The impact of foreign buyers

Earlier this week the busy press office at RyanAir had me scratching my once head again. Was their media-shy chief executive saying that the airline was pulling 600 flights (37%) a week from Stansted this winter and about a third from Edinburgh the result of falling demand, was it a stunt to try and reduce the £10 airport tax in the UK or the landing charges that they are billed for using the tarmac and the regional airports they fly to? Part of me thought “he’s a clever man that Mr O’Leary so I’m sure it’s not as simple as it seems ” and then I considered the impact on house prices if the second home owners who had fueled the surge in demand in otherwise unfashionable addresses couldn’t catch a flight for a fiver.

It’s down to the remarkable service that the likes of RyanAir and EasyJet have set up that people considered buying (or “investing” as they rather naively described it) in places like Pula in Croatia or Lodz in Poland. I’m not sure what the draw of a recent war zone is for the average ‘Place in the Sun’ viewer but thousands of Brits seem to have been drawn like moths to a flame.

It’s possible that RyanAir might consider pulling out of some of their routes altogether. For the residents of Stansted campaigning for fewer flights this is not going to be a great disappointment (or bad news for the value of their homes!) but if you bought a house hoping to use the daily flight to Bergerac in France or Peruga in Italy for example then you might be pretty jumpy.

The airline have been uncharacteristically shy when it comes to confirming the specifics of which airports may get the chop but the impact on local house prices of the rich Brit has been significant in many of the provincial centres that they fly to. Without them the supply of owner-occupiers dries up as will the stream of holiday makers coming to help pay the mortgage. House prices could fall by as much as 35%.

When RyanAir were rumoured to be pulling out of flights to Valencia last year the local market froze. The airline brought three quarters of a million passengers to the airport each year. As it turned out, a solution was found but not before estate agents in the City had lost several pounds.

In 2003 the European Commission ruled that RyanAir could not receive what were referred to as ‘subsidies’ from airports like Charleroi in Belgium. The rising local housing market was throttled before a solution was found.

Falling house prices are not a just British thing, values have been falling almost everywhere in Europe. In some of the less robust markets where a froth has been created by foreign buyers, locals and speculators have been cashing in on the bonus that the budget airlines brought. Like a rushed pint of Guinness, undue haste results in too much froth and as an Irish airline will be only too aware, there’s nothing worse than a big head.