Ireland second last in global league
As an international property index puts us in the bottom three of 48 countries, we look at what's happened in other states bailed out by the IMF
Published 05/12/2010 | 05:00
HUNGARY, Ukraine and Ireland will be the bottom three countries out of 48 in international estate agent Knight Frank's latest Global House Price Index when it is released next week.
All three countries have taken their economic medicine, us most recently, courtesy of the EU as well as the IMF.
As we languish second from bottom in the Index, with a double-digit percentage fall in prices in the past year, we take a look at what's happened to house prices in these countries and others where the IMF is calling the shots.
As Liam Bailey, head of residential research says: "The IMF's involvement in these economies means bank funding is more limited and that creates an additional downward pressure on property prices.
"Consumer confidence and the attitudes of potential buyers also push prices down even further. At the moment, our outlook for 2011 is that prices will continue to fall in places like Greece and Ireland."
Joining us at the bottom of Knight Frank's Index, Ukraine agreed a new €11bn loan package with the IMF after an earlier one shortly after the crash of Lehman Brothers in October 2008, which ended a seven-year boom in property prices.
A property tax was introduced earlier this year and in the 12 months to June, residential property prices had fallen by over 30 per cent and are still falling, according to the Index.
Popular with investors from Ireland and the UK, Hungary began borrowing from the IMF after the Lehman crash, but talks have since been abandoned and a new government has proceeded with devaluing its currency, the Forint.
After peaking in 2007, prices are still on a downward slope, with independent economic researchers GKI expecting both residential and commercial property prices to fall by up to 5 per cent next year.
According to property news website RealDeal, some foreign investors are snapping up apartments at bottomed-out prices and doing basic refurbishments so they can be rented out to tourists for €20 to €40 a day. A property tax may soon be introduced.
The IMF lent Latvia €1.8bn as part of a wider rescue package in October 2008.
Property prices plummeted by a massive 63.4 per cent from their mid-2007 peak, bottoming out in the third quarter of last year, according to Propertywire.
Property and land tax rates were raised in January this year, with a 3 per cent tax being slapped on speculative development land.
Since receiving a €12.95bn loan from the IMF last year, a distinct two-tier property market has emerged in Romania, which saw property prices rocket by up to 1,000 per cent in the five years before it joined the EU in 2007.
Prices of new apartments have fallen by up to 60 per cent from their peak, leading to a lack of demand, while prices of better located properties are stabilising, according to property consultants King Sturge.
The government has introduced a €75,000 loan guarantee scheme for first-time buyers, who favour older apartments.
Iceland received a $2.1bn loan from the IMF in 2008 and has seen property prices plummet by up to 40 per cent after a boom in the preceding eight years, although they are now beginning to stabilise.
Foreign buyers have been encouraged by the Krona's devaluation, while some estate agents in Reykjavik report that a new trend for swapping homes rather than selling them is beginning to emerge.
Having received €30bn from the IMF in May as part of a €110bn EU-IMF bailout, like Ireland, Greece has turned to property taxes to try to raise money to pay its bills.
Renovations and extensions that weren't declared to government inspectors are also being hit with a tax of up to 19.5 per cent.
Prices of luxury properties on its islands and less expensive properties have fallen by up to 50 per cent and are continuing to drop, according to the Knight Frank Index.