Find Property Investment – Overseas Property

Top Do’s and Don’ts

Don't rush into fashionable property markets; they may not be all they are cracked up to be!

Us British love to buy second homes +- 230,000 Brits own one a second property abroad. But with property in the UK, the US and across much of Western Europe looking frighteningly overpriced, they've started to look further a field for good deals. But is that such a good idea?
Dubai

Dubai must be one of the most hyped property markets in the world. Property journalists write about it endlessly and the developers never seem to miss a PR trick.

David Beckham was reportedly given a home on the famous Palm Resort, a huge man-made archipelago that can be seen from space, when he passed through Dubai on his way to the last World Cup in Japan and South Korea in 2002. The ruling Maktoum family (who control Dubai) have spent £200m on appearance fees to persuade top sportsmen, including tennis star Roger Federer, to perform in Dubai and raise its profile.

Still, says Jim Pickard in the FT, so far it has been money well spent… if you are the Maktoums. Some of the off-plan units on the island are said already to have been resold four or five times, despite completions being still some years away.

But is buying here really a top idea? Supply is rising alarmingly fast. Dubai is said to be making use of 15% of the world's cranes and 215 big projects are under way, including The Burj Dubai, the world's tallest building, and The World Resort (250 man-made islands with access only by boat or helicopter).

At the same time, the number of properties planned on the Palm Resort is creeping up, despite the fact that there is only one road in and out of it. Who will really want to spend their holidays on an overpopulated island suffering from Oxford Street-style traffic congestion?

But oversupply might just be the tip of the trouble iceberg. Tellingly, professional investors are wary of the whole thing. The reason? Foreign investors are not able to have freehold property rights in Dubai and, despite rumours that this is to change, not everyone is convinced. “The royal family here have been promising that since about 1976,” John Sandwick, managing director of Encore Management, told the FT. 
Eastern Europe

Right now, Eastern Europe is all the rage with UK property buyers. In Estonia, Bulgaria, Montenegro and Croatia, we are told, one can get a second home for the price of a second-hand car. There are ski chalets for £30,000, flats overlooking the beach for £50,000 and five-bedroom villas for £100,000.
These prices look very cheap to UK investors, so it is no wonder that, with the encouragement of the weekend property supplements, they are pouring in in droves. Two thousand Brits have already bought in Poland.
However, it is worth remembering that - rather like second-hand cars - these markets are cheap for a reason. Take Bulgaria. It may have splendid skiing and an attractive coastline, but buying there isn't easy. Estate agents are notoriously unreliable, commissions are high and, while foreigners can buy buildings, they can't buy the land they're built on. If you want to do this, you have to set up a firm (this isn't easy, but worse, it leaves you embroiled in the Bulgarian tax bureaucracy for as long as you own the land).

There are similar problems with buying in the Czech Republic, Poland, Croatia, Estonia and Montenegro. These are not Western countries and they do not have Western legal systems or consumer cultures. Estonia's Tallin may be “the new Prague” to some, says Tom Dyckhoff in The Guardian, but it also comes with “the Baltic equivalent of dodgy time-share salesmen”.

Another thing to bear in mind is that prices in many eastern European countries may be quite high enough already. In Croatia, small concrete houses with no direct sea access go for £150,000 and in Montenegro, a small two-bedroom house on the edge of one of the (admittedly amazing) fjords fetches about the same. Given the state of both economies and their appaling lack of infrastructure (getting from Dubrovnik to the resorts is, for example, a nightmare of a car journey), this is too punchy.

Other countries (Bulgaria in particular) have been attempting to cash in on demand by building huge low-cost resorts, so soon oversupply could end up pushing prices down (as could the fact that English is barely spoken and Soviet housing blocks dominate the market).

There is a similar risk in Prague, where prices have been rising at 20% a year for the last five years or so, but where there has also been a lot of new building and rental yields are falling fast.

Then there are the dirt cheap castles in Poland we hear so much about. They sound nice, but one will not only cost you a fortune to renovate, but anything built pre-war still comes with the possibility of an ownership dispute.

Just because prices in Eastern Europe look cheap to the British eye today, that's no reason why they should go up, or, indeed, why they can't get cheaper.

Spain

Spain isn't exactly far a field for Brits, but it makes it into our list because it is still much more popular with British buyers than it maybe should be.

The coastal areas of the country were once cheap by any standard. But not now. After a 15-year building boom, most impartial experts now agree that you can't do many more stupid things than pay the asking price for a flat on the Costa del Sol. Last year more houses were built in Spain than in France and Germany combined - but there isn't much demand for it all any more.

The Costas have been eaten up by cheaply constructed and intensely ugly developments, their beaches are overcrowded, their seas are not exactly clean and any sense of Spanishness is long, long gone. Worse, the area has long been a gold mine for the unscrupulous: stories abound of off-plan flats and houses bought from developers by Brits who later find that, when built, their dream home bears little resemblance to the architect's drawings.

Then they find that they can't sell their nightmare on at a price that will even begin to match the one they paid. The fact is that in most of Spain the easy money was made long ago. If you must buy there (and we aren't suggesting you do), you'd be better off looking in city centres. Back from the coast, Malaga is beautiful, or considers Valencia, where asking prices are a third lower than on the Costa del Sol and Costa Brava, and where the 300 miles of coastline remains relatively unspoiled. If you do buy, do so with your eyes open: prices have risen 25% in the last year and the developers are on their way.

Do; Think “out of the box”

It may not be the obvious that is best for you. Like all purchases it pays to shop around. Don’t be bullied by over zealous property agents, and always insist on an on site inspection.

Turkish property ''among top 5 buys for 2007''

The Turkish property market will be the fourth most popular option for overseas real estate investors next year, according to a survey carried out at A Place in the Sun Live.

Consistent favourites Spain and France topped the list, followed by Bulgaria, with Cyprus rounding off the top five, Overseas Property Professional reports.

There has been debate among members of the real estate industry over what is more important to investors: capital growth or lifestyle benefits. In its latest study on the market, Assetz said that Turkish property could appeal to people looking for a bargain in an emerging market.

"Those looking to capitalise on emerging markets will be keeping a close watch on Turkey in particular," the site said.

"Mortgage rates are