Irish Investors crying in their beer.

According to the Irish Independent newspaper: “Tens of thousands of Irish homeowners may be facing financial meltdown as hugely hyped overseas property investments turn sour.”

Lured by unrealistic promises of extraordinary returns, Irish investors borrowed heavily to pick up cheap buy-to-let apartments abroad. But property prices in these so called “hotspots” have begun to plummet in recent months.

The slowdown in the overseas property market comes at a time when Irish investors in properties promoted by Michael Lynn, the solicitor and property developer at the centre of an investigation by the Law Society, are already worried. Some of these investors have paid deposits on overseas property but have not yet secured the title.

The US housing market is  in freefall, fuelled by the sub-prime crisis. The Florida property boom, which lured thousands of Irish fly-to-let investors, has gone into sharp decline. Investment properties are being advertised with massive reductions all across the state. A property at the Barefoot Beach Resort in Indian Shores has just had $14,000 sliced off its asking price in the past month. The latest rat to leave the sinking ship is “British Mortgages Abroad.”

“I know of one case in Florida where the house, which has a paper value of $300,000 (€210,525), is being repossessed,” said Darren Costello. “The owner is looking to sell it for $200,000 (€140,350).”

The poor performance of the dollar over the past year has also eaten into the pockets of Irish investors. Since mid-October, the dollar has lost 13 per cent of its value against the euro, according to Gary Connolly, head of fund marketing with Dublin stockbrokers Merrion Capital.

“If you bought a property in the US for $500,000 a year ago, it would have cost you about €400,000,” said Mr Connolly. “Even if the property’s value has remained the same since, the fall in the dollar means that you’ll only get €350,000 if you sell it today.”

Overstretched Irish borrowers are already falling victim to the bursting foreign property bubble. One lender who specialises in overseas finance told this paper about a homeowner who raised €700,000 in equity on their Dublin home to buy apartments in Turkey, Budapest and Bradford in England. “The apartments came with a year’s rental guarantee,” said the lender, who did not wish to be named. “When the guarantee ran out, he realised there was no rental market in those areas. He’s put his home as security for these loans, he has no rental income and meanwhile European interest rates have gone up by 2.5 per cent. By the end of this year, Irish people will be struggling to extricate themselves from some of the investments they’ve made.”

It is of course, unreasonable to point the finger solely at the unrealistic promises offered in the first instance. As the saying goes, “If it looks too good to be true – it probably is.”