An industry that prospered by piggybacking on the international property boom is struggling to stay afloat now that sales are plummeting.
The number of companies offering support and advice to those buying real estate far from home burgeoned between 2000 and 2007 as investors, retirees and would-be vacation home owners snapped up houses and apartments from Brazil to Bulgaria. They ranged from experts to translate foreign legal documents to decorators who chose sheets and towels for beachfront villas.
But as the downturn spread in the wake of the
U.S. subprime
crisis last year, the sector took a painful pounding, with many
companies cutting staff in hopes of surviving.
"What we've seen is a bloodbath," said John Howell, the senior partner at the London-based International Law Partnership, describing the decline in international sales.
At his firm, which provides legal and financial advice to people buying foreign homes, real estate-related enquiries have fallen to between 50 and 60 a week, down from 250 a week in 2006 and 2007, he said. Property business has halved since last August, just before the
financial crisis hit, he said.
The firm expects to lay off two or three of its more than 20 property lawyers soon, and already has moved five of them to real estate litigation, Mr. Howell said. That sector has boomed as deals and developments gone bad give rise to lawsuits, but the six- or seven-fold increase in that business has not been enough to make up for lost sales work, he said.
Things are even worse for British-based Villapac, which for the last five years has been selling all- inclusive furniture packages — everything from sofas to silverware — for vacation and rental homes in Spain, Portugal and Morocco. The average sale used to be around 9,000 euros, or $11,600, now it's around 7,000 euros.
"It's brutal. Disastrous," said Mark Wilman, the company's owner. "We're fighting every day" to keep the business alive.
Villapac has laid off 75 of its 100 workers in four waves of cutbacks since August and has closed showrooms, he said. Earnings in January will total around 100,000 pounds, or $140,860, compared with 650,000 pounds in January 2008, with new customers hard to find and many of those who paid deposits trying to back out as they cancel or postpone pending property purchases.
Mr. Wilman said he was trying to reorient the company toward selling furniture to retailers, rather than individual home buyers. "The business we did with the small investor is finished," he said. "I think it will be a long time before it will come back."
Help has long been available for those buying homes internationally, but it only became a big business after 2000, when the number of people seeking properties outside their home country jumped sharply, said Adam Samuel, director of the real estate Web site nubricks.com. "Mass market-wise, all of these industries are relatively new," he said.
Now, "many companies are in dire straits," Mr. Samuel said, adding that he regularly hears of companies in the sector going under.
The biggest drop-off in business has been among
investors who once saw international property markets as a place to make easy money, said Simon Conn, of the British-based company Conti Financial, which connects buyers with overseas mortgages.
With prices dropping nearly everywhere, investors like that are now hard to find, he said.
Mr. Conn said business was off about 40 percent from a year ago, with many inquiries now coming from those who want to refinance homes rather than from new buyers.
Those who are buying, now mostly people looking for someplace sunny to retire or cash-rich families hoping for a bargain on a vacation home, are far more cautious, he said, adding, "People are being more selective now, they're not rushing in and buying the cheap properties, they ask more questions."
Adding to the trouble is the pound's slide against the euro, which makes Continental purchases more expensive for British buyers, who have been the largest segment of international house-hunters for decades.
Sales volume and prices have fallen most precipitously in the cutting-edge
markets that international buyers entered most recently, countries like Bulgaria, Romania, Egypt and Turkey, where investors sought to turn quick
profits. They have slumped more slowly or stabilized in more traditional destinations still seen as relatively safe, places like France, Spain and Italy, as well as Mexico for American buyers.
Simon Greenwood, whose company, A Life in Puglia, is based in that southern Italian region and helps English speakers find and buy homes there, said business at the end of 2008 was off by nearly a third. Since then, it has ticked up again following a new publicity campaign, but he said he feared for the future, as many potential buyers are just watching and waiting.
"The people with
money are thinking, 'Maybe if I hang around for six months, prices will go down even more,'" he said.
Mr. Greenwood and his partner, Charlotte Senior, started the business in 2006 to give up their fast- paced London lives for a quieter Italian existence. They charge 2 percent of a home's
purchase price, up to 200,000 euros; and an additional 1 percent on anything over that amount.
Paul Collins, property editor at the real estate Web site buyassociation.co.uk, said he was optimistic that while individual companies might fold, the hard economic times will not kill the entire industry.
"It's going to reflect how the international property market is going to be when we get to the other side of this downturn," he said. "The companies that are left are going to be very high quality, they're going to be lean, they're going to be able to give customers value."
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The Euro will struggle to make much headway without an improvement in sentiment surrounding the global economy, but there should be solid downside protection given US vulnerability
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