crash of 2007, it was likely the coming year would see further falls in house prices.[/color]

[shanagarry]

Widge

Your reply takes me back to my original point - if the property was being sold in the UK, surely the price would be adjusted to reflect the market conditions - regardless of the gain/loss scenario?

That being the case - why is it that sellers appear to believe there to be a different set of market conditions in play here in Portugal? If anything its many times worse or am I missing something

[widge]

Widge

Your reply takes me back to my original point - if the property was being sold in the UK, surely the price would be adjusted to reflect the market conditions - regardless of the gain/loss scenario?

That being the case - why is it that sellers appear to believe there to be a different set of market conditions in play here in Portugal? If anything its many times worse or am I missing something

You may have already identified one of the reasons...................these are often second and not primary residences so people don't have to move for reasons of work or family, moreover I guess there are proportionately fewer estate settlements, company purchases, buy to let portfolios etc. As you say these villas and apartments may represent investments, pension funds etc. but it's spare cash tied up and therefore perhaps there is less pressure to sell at any price.

It reminds me of sailing marina's the world over, full of beautiful yachts which are all for sale but going nowhere fast.

As for the "return on investment" forget it, a holiday home in the Algarve is a lifestyle choice not a financial investment.

[laserblazer]

Don't you think theat a lot of the "For Sales" are speculative? Owners are not desperate to sell but if someone came along and offered a good price.

[shanagarry]

Don't you think theat a lot of the "For Sales" are speculative

Very probably - but they are obstructing those needing to sell by asking inflated prices (based on the good times) for what in the main are below average properties. All the time we were looking to sell our previous property we were looking for a place to become our home and we looked at a lot of properties in a 3 year period. It was the 'old-story'' the estate agents details and the reality were poles apart.

Nevertheless, the speculators will be the only winners in this scenario because this market is not going to get better anytime soon - unfortunately.

[Bristle Si]

Interesting topic.
I posted on here when we returned from our 10 day jaunt to CVO in Sept.

Really bad 'marketing' by CVO estate agents IMO. The number of people i saw, whilst on hols, look in the Estate agents windows, talk about prices being advertised and just walk on without going in was quite staggering - listening to their conversations sometimes they were genuinely interested in buying in CVO, but the 'window' prices meant they didn't even go in. CVO estate agents really missing a trick here.
And whilst in Monte CVO, i directed a couple to an apartment they were looking for, to view from the outside and advised them to table an offer of 40% below the asking price - it was a 2 bed apt in Monte Paraiso on the market for nearly 200K euros - ridiculous!

The main issue in CVO and the Algarve is that maybe there are not so many distressed sellers, as say in Spain - so not really desperate to sell. I suppose they could become 'distressed' soon - house prices in Portugal will not recover for many many years IMO - there's too much austerity stuff going on at the mo - both in Portugal and the UK. A depressed housing market could last as long as 10 years IMO (and i include the UK in that forecast).

[shanagarry]

A depressed housing market could last as long as 10 years

Sad and probably very true