Overseas Property: the Time to Buy is Now

With the credit-crunch and rising oil prices becoming a devastating tag-team on the global stock market and the performance of other investments, global real estate is becoming the most popular investment choice.

Billions of dollars are being put into the creation of more and more property investment funds around the world, and almost every country in the world is getting in on the action. The emergence of Africa onto the international property investment scene, and now even Iraq seeing its first luxury property development, is testament to the rising popularity and profitability of overseas property investment.

The time to buy is definitely now, no one can say for sure when the credit crunch will end, prices in the best emerging markets are rising well above inflation, and getting higher all the time, not to mention building regulations making off-plan purchases harder to come by in some of the older strong markets – off plan property providing the best value and biggest potential for profit.

Number of Brits Buying Abroad Continues to Rise

According to figures released by the Association of International Property Professionals Britons spent a whopping £246million on overseas property last year, a 21% increase on the figure of 2006. This displays that Britons’ desire to own a holiday home in the sun or snow, or an investment in the money is not abating, especially when viewed against the fact the U.S. sub-prime crash began seriously affecting the industrialised world just around mid-2007.

The report noted that Spain was still the most popular in 2007, but that other locations, including emerging markets were quickly catching up, most likely because of the rising number of investors as oppose to primarily holiday home buyers.

I believe there is the potential that the number of Britons buying property abroad could rise again in 2008, as well as the figure spent. And I foresee that the gap between the popularity of established markets (Spain) and emerging markets will continue to close. I believe this because many overseas property markets, especially emerging markets have been largely unaffected by the credit crunch.

The BRIC emerging markets of Brazil, Russia, India and China continue to grow massively and they are spreading their wealth to the next generation of emerging markets, by sourcing goods from the cheapest sources, as well as companies from within BRIC often opening manufacturing plants in the new emerging markets because they can run their operations cheaper from within the countries.

What we also can’t forget is the widespread and growing British dissolution with the government, the deteriorating city estates and rising crime that is causing millions of Britons to move abroad every year, which will continue to keep the number of Britons buying property abroad at high levels.

All in all it is a fairly safe bet that the number of Britons buying property overseas will continue to rise throughout the duration of the credit crunch and beyond for as far into the future as I can see.

 

 

Property Abroad: Time Important but Don’t Panic

I have just read a press release that said Britons that are choosing to sit on their hands because of the credit-crunch, and postpone buying their overseas property could end up missing out on the potential gains, because in Europe and other places overseas not so badly affected by the credit crunch property values continue to grow, and people from those places continue to snap up properties at home and abroad.

Even though I work for an overseas property company, the truth is the investment opportunity of an emerging market is not going to disappear overnight, or even noticeably quickly. In fact, because the biggest gains are to be made on off-plan properties when sold on the resale market, the potential gain can actually increase, because values will have risen on the resale market.

Of course it still is better to act quickly, because the sooner you act the more chance you have of catching some additional high level growth on the resale market, before the market levels off.

For example, I buy a 2 bedroom apartment off-plan. At the considerable discount you get on off-plan apartments because of the perceived risk of buying a non-existent property, I get it for 30% less than what the market value of the completed unit will be. Therefore as soon as the property is completed it is worth 30% more.  I acted quickly just as the market began emerging and got 3 years of 20% value appreciation on the secondary market, thus I made a total 90% gain in 4 years.

But if I waited 3 years, though I would need to pay quite a bit more for the off-plan apartment, I would make around the same percentage as an immediate gain, but I wouldn’t get very long as high percentage growth on the resale market, I would probably make a 60% gain over 4 years, you could say I lost just over 1% of my total potential gain every month I waited.

All in all, it will always be better to get in early when buying an overseas property, especially in an emerging market, but I don’t agree that anyone should be caused to panic and make a rushed decision.

Overseas Property: More Signs for Sustained Growth

Canada, Autralia, New Zealand and United States, are the most popular destinations with emigrating Brits, and according to an study by the UK Office of National Statistics that is currently some 4000 people every week. This number has increased extremely rapidly in the last few years, as people tire of yobbish behaviour, deteriorating housing estates, the government, rising cost of living, and others emigrate seeking career opportunities in growing economies like Montenegro.

The yobbish behaviour and living costs are unlikely decrease anytime soon (short of a miracle), so the number of Britons moving abroad will continue to rise. As people emigrating are usually looking to buy existing houses, as oppose to off-plan, this is great news for secondary housing markets, especially in the most popular countries mentioned above.

