Overseas property market hit by credit crunch

It is a dream of thousands of Brits – to buy a second home in a picturesque spot in France and wile away hot summers converting a dilapidated barn into the perfect home in the sun.

But there are signs that many are abandoning their plans to buy a plot over the Channel as the economic downturn hits the second home market. And the situation has become so bad that some second home-owners wanting to sell up in France have had their properties on the market for as long as three years, according to agents. Experts say the overseas property market could be down by as much as 40 per cent on last year.

A popular trade show has also moved its flagship London event because of fears that the slump in the market would make for dismal visitor numbers.

Brits spent about £24bn on overseas property last year but that is expected to see a big fall this year. Mark Bishop, a columnist with A Place in the Sun magazine, warned that the market was down between "35 and 40 per cent year-on-year". "People buying pure holiday homes are less likely to feel comfortable with discretionary spending in the current economic climate," he said.

John Wall, who set up his estate agency after moving to France and falling in love with the Pyrénées-Orientales region, has noticed the fall in British buyers. "There is no question that the market has slowed," he said. "Anyone still looking to buy is being far more selective and looking for a good price, which means that anyone putting a property up for an unrealistic price has a much poorer chance of selling."

The property exhibition A Place in the Sun Live was due to take place last weekend at London's ExCel centre but was withdrawn as those behind the event feared it would not attract enough visitors. A similar show was held in Birmingham last month and the fear was that demand was too low in the current climate to warrant another one so soon. "Developers were keen to attend but we were worried about visitor numbers," said an organiser.

So instead of France, some investors are now looking further afield to secure a bargain. Places previously considered too politically volatile or far away are starting to attract British buyers. Thailand, Bulgaria and Venezuela are some of the destinations seeing increased interest from Brits. "Opportunities to make capital gains in so-called 'emerging markets' has accelerated this phenomenon," said Mr Bishop. "Countries such as Turkey, Cape Verde and Cyprus are growing in popularity among buyers wanting some personal use of holiday properties, while pure investors are purchasing increasingly in the EU accession states, the Caribbean and elsewhere."

According to Mike Holwill, of the estate agent Someplace Else, investors previously put off by South America are now deciding to take a risk on the region. "Brazil and Argentina were seen as too risky in the past, but their lack of reliance on liquidity has meant they have largely escaped the ill effects of the credit crunch," he said.

Bargain in Bulgaria A home for £100,000

Bulgaria may not have been top of the list for second homes over the years, and the European Commission's concerns over rampant corruption in the country cannot have inspired confidence among would-be investors. But it is one of the locations benefiting as investors begin to search out emerging property markets as the potential for making a profit in more traditional markets evaporates. A miserly £116,000 would buy you a three-bedroom villa on the Black Sea Coast, complete with open-plan kitchen, a large garden and three bathrooms. It may not be in the land of wine and cheese, but it is just down the road from Varna, a seaside resort and one of Europe's oldest cities.