Bulgaria and Dubai are places that will go down in infamy with Irish investors, writes JACK FAGAN

JUST WHEN YOU think that you have heard all the bad news about the property industry, another bombshell lands on your desk. This time the problem relates to investment homes in Dubai and Bulgaria which are now virtually unsaleable because of the withdrawal of domestic mortgage products.

Close to 10,000 Irish investors now own properties in Dubai, according to a Dublin selling agent who specialised in that market. It is estimated that several thousand more Irish buyers also purchased in Bulgaria – many of them with mortgages – believing that capital appreciation would enable them to sell on to new investors at a profit. Like Ireland, Dubai and Bulgaria experienced a massive boom and bust at the very same time.

New research by the Investors Chronicle shows that the lack of liquidity in both Dubai and Bulgaria has led to a collapse in values of up to 75 per cent. Leading overseas mortgage broker Conti has taken Bulgaria off its website because of its unstable property market. “There are no mortgages available on flats or apartments in Dubai,” the brokers told the publication. “You might get a 50 per cent loan-to-value deal on a villa, but that’s it.”

Bulgaria’s Black Sea coast attracted huge numbers of Irish and British buyers between 2004 and 2006, largely because they could not afford the prices in Spain, Portugal and France. Some Irish investors bought up to half a dozen apartments with the intention of flipping them on. Not only are the resale prices now on the floor but in many cases it has not been possible to lease the units over the summer months because holidaymakers have been availing of cut-price package holidays in hotels. One report says that troubled sellers are now accepting cash offers of around €20,000 from “acquirement firms” on apartments that originally cost around €65,000 to buy.

The meltdown in Dubai’s property market has been almost equally devastating for many purchasers. The Investors Chronicle estimates that prices have already halved in the past 12 months and could fall by another 20 per cent later this year. Only two years ago there were so many Irish investors chasing a piece of the action there that Aer Lingus had no difficulty in filling its direct flights between Dublin and Dubai. And, what’s more, the Irish were seldom fussy as to whether their new investment properties were located in a fanciful desert development or a man-made island on the high seas.

In one particular buying frenzy – at the International City scheme – Irish visitors booked no fewer than 1,400 of the 25,000 rental properties. They were also heavily represented in other large schemes, paying deposits of 10 per cent and promising the remainder on hand-over. However, many of the projects will not be completed because of the collapse of the industry.

The Spanish market has also come to a halt with almost one million newly built homes available, about half of them on the coast. It is estimated that there could be a further two million holiday properties on the resale market but few of them are shifting because of the credit crunch. Many of these belong to Irish families who now need to cash them in because of the economic difficulties at home. Some are finding it difficult to meet mortgage repayments after losing their jobs.

There are no such problems in France where 100 per cent mortgages are still available and prices are holding up. Things have been so good there that some Irish and UK owners are now remortgaging their properties to release capital to pay off bills at home.