This is also great news for the overseas property investment industry, as overseas investors usually buy off-plan in order to make the biggest gains, and a frequent worry is whether they will be able to sell for their projected profit; will there be anyone to sell to, and according to this report, the answer in Canada, the U.S., Australia, and New Zealand is a definite yes.

The Sunday Express recently reported that the number of young Britons investing in property overseas continues to rise, despite falling U.K. house prices, prices still haven’t fallen substantially enough for first-time buyers, and this is also great news for them.

I wrote in my last article that all the signs point to the overseas property market continuing to be strong, and the two latest reports only strengthen my standpoint

Property Abroad Popularity Growing Despite Credit Crunch

All the signs point to the overseas property market continuing to remain incredibly strong for the foreseeable future. A survey by fairinvestment.co.uk has revealed that nearly 50% of Britons said they would consider buying their first property abroad, and 8 percent had already done so. A similar survey last year revealed that 25% of Britons would consider buying their first property abroad, and the 25% rise is excellent news for the U.K. overseas property industry.

Property abroad is becoming even more popular, not least because of the people who can’t get onto the property ladder, and who buy a property abroad to use the rental income to increase their buying power back home, and/or to use the lump-sum from the profitable resale as a down-payment, or towards paying off their mortgage.

With the credit crunch and UK property prices now falling, you could say that this soon won’t be as necessary, but another consequence of the credit-crunch is that it is making mortgages harder to get in the UK, which means buying property abroad will remain a necessary part of some people’s path onto the property ladder.

Another big advantage property abroad now has is the fact that profits are proven. I can give examples of Goa properties we sold last year, that are now on the secondary market, and selling for over 40% more than they were last year. Of Thai island Koh Samui properties selling at the end of last year for 100% more than they went for at the end of 2005.

And with investment banking reports that emerging markets will continue to grow strongly throughout global turmoil, because of India and China’s need to buy bulk basic materials at low prices, which they buy from the new emerging markets, property abroad has a bright future, a rarity in the present world.

Property abroad has another string to its bow: the security of putting your money into bricks and mortar.  Stocks and shares are fine when they are doing well, but they can go from being worth millions of pounds, to not even being worth millions of pence overnight. Property cannot do that. So, if you buy property abroad to make a profit, and you do that’s great, but even if you don’t you are unlikely to be hurt too badly by it, of course assuming you have chosen carefully in the first place.

Of course, if you buy a property abroad as a holiday home only, then you have nothing to worry about as it will almost definitely be a nice nest egg for those you leave behind, or to pay for kids college fees etc.

So there you have it. In the face of global economic uncertainty and credit crunch anxiety, property abroad continues to grow in popularity, and remains one of the most profitable forms of investment in the current climate.

Emerging Market Property Investment: Fortune Favours the Bold

What I have been saying for a while now was confirmed by Standard Life Apr 18 when they announced that emerging markets are the safest place to invest in the current global economic slowdown. Standard Life made the announcement alongside making a major investment into the emerging market of Brazil, as they put their money where their mouth is.

They explained that emerging markets are currently excellent investment locations, because the two big emerging markets, China and India, are massive importers of the basic materials that the new emerging markets are exporting cheaper than any of the established markets.

For a long time now I have said that a global market slowdown will actually be good for emerging markets, because as people and businesses tighten their belts, they will increasingly turn to the lower cost of the new emerging markets, to relocate their operations to, outsource to, import from, and holiday in.

This can only be good news for emerging market property. When you buy a property in an emerging market, you are buying to capitalise on either the influx of businesses, the influx of tourists, or, if you’re lucky, both.

You are relying on these things, a: because incoming tourists and businesses importing their top level management, translates to lots of people to rent out your property to. But also, because the incoming money, be it from tourists or new business and the employment thereof, increases the affluence of the area, this causes living costs and the cost of building materials to rise, which then means wages have to go up, translating to increases in the costs of building properties, all of which pushes house prices up, sometimes by as much as 50% per year.

You will only get growth like that in an emerging market. Some people, and I don’t mean Joe down the road, but well respected people in the industry, say that emerging market property is cheap, and likely to stay that way.

