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Post by Valleycat on Oct 24, 2007 18:43:50 GMT 1
Darcy, To start of the Brits invented the entire SIV (Structured Investment Vehicle) concept and abuse it the most which is the root of the debt problem. The reason why there are so many subprime mortgages in the US is that the Brits among others were very keen to buy them, securitize them into bonds, and sell them to punters around the world. London is the world's biggest bond market. Why do you think there are runs on English banks? That being said there is a debt crunch developing around the world due to these bad debt products out on the market which are slowing down the property markets in UK, US and Ireland and make people think if they want to pay insane prices. As shaky as the US property market is people are even more in debt in the UK. Simply put if (and they will) prices go down in UK, Ireland, US then people will stop taking out second mortgages to buy second properties. Many who are leveraged out will look to sell them. We all know the pain it is to do things in Croatia and that the property market there has already been in decline for the past two years. If you have more sellers than buyers then prices drop to a point where buyers feel it is worth it. Just because something becomes a little bit cheaper does not mean it is a bargain. Property in Croatia has already dropped by 20% in the past two years. I expect we will have at least the same in the next three years. There are no reasons why it shouldn't. What can go up can come down if the fundamentals are wrong and there are no buyers. I don't know about anywhere else.. . but in USA. . .people were greedy. . . most of those people getting sub prime loans. . . and even prime loans.. . that were done with only stated income should never have gotten them. . . then there were the people who got the first mortgage and simultaneously got a home equity/second mortgage on the same property and too out the limit on the credit line. Now they had this brand new big house to pay for . . . plus all the extra expense of new EVERYTHING inside . . . upgrades out the wazoo . . . this was probably most likely an ARM.. . (Adjustable Rate Mortgage) . . . the second most likely an ARM also. With all their credit cards to the max . . .. well, I need a new car to go with this new house. . . all payments come due . .. there was a interest rate adjustment . . and boom it all goes up in smoke! Even though this issue of sub prime trouble. . .is only 6% of all loans. . . these people are complaining that they didn't know what they were doing. It makes me wonder . . . this was not the first home that they purchased. . . and even if it was. . . nobody put a gun to their head. . . more than likely they simply did not want to hear it. . . they all thought that their houses would continue to climb in value. . . their error was to live way beyond what they could afford. Only time will tell what will happen to these folks that don't want to take responsibility for their actions. . . more than likely just like everything else. . . the general public will have to pay for it.
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Post by Valleycat on Oct 24, 2007 18:51:15 GMT 1
Whoops. . . got interrupted and sent off the last post before saying.. . . if they did buy second homes they might of been better off. . . then they would at least have something solid to show for it. . . they could rent it out. . . they could of waited until the price came back up. . . and then sold it.
Yes, the value did go down. . . and it will go up again. .. the housing inflation was a wild feeding frenzy . .. now actually it is a wonderful time to buy. . . for those who have great/good/decent . . .even fair . . credit.
Again, I think it was all about greed. . . many bought in hopes of flipping it. . . with not much . . . or nothing left for fix up. . . that's if you could find a person to fix up. There were many people buying for investment . . . that were not investors.
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Post by zorro on Oct 24, 2007 22:15:07 GMT 1
Property in Croatia has already dropped by 20% in the past two years. I expect we will have at least the same in the next three years. There are no reasons why it shouldn't. What can go up can come down if the fundamentals are wrong and there are no buyers. Not that I have any idea, but do you have any stats to back this up. Within 3 years would include Croatia joining the EU possibly
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Post by zorro on Oct 24, 2007 22:17:45 GMT 1
It also goes against what Carol said "Croatia is largely immunised from a fall in prices resulting from the credit crunch due to the absence of mortgages until the last few months"
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Post by Carol on Oct 25, 2007 10:53:05 GMT 1
Furio and I disagree on a couple of points but I am not going to argue with him. I haven't noticed any price fall particularly although prices have stopped rising, except in one or two cases where the seller refuses to see reality. I've seen a few isolated examples of price cuts but mostly the market is characterised by nothing moving. If you think about it, as an estate agent this is worst case scenario for me: I take a % on the sales price whether the market is moving up or down. Up is obviously nicer and you get more sales but down is not so bad when there are bargain hunters around. However if there are no sales then I earn 0. So I've got no reason to lie about what i said above.
My personal view is that the problem is one of product. If the non availability of GUP issues had not effectively halted building of new developments then there would have been good quality new apartments and villas to offer once the available old stone houses had been sold. But it was halted and it will be a couple of years from now before the new builds will be ready for sale. That should co-incide with EU accession, so the market will come back again. Meantime many agencies are going under. i am sure no one cares about this - as an industry we hardly have a high standing, but its the truth anyway and backs up what I am describing here. For those reading this, you can make your own minds up about where the truth lies.
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furio
Junior Member
Posts: 25
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Post by furio on Oct 25, 2007 12:26:13 GMT 1
3Lions,
The 20% drop is what I have heard from a variety of people in Croatia. Is this reported fact? No it is not. I doubt there are any reliable statistics on pricing in Croatia at this moment. My opinion and that of virtually every Croatian as well is that foreign purchases have been driving the price increases and from what I have heard from lawyers dealing with foreigners property transactions were off by 50% in 2006 as compared to 2005. I haven't heard about 2007 but I don't get the impression they have improved. So if foreigners are not driving pricing as much then we should see a decline. If someone needs to sell quickly they need to drop their price below that of others since now the sellers are in competition with each other and not the buyers as has been the norm for a while.
