Tuesday, March 18, 2008
Overseas property markets
THE UK housing market may be in the doldrums, but activity in markets abroad is as strong as ever.
Increasing numbers of people are deciding to investing in overseas property, with research from the upcoming Property Investor and Homebuyer Show North suggesting that more than three-quarters of serious investors are planning to buy overseas in the next 12 months. Of these, almost a third believe emerging markets offer the best opportunities.
Stuart Law, managing director of Assetz, a property investment specialist exhibiting at the show, says you can make up to twice as much money on your investment in property abroad compared with the UK.
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"Yields of between six and 10 per cent are possible in overseas markets, compared with around five per cent in the UK," he says. "So it's not surprising that many investors are looking abroad for bargains."
Kevin Axon, a property consultant at Emerging Real Estate Ltd, also exhibiting at the show, says such investments can be relatively low-cost.
"Established overseas markets are still popular but emerging markets can offer good opportunities for investors. Lucrative property portfolios can be started from as little as £30,000 by investing in off-plan developments."
However, before you raid the piggy bank and book a flight to Bulgaria, Turkey, Hungary or Slovakia, would-be investors would be wise to remember the old adage "buyer beware". Buying in emerging markets could prove problematic.
The risks are higher than in the more emerged markets as the economies, infrastructure and legal framework are not as advanced as in western Europe.
Not only that, but property markets in Bulgaria and Turkey could be hit hard by the resounding `No' votes in the recent French and Dutch referendums.
This was clearly a warning that the existing EU members are unhappy with what they perceive as the excessive growth of the Union. As a result, countries not yet in the EU could be left out in the cold, with the gate to membership perhaps beginning to close, with severe potential consequences for their economies and property markets.
Investors should treat property investment in these countries as speculative and be careful not to put all their eggs into one basket.
It may be better to stick to tried and tested markets such as Spain, although once again the advice is to shop around and do your homework.
Mike Hayes, editor of Homes Overseas Magazine, says: "Spain has excellent year-round weather, a superb infrastructure and plenty of sport and leisure activities, including some of Europe's finest golf courses, great food and even better drink.
"Having said that, southern Spain - and the Costa del Sol in particular - is having something of a tough time at the moment. Property prices are high and there are reports of agents overcharging on commission, money laundering scams and `land grab' horror stories.
"However, the famous Costas march on, because, the truth is, nowhere else in Europe can match the year-round sun and fun of Spain or the range of property available - and all just a two-and-a-half-hour budget flight from the UK."
For long-haul destinations, Mike Hayes recommends Florida and Australia. He says: "With the dollar still poor, property in Florida has potential, both for investors and for holiday-home buyers.
"Orlando's rental zone is the centre of attention for Brits, with Disney World, Universal Studios and Discovery Bay for the kids and many places to eat, shops, bars and golf courses for the bigger kids.
"Property rental is a well-oiled machine in Orlando, with everything taken care of, from pool cleaning and lawn mowing to the replacement of cutlery and linen.
Of course it all costs, and you shouldn't expect to clear a large profit from renting there. A combination of a small amount of rental return and a potential for good capital growth, though - plus a strengthening dollar over the next few years, should make for a sound investment."
Mike also recommends Australia for long-haul investors, citing the fact that some 10,000 of us leave the UK each year to live there. Destinations such as Sydney, Melbourne, Perth, Brisbane and Adelaide are all popular and, again, a combination of a weak dollar, fantastic weather, great beaches and the low cost of living is proving attractive.
"Of course, Australia is no weekend getaway destination - buyers will generally be looking to make an investment based on capital gains and rental returns," he says.
Another long-haul contender is South Africa, which is currently witnessing a boom in property prices with increases of 25.5 per cent per annum, according to recent research.
Although geographically beyond other favourite investment hotspots, such as Spain and Cyprus, South Africa offers astute property investors the chance to benefit from a still booming property market.
Whereas property prices in Spain are now comparable with those in England, South African property offers incredibly good value for money.
Chris Wilson, marketing and communications manager of John McDonald Properties (JMP), says early returns can be very good indeed.
"The demand for housing far outstrips supply. The value of properties is expected to increase significantly and, for early investors, growth in the region of 30 per cent can be expected in the first year."
Overall, Nick Clark, managing director of The Homebuyer Show, says the future looks good for investing overseas.
"Many agents will take care of the whole procedure from initial visit to signing the contract. Buying a property overseas has been a distant dream for many people for a long time.
"But the process is becoming a lot easier."
Real Estate Directory
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