But I have always said, once a market starts to emerge, be it triggered by growth in new businesses or tourism growth, the cycle I laid out above begins and it is a cycle that has perpetual motion; increasing house prices means more money in tax revenues, wealthier developers putting money back into the economy, thus continuing to increase affluence, not to mention members of the local communities getting promoted, small business becoming big from rising tourism, all translating to rises in living costs, higher wages and keeping house price growth strong.

Some would say that investing in an emerging market property is a bold move, but in that case — as Standard Life’s announcement proves — the saying: fortune favours the bold has never been more true of anything, than it is of an emerging market property investment in the current climate.

 

Berlin Property: Unprecented Growth Makes a Hot Prospect

The reports are true; Berlin is currently one of the safest countries in the world to make a property investment, but a new report also hints at it being one of the best, writes Liam Bailey.

According to a major study into the Berlin housing market in the first quarter of 2008, rental rates are growing in every district in the city. It is 50/50; in 6 of the 12 districts rental rate growth is accelerating, and in the other 6 it is slowing, but in none are rents bottoming out or falling.

In the same report last year, rental rate growth was accelerating in only three districts: Spandau, Charlottenburg-Wilmersdorf, and Treptow-Köpenick, in all the rest rents were either bottoming out or falling.

In Spandau, which displayed the fastest growing rental rates in last year’s report, rental rate growth has begun to slow according to the recent report, but in the other two districts that saw accelerating rental rate growth last year — Charlottenburg-Wilmersdorf and Treptow-Köpenick — rental rate growth is still accelerating.

Mitte and Neukölln, two districts that saw falling rental rates this time last year, along with Pankow and Steglitz-Zehlendorf, that both saw rental rates bottoming out last year, have joined Charlottenburg-Wilmersdorf and Treptow-Köpenick  in the rental rate accelerating bracket in this year’s report.

The fact that 5 of the 6 districts now seeing rental rate growth slowing, were in the rental rates bottoming out, or rental rates falling brackets in the report this time last year, means that they must have seen accelerated growth at some time over the past year. This all shows that Berlin rental rates have been on an upward trend for the past year.

Germany’s government is strict about rental rate rises in Berlin. It has to be, to avoid people being priced onto the streets because of the large portion of Berlin’s population forced to live in rented accommodation, because they haven’t been able to buy their own home. Landlords are only allowed to raise rental rates when the economy and wages are growing, and even then by no more than 20% in three years. Berlin rental growth is so strong now because the economy is extremely strong.

The extremely large proportion of Berlin residents either forced or choosing to live in rented accommodation (82%) gives Berlin one of the strongest residential rental markets in the world, but government control means residential tenancies barely achieve more than a five percent yield.

The current unprecedented level of economic growth, and the fact that it is largely fuelled by growth in the export sector, which should see Germany survive a rocky global economy better than most, has brought reports that the government may soon be able to bring new legislation relaxing the strict laws governing rental rate rises.

For the first time there is hope of achieving higher yields in Berlin, which should really be the case from the solid all year round rental that is so easily achievable. But even without a government relaxation, the growth in Berlin rental rates without government help, the aforementioned stability of Germany’s economy and the high likelihood of it best weathering the global economic storm, is turning Berlin into one of the world’s most popular destinations for a property investment.

The Strength of Asia Emerging Markets

I found out some very interesting facts today about the emerging markets like Cambodia, the Philippines, Thailand and Malaysia. Almost every investment property in the aforementioned countries comes with a guaranteed yield, even up to 10% guaranteed yields (French Colonial apartments Cambodia), and some with initially lower but uncapped guaranteed rental yields, which mean buyers can earn more but not a penny less than the guaranteed yield (Lancaster, the Atrium Towers, Philippines).  

Obviously the higher end of the rental yield scale comes from short-term holiday lettings. Perhaps this is just me but I always assumed that these great rental yields were reliant on western tourism, like from the U.K., U.S. and Europe. I found out that most of the tourism to Asia’s main centers is regional tourism – connecting flights from country to country are cheap as chips. I learned this from an extremely knowledgeable source, well traveled in Asia and with a deeply vested interest in the performance of the various emerging markets, but unfortunately who can’t be named in this article. 

We talked about how Asia is one of the few places in the world that there are barely any fears of its growth stopping, a focal point of sustainable and strong growth, and where the smart investments are being made as the bigger markets slow, before discussing each of the major emerging Asian markets in turn: 

Thailand: 

The main course of Thailand’s sustainable growth is coming from its strong and high-end tourism market. Thailand has been emerging for a few years now but there is still money to be made. My source told me that she wished she had a time-capsule so she could go back four years and “buy, buy, buy in Bangkok” because prices have grown massively over that period and the prices there have kind of leveled out now. The smart money now is in resort properties on Thailand’s hip, gorgeous tropical islands. 

