Unregulated overseas property investments remain an "obsession" among consumers and are "a scandal in the making", a body representing investment fund managers warned yesterday.
The Irish Association of Investment Managers (IAIM) said it was regrettable that no real progress had been made on regulating the sale of overseas property since it wrote to Minister for Justice Michael McDowell about the issue last year.
"The appetite for foreign property is insatiable to the point that instant decisions are being inappropriately made," said Gary Connolly, chairman of the IAIM's products and markets committee.
"Because it is an unregulated business, the risks are rarely highlighted," he said.
In many cases, investors are using their own homes as security for overseas property purchases and have no comeback if the investment goes wrong.
IAIM chief executive Frank O'Dwyer said people were spending large sums of money when "all they have is an e-mail address and a mobile phone number".
Any comparison of property prices in countries such as Bulgaria and Romania with Irish property prices would look favourable, Mr Connolly said, but these comparisons do not take into account the significantly lower average earnings in those countries. These earnings will limit investors' ability to rent out and sell on the property.
Currency and interest rate risks are rarely considered, he added.
"In Turkey, interest rates have gone up from 13.5 per cent to 17.5 per cent in the past 12 months and the currency has gone down 16 per cent. That's a pretty nasty sting," Mr Connolly said.
The comments were made as the IAIM published its annual survey of investment trends in the Irish retail funds market.
The value of new retail investment product business taken in by IAIM members was €2.1 billion in 2006, down 25 per cent on the level of new business in 2005. This was mostly caused by a "swing" of €1 billion in the value of money held in Special Savings Incentive Accounts (SSIAs).
In 2005, some €600 million in consumers' money was invested in equity-linked SSIAs. However last year, as the first accounts matured, some €410 million was withdrawn.
But Mr Connolly said the evidence was that between a third and a half of SSIA savers were keeping their money invested.
"Some of those who did encash their SSIAs pre-Christmas have actually re-invested their money in the first quarter of 2007."
The IAIM said equity-linked SSIAs maturing later this month were on track to be around €4,500 higher than deposit SSIAs with a fixed 4 per cent interest rate, which was a "very favourable outcome" for equity SSIAs.
The value of assets held in retail products increased 18 per cent to stand at €29.4 billion as of December 2006, up €4.4 billion on their value at December 2005.
Total assets under management by IAIM members on behalf of both domestic and international clients, including corporate and individual pension plans, amounted to €260 billion at the end of December 2006.
