And we don’t mean distressed in a ‘make look attractively antique’ kinda way

Below Market Value specialists IPS have compiled a list of the top 8 countries with serious housing market problems.

These could present big opportunities for investors, but the report adds this sensible caveat:

Of course all this distressed property piling (mostly in Europe) can be bad news for unwary property investors who might stray off the beaten track into areas that are unlikely to see growth for the next 20 years or so.

These are the ghost towns where supply far outstrips demand, tourists are conspicuous by their absence and the buildings themselves are built on shaky foundations, which has been hinted at in some areas of Cyprus for example.

They urge prospective investors to keep these five factors in mind and warn that “if any of the above are lacking you can safely say that no matter what your heart is telling you, the property is a no go from an investment point of view.”

•    The quality of the development
•    The availability of finance
•    Location
•    Capital growth prospects
•    Rental market 

And the eight laggards?

1. Ireland – Plummeting property prices continue in Ireland and if anything the pace of price falls has quickened this year as prices nationally declined by 8.5% in the first 6 months of this year which means that prices even in Dublin are more than 50% below their peak in 2007.

Falling rental yields and distressed sale auctions now commonplace in the Ireland so now could be the time to pick up some real bargains, but how low can property prices go in a background of such deep economic uncertainty?

Verdict: Some bargains to be snapped up in auctions.

 2. United States – The USA  market is where the sub-prime crisis began and there appears to be no end in sight in states such as Florida. Though there are signs that this market has reached rock bottom and prices are beginning to pick up.

Verdict: A market only for the experienced.

3. Hungary – Moody’s have just downgraded Hungary’s rating to Junk status. This comes on top of rising interest rates with the base rate now standing at 6.5%. The first signs of the impact of these higher interest rates on mortgages is now being felt in a rise in the supply of distressed property.

Verdict: Even in the good times the market in this country was uncertain.

4. Greece – Flirting with bankruptcy and may become the first country to exit the EU. Uncertainty and a high risk gamble for anyone but the most experienced property investor. Buying property in Greece could get your fingers severely burnt by a return to the Drachma and a subsequent halving of current property value.

Verdict: Not worth the risk.

5. Bulgaria – Property prices remain in freefall in the capital, in the ski resorts and even on the coast where many British and Irish investors are trapped in a market where tenants are hard to come by and there are even issues surrounding ownership of properties with tales of unfortunate investors sitting outside the gates of properties they once owned.

Verdict: This market has further to fall in 2012.

6. Cyprus – Falling property prices, lack of clear data, transparency and corruption, oversupply and poor quality developments. Unfortunately banks appear to be unwilling to offer any incentives to overseas investors to take property off their hands, one to avoid for now.

Verdict: Things will get worse before they get better

7. Spain – Oversupply and an economy on the brink of needing a bailout has put huge pressure on this nation’s property market with prices plummeting since 2008, even in fashionable resorts like Marbella.

It is now possible to buy a property at 60% below market value with 100% finance. If the banks are willing to lend at this amount with no deposit then they must be confident that this market has finally reached bottom in the more desirable coastal areas.
Verdict: Invest now if you want to grab a bargain in coastal areas. Properties are unlikely to get cheaper but you need to know this market well to get the best deals.

8. Portugal – Portugal’s property market like most others in Europe has been hit hard by the sovereign debt crisis. While Portugal’s cities are a definite no no as the population struggles with austerity measures, the government is actively encouraging overseas investors to come and invest in prime coastal resorts such as Vilamoura.

Compared to Spain the gap between supply and demand is less pronounced meaning that when economic conditions improve, property investors could make a nice return by investing in discounted property.

Verdict: Can be difficult to secure mortgage finance, but not impossible and there are some good opportunities to invest in some high spec coastal properties.