Own a house abroad? What is a property bubble?

By on October 26th, 2017

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What is a property bubble and how could it affect you if you own a house abroad?

At present, the housing market across Europe is unstable and changeable. Prices in some European countries such as Ireland, Lithuania, and the Czech Republic are steadily rising, prompting fears that another property bubble could occur. You may have seen the phrase property bubble being splashed across different articles and headlines, but do you actually know what it means and how it may affect you if you own a house abroad?

Keep reading to find out exactly what a property bubble is and the implications of one setting in.

What is a property bubble?

A property bubble is an increase in housing prices which is prompted by higher demand in the face of limited supply, which can take a long time to readjust and increase.

Speculators will enter the market in order to trade during a time of higher risk, hoping to capitalise on higher profit margins. This will further drive demand, which will at some point decrease as supplies simultaneously increase. This results in a sharp drop in prices, and the bubble bursts.

How will a property bubble affect you?

If you own property in a country within the EU that is in a property bubble, this could be interpreted as being a good thing. An increase in demand and prices may mean that, if you are looking to sell your property, you will be able to do so more easily and will benefit from a higher return.

However, it is important to remain vigilant regarding property bubbles, as once they burst prices will drop significantly, which could leave you in a situation where you receive less money than you hoped for your property. You may even be left in negative equity.

The Spanish property bubble

The property bubble in Spain burst in 2008, before which the country had been building more homes than the UK, Germany, and France combined.

Brits also forked out millions for holiday homes that were never built, but luckily many will be getting this money back as Spain’s Supreme Court opened the way for around 130,000 Britons to claim directly from banks.

If you have any questions about property bubbles or are concerned about selling your property abroad, get in touch with us and one of our friendly and highly-qualified staff will be happy to offer you assistance.

If you are considering a home abroad, read our advice here..

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