Mr Thomsom (Building mania, 1st Sept) bewails the plethora of building, and the pleas from housebuilders for a rescue. My own view is simple: serve them right. Unfortunately it doesn't end there. I have for some time been moaning about off-plan sales (my own book on the subject, plus a good moan on radio and t.v. whenever a producer gives me air time). There are several problems. Off-plan is like a pyramid sales system. People are encouraged to buy at a discount and then sell on later for a profit, or rent out to pay the mortgage. Anyone who does even the simplest of calculations will find that the investment side is a recipe for losing large amounts of money. The more people who buy, the less there are to sell to. The more people who buy the less there are to rent to. Also there is the ramped-up price which is quoted as a discount. I can quote a dozen off-plan developments in the Algarve which are advertised abroad at a 15% or more "discount" when they are generally selling for twice the price of a second-hand house. In my book I quote a new off-plan deal near Guia (Mr Thomson's neck of the woods) where a terraced three bed house with one bath and shared pool is selling at twice the price of a three bed, 2 bath detached villa with pool in a more upmarket location on the edge of the golden triangle, which is advertised in The Portugal News. On the Silver Coast a deal is offered (always abroad of course) at no less than three times the price of a second hand property of similar size and more vernacular style. When the off-plan buyers come to sell they have to enter the second hand market, and no doubt they get the fright of their lives. So what? A fool and his money are soon parted. But the long term fallout is a crashed property market which affects the rest of us. This will start as soon as a significant number of off-plan idiots start to panic sell. We will then all suffer from the current insanity around us. Already there are vast swathes of empty investment properties. There is a whole estate behind me. It has been empty for the past 18 months despite the fountains playing, and the grass being cut. Then there are the foreign deals. I can buy the same spec in Morocco at half the Algarvean price. It's cheaper still in Cabo Verde. And even cheaper in Turkey. The answer to a stalled property market is to cut back production, and until that happens we are all in the same boat, and I'm sorry to say, it's sinking. I only hope the developers are losing money, and stop building. It's our only hope. |
© John Clare 2007