Buying Property in Europe?
I try not to write too much
about the property markets in Europe as the story is boringly
repetitive, and tediously depressing. Estate agents are no doubt busily
talking their book, and saying that now is the time to buy, but the
obvious fact (at least, obvious to anyone with a grain a common sense)
is that prices are still going down across Southern Europe, and they
will continue to go down.
There is much talk about how the French in particular are swarming to
buy houses in the Algarve to escape the economic calamity that is
France. Unfortunately, that relates only to a few very rich French
people who simply want a tax exit. It doesn't relate to the broad
Indeed, the whole issue of the legality of certain properties is still
rumbling on after various municipalities issued building licences for
zones that were not in the building zone at all. Have a look at the
accompanying article on the subject from The Algarve Daily News:
Up until the beginning of this year the focus was on the lame ducks in
the EU; Greece, Spain, Portugal, Italy. Things, however, have changed.
Not only has France joined the lame ducks (as I warned at the end of
last year), but Germany as well is heading that way. There doesn't seem
to be any economy within the Eurozone that can hold up the currency.
Recently The Economist reported:
Their collective GDP stagnated in the second quarter: Italy fell back
into outright recession, French GDP was flat and even mighty Germany
saw an unexpectedly large fall in output. [...] Meanwhile, inflation
has fallen perilously low, to around 0.4%, far below the near-2% target
of the European Central Bank, raising fears that the zone as a whole
could fall prey to entrenched deflation. German bond yields are
hovering below 1%, another harbinger of falling prices...
Despite the clear need for deep-rooted economic reform, this has not
happened. Not only that, the political union is so weak that it is near
impossible to get support from voters.
The perverse part of it is that the European Union, and the euro
currency, were supposed to be the agents of much needed reforms. The
aim of the political union was to make less competitive nations –
places such as Greece, Spain and Portugal – more competitive, creating
stronger local markets for the likes of France, Germany and Britain.
Instead, these less competitive nations took the cheap money made
possible by the single currency, and went on a self-destructive credit
binge, the effects of which are still being felt throughout the
continent. These effects will not go away in a hurry. There are those
who believe we have another twenty years of this current scenario, in
short, following in the footsteps of Japan. It is not a scenario
conducive to investment.
The next question is: will the European Central Bank start to print
money? It looks likely. And so the problem of horrendous amounts of
debt will be subjected to even more debt, which will act as a drag on
the economies of the Eurozone for a decade or more, unless the whole
system blows up before then.
Sadly, it looks as tho Europe is staring into a bleak future.
Add to that the slowdown in Asia's largest economy, China... that
economic growth in South America's largest economy, Brazil, is
flatlining... and that there is a serious downturn in Russia, where GDP
growth slowed to 0.8% in the second quarter... and it's very hard to
construct a bullish case for global growth. That means it's pretty hard
to envisage a bullish scenario for real estate.
And what am I doing? You may well ask. Currently, I am living in
hotels. They are cheap, especially when you stay long term. You get
servants to do everything you need. The traditional curses of home life
are no more: no washing up, no shopping, no cooking, not even changing
the bed linen. I'm getting hooked on this. And when I want a change of
scene I simply move somewhere else.
I simply love the fact that I dont have to clean the swimming pool, or
mend anything that goes wrong, dont have to pay rates, or deal with
maintenance. Life has become quite charming. I did some sums a couple
of years ago, and reckoned that living this way was cheaper than having
finance tied up in a home, with all the attendant costs, especially if
you add in the personal service, such as gardeners, cooks,
washer-uppers, and plumbers, and so on.
As far as I'm concerned deflation can stay forever. I'm enjoying it.
I'll buy real estate when deflation changes to inflation and folks get
caught out with too much debt and rising interest rates, and the market
is flooded with cheap repossessions. I can wait.