Buying a Thai island resort property gives you two main options:  

Koh Samui is semi-emerged, the market is enjoying stability and sustained growth, and prices are in the mid-range bracket: £100,000 – £200,000, but there is plenty of room and a high likelihood of a good profit on those prices. Koh Samui has more five star resorts than any other island in South East Asia. Its tropical climate and sheer beauty have seen tourism to the island increase by 13% year on year. 

Koh Paghnan is a fresh new emerging market. The market is very immature so prices are low, but it shares the same qualities as Koh Samui with the climate and beauty. Again, tourism is rising throughout Thailand, and mainly to the island resorts, unaffected by political turmoil on the mainland. With such cheap connecting flights and low property prices there is definitely a profit to be made in Koh Pahgnan. 

Malaysia: 

Again Malaysia’s strength comes from its rising tourism, both regional and global, but Malaysia has additional advantages for U.K. buyers. Malaysia is an ex-British colony and many of the laws are still the same as they were under British rule. This means U.K. buyers familiar with the process of buying property in the U.K. will find the buying process incredibly easy. On top of that there is no restrictions whatsoever on foreign ownership of Malaysian property, in fact foreign buyers automatically gain residency in the country upon taking ownership of the property.  

Malaysia also has additional financial and taxation benefits: Malaysia’s banking system is the most advanced of the S. E Asian countries which means foreigners can obtain 70% loan to value mortgages to finance property purchases in the country. There is no inheritance or gift tax in Malaysia, and capital gains tax drops to 5% after five years, on a sliding scale from 30% on buying. 

The two main areas for tourism in Malaysia, and therefore foreign property investment are: 

Sabah has fantastic beaches, tropical climate and all the wonderful tropical plants that flourish in such places. Combined with the low living and therefore holiday costs it is easy to see what attracts tourists to this particular part of Asia. To capitalize on the booming tourism market again the wise money in Sabah goes into a resort villa, which is where 99% of the tourists stay.

Kuala Lumpur is Malaysia’s capital and attracts so many visitors for the same reason so many brits travel to Paris or Milan. The prestige and flagman-ship of a capital city, it standing within the region, and cultural focal points thereof attracts the regional visitors and, again the climate and mystique of Malaysia attracts foreigners. The wise money in Kuala Lumpur as is the case with so many capital cities, is in a stylish apartment, in the hope of capitalizing on tourism, or if your lucky a high-yield residential let from an exec in one of Malaysia’s multinationals. 

The advantage of making your property investment in an Asian market fuelled by primarily regional tourism is that should western markets continue to die down, yields will remain strong on your South East Asian property. 

The Philippines and Cambodia: 

The two other emerging South East Asian markets are the Philippines and Cambodia. And they share the same growth qualities and factors. Both have previously been the most under-developed and impoverished of the Asian countries. The Philippines was the worst affected of all S.E. Asian countries by the economic depression in Asia, and Cambodia was under the Tyranny of the Khmer Rouge.  

The latter gives Cambodia one uniqueness that I’m sure Cambodian’s would rather be without, because of the Khmer Rouge’s brutality most of Cambodia’s male population is under 25. The reasons for this are abhorrent, but it means that Cambodia has a very young and energetic work-force, and throughout the whole population, including a vibrancy in the education system is a drive to better themselves and the country as a whole. 

Both Cambodia and the Philippines’ under-developed state, means their living costs are lower than any other S.E. Asian country, this makes them attractive to multinational corporations, several of which have already set up shop in the emerging countries. Most of the senior staff are brought in from outside the country, but in the case of Cambodia, many exiled Cambodians are returning to take up senior positions within the big corporations.  

From top-management down Cambodian’s and Philippines are being employed by the big companies, who often pay better wages than would be possible, this puts more money into the economy. The education system is good in both countries so there is a high probability that many of the local’s employed will be in mid-level management positions, and those in lower positions will be promoted. 

 I was told that the tourism market is not as big in Cambodia and the Philippines as it is in Thailand and Malaysia, but it is growing all the time as it is across Asia. The low living costs that attracts the big corporations also attracts tourists for their cheap holiday costs, this is an attraction especially to tourists from more developed countries, such as westerners. 

