Thorough research could mean the difference between owning a glorious villa or a vacant, money-sucking foreign property, writes Laura Slattery

A meltdown in the share price of Spanish property stocks was enough to spark a few hot flushes last week as it began to sink in that overseas housing markets might not be as kind to investors as the Irish market has been.

Conservative guesses suggest that the overseas residential property market is worth ¤10 billion or more. But there are no statistics on the number of people who actually go ahead and buy an overseas property, having spent their weekends traipsing around hotel property expos, torn between a Hungarian townhouse and a Turkish villa.

The changing fortunes of Spanish real estate companies aside, these buyers have been subjected to a series of stark warnings from investment experts who believe that they are being caught up in a wave of unregulated hype which will end in financial scandal. The Irish Association of Investment Managers (IAIM) is frustrated that its efforts last year to bring dodgy advertising practices in the overseas property business to the attention of Minister for Justice, Equality and Law Reform Michael McDowell have not led to any concrete action to regulate the industry.

According to IAIM chief executive Frank O'Dwyer, people hand over large sums ofmoney to overseas property vendors when "all they have is an e-mail address and a mobile phone number".
If anything goes wrong with the purchase, the buyer has little or no comeback.

The Society of Actuaries cautioned earlier this year that when people buy property they do not benefit from the full disclosure of charges and sales commissions which apply to most regulated financial products.

Some of the claims made for he future performance of overseas property investments are very misleading, according to the society's president, Colm Fagan.

For many people seeking holiday homes, boring details such as the country's rate of economic growth, capital appreciation rates and current rental yields in the locality will seem irrelevant to their dream of buying a southfacing apartment in a sexy Balkan state. After all, when they can quite easily afford an overseas property for the cost of some loose change, what can go wrong? Well, for starters, if the property market in the country collapses, buyers could easily find themselves in a financial quagmire, particularly if they have released equity from the value of their Irish homes to fund a property which is now worth less than their borrowings.

For people who are convinced by the investment case or who view owning a place in the sun as paramount - especially now that they have a Special Savings Incentive Account (SSIA) lump-sum they can use as a deposit - there are many reputable companies out there selling overseas property. But even if you pick the right one, it will still be worth doing your own independent research into the various tax, legal and property market quirks in the destination country.

This could make the difference  between a glorious getaway home and a vacant, moneysucking albatross which might be good for dropping into dinner party conversations but little else.