I honestly don't have the answer, but I admit that it worries me. I just don't know if my worries are as valid as a fear of flying or are we sleep-walking ourselves into a financial disaster.
I can't quantify it, but I think there's little doubt that the Irish are buying up overseas property at a clip way beyond what you might expect given the size of this country. Little items I stumble on, like this one from the Warsaw Business Journal, make me wonder whether we as a nation are over-extended overseas.
Of the total investment volume in CEE (Central & Eastern European) property, 75 percent came from just four countries: Germany, the US, Ireland and France, with Irish investors expected to make their presence felt even more over the next few years.What is Ireland doing in that company? The population of France is approximately 13 times that of Ireland. Germany and the US are even bigger. I would expect Ireland to keep company with Norway or Denmark or maybe Belgium, but not the US, Germany & France. The UK's not listed there.
It's not limited to Central & Eastern Europe either. Tune in to any radio station playing pop music and you'll hear ads for property investment opportunities in London, Miami, Cypress, Mediterranean Spain, Turkey, anywhere. How much do Irish investors really know about these property markets? There was an article in the Sunday Business Post advising potential investors as to the ease with which you can fly to your property investments.
The reason I'm worried is that I don't know if our banking system is over-exposed to overseas property markets. I really don't know, but if people are re-mortgaging their homes to buy property overseas then surely our banks will be stuck with a lot of bad debts or even repossessed homes here in the event of any significant change in our economic fortunes.
Isn't this a big part of what happened to the Japanese economy in the early 1990s?