Is there a supply crunch? I don't know it's entirely possible but then there would also need to be pent up demand as well to define a lack of supply. But if there is pent up demand but little supply you would typically see bidding wars on the few available good properties as seen in London, Dublin, Paris and New York.
My opinion on the pending drop in pricing is based upon traditional bubbles where the mark of the top of the bubble is defined by a big drop in transactions due to buyers unwilling to pay the market price and sellers unwilling to drop prices enough.
I do agree with Carol that once Croatia enters the EU the market will change. But I also think this depends on the economic conditions in the world as well. No one has a clue where things are going. Remember Japan just finished a 15 year downcycle in their real estate market.
From a long term 5+ years perspective I think property in Croatia will do well but also don't expect to make a killing either. It is a beautiful desirable place. I bought a place last year so I'm in the market as well but would rather retire in my place rather than wait to sell at a higher price.
My main message, and I should have stated it early, is that right now potential buyers do not need to rush into any purchase in Croatia. Wait until you get exactly what you want, where you want it for how much you want to pay. Also buy as an individual not with a company, no matter what people tell you. If you can't buy as an inidividual, don't, just wait until the laws change.
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Post by Carol on Oct 25, 2007 13:42:39 GMT 1
I agree with most of this. Buyers are doing what you suggest anyway: hence the no. of transactions down statistic. Other factors have been: rising interest rates bringing a higher cost of living to the foreign buyers (before the credit crunch crisis), Montenegro becoming bizarrely popular. However you do need to be specific about where the market is driven by foreign buyer demands and where it is driven by local demand. Split is definately locals and i suspect Zagreb is too. Whereas Brac and Hvar markets are foreign buyer territory. One thing I would add though, is that the sellers don't always view the property market as something which goes up and down depending on supply and demand. In fact that is rare. Its more common for sellers to tell us they are raising prices to attract interest as it is for them to say they have decided to lower their prices. One thing our sellers are is very patient. its a bit like the stock market there seems to be a significant body of the population which believe the property market only goes in one direction, and then they go on to make it a self fulfilling prophecy. Prices have stalled for the last 18-24 months. Sales have fallen of a cliff. But hardly anyone is dropping their prices.
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Post by zorro on Oct 25, 2007 20:16:10 GMT 1
I guess the question now is if you buy something, is when will you sell it again?
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Post by Carol on Oct 26, 2007 8:34:34 GMT 1
yes but not for a profit one month later. You would probably have to wait a couple of years in anticipation of renewed interest on EU accession. There are no guarantees but it happened everywhere else
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Post by Ribaric on Oct 26, 2007 9:46:18 GMT 1
I know people are generally disinterested in non-coastal Croatia but, for what it's worth.... Sellers here are also very patient and will generally pay the upkeep and communal costs rather than reduce the asking price. I'm told it's a Zagorski thing that everyone fears selling below optimum to a point of obsession.
The few people I have seen drop prices to, in my humble opinion, a reasonable market level have sold without too much difficulty. I don't know what level of activity Carol might regard as "active" but certainly things are changing hands as regularly as ever, maybe more.
We do have a particular type of buyer here, these are the folks, mostly baby-boomer generation, who worked in Germany and now have a European budget in terms of savings, pensions and equity from home sales. Plenty of Brits are buying too but this looks to me like it's driven by the bargains available rather than peoples' desire to have somewhere in Croatia. ISTM to me that, if sellers get the idea that the location is the main attraction, then the subsequent hike in asking prices will kill it stone dead.
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Post by Carol on Oct 26, 2007 9:51:01 GMT 1
everyone fears selling below optimum to a point of obsession. EXACTLY!!!
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Post by Carol on Oct 26, 2007 10:00:32 GMT 1
We have one property for sale. Its been with us for two years now and was on the market for a couple of years before we saw it. I am going to lower the prices to hide the identity, but you will get the idea... when we saw it the seller wanted €800k and had been asking that amount for 2 years. We got him a full asking price offer within a month. However he turned it down flat because the buyer was arrogant. (For people who the seller does not like the price is higher apparently: €950k). After that we got a little interest but no one else actually visited the property and there were no offers. Then in January 2006 the price went to €1.1m. After that zero interest. Then this year it went up again to €2.2m. The seller is an educated man, however it was really not worth our time explaining to him the folly of his ways, because he is pig-headed too and desperately scared of being ripped off. So we just quietly dropped it from our website. plenty of other agents still advertise it though and none of them have had any interest for the property in years.
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Post by coolpal39 on Oct 27, 2007 0:13:49 GMT 1
Carol, In my opinion if he did not get 800K he certainly will never get 2.2 million.
There is no accounting for some people being down right stupid.
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Post by darcy on Oct 27, 2007 2:13:04 GMT 1
People sell because they want to upgrade or downgrade and purchase another property, invest in business, early retire, help kids to buy their own place ... If that is not the case, sell is very hard as sell and buy need to be win-win in order to proceed.
Carol, why you do not advertise the place for 3.3 mills? It is obviously priceless.
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Post by happy on Oct 27, 2007 9:04:11 GMT 1
Carol, In my opinion if he did not get 800K he certainly will never get 2.2 million. There is no accounting for some people being down right stupid. I think he will get his 2.2 million eventually if he waits long enough, like 50 years.
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