The conclusion is very much the same as the opening. Asia is the world’s main growth center and currently has the best prospects for sustainable growth. Asia has risen from the ashes to become a central part of the global economic circle and one of the best regions in the world to buy a property.      

Albania Seeks Blue Flag Recognition for Beaches

Albania’s gorgeous beaches could soon hold the Foundation for Environmental Education’s Blue Flag, awarded to beaches that meet strict water quality criteria. Seeking such recognition is a move supported by the United Nations Development Program as part of a larger drive to improve Albania’s image, increase the country’s chances of gaining access into the European Union, and it will do the country’s growing tourism industry no harm either.

The blue flag is a long way off, Albania has a lot of work to do, firstly to address the growing problem of waste management in the country. A large part of the blue flag program is to generate community awareness and pride in their locality, Lauren Bohatka, the UNDP’s eco-tourism program manager said:

“You get the community involved to work together on protecting the environment, and from that you can spearhead other activities.” A national certification body is also to be set up because: “There has to be someone championing the project, pushing it forward and taking responsibility, and others will follow,” Bothaka said.

Currently there is no community spirit, it died with communism. The communist regimes imposed community cleaning operations and now similar schemes are frowned upon because they remind people of the schemes imposed by the totalitarian communist regime. In the words of another UNDP representative, project coordinator Dasara Dizdari:

“Now everyone just takes care of his own little apartment or area without looking at the larger picture,” Dizdari said, noting that the issue is part of a broader waste management problem in the country. “Everyone is building his own house and fixing everything individually without thinking of an entire system. Some houses by the coast have their own sewage going directly to the sea.”

It is hoped the Blue Flag aspirations will remedy the situation, Dizdari added: “The best thing is that it stirs up community pride; after the first community does it, others will want to do the same, and it will start a little competition. Once communities get this standing, they don’t want to let it go, and hopefully it will also inspire other entrepreneurial activities.”

Albania is becoming one of the world’s hottest emerging markets. Currently coastal properties and those in the prime areas of Tirana are selling like hot-cakes. Realistic estimations for rental yields are in the 5-7% bracket, but capital appreciation could jump to 15-20%, given the current surge in foreigners investing in property and growing tourism, which could grow even further in light of this new scheme. And the cycle begins, tourism growth attracts more investors, holiday spends increase growth in the economy and the cycle continues.

Given the current low price of property in Albania, the country is certainly worth consideration for overseas property investors.

I Would Invest In Philippines Property

As well as working in the field of overseas property investment I spend about 25% of my free time reading articles about it. As I love emerging markets articles with that in the headline increasingly attract my attention. Through these readings it has become apparent that Dubai, Bulgaria and Turkey are among the most popular emerging markets with buyers. This breaks my heart because people, while Turkey is and will continue to be a relatively strong market, all three are now semi-emerged and there are far bigger profits to be made elsewhere.
What you very rarely hear in this industry is any of the experts saying if I was going to make an investment it would be “here”, though I have read one expert saying he wouldn’t invest in Dubai. So I am going to take a rare step here and say:

If I was going to make a property investment it would be in the Philippines, where I could get a really promising off-plan apartment for under 30k and where I would be in for a tidy profit.

The Philippines has its troubles outside of Manila but the EU has pledged millions of dollars to the Philippino government to try and assist them in bringing in health service reforms and reforms to try and reduce corruption, and for better distribution of wealth. Manila is booming, primarily it is benefiting from its new attractiveness to big business who can set up outfits there relatively cheaply, and to be honest in my book, businesses coming in is better to base a fledgling emerging market’s growth on than tourism. As it gives the population jobs, and ups the possibility of resale from within the country if the foreign interest dies down because of changes in the global economy.

Having said that regional tourism to the Philippines is growing really quickly, apartment rental yields are already around the 8% mark and will rise to more like twelve when holiday lettings become more readily available, especially from western tourists. With the Philippines of course, being so attractive to big business there is of course the potential for high yield residential lets from imported execs or even young and newly promoted local workers looking for a swanky luxury apartment.

Because of Manila’s across the board growth, and as a part of Asia its potential for sustained growth for at least the next 5-10 years also make it a safe investment. But my reason for investing in the Philippines is because it would be short-term, I would be selling my Manila property in about 4 years at which point I would expect to be selling for at least twice what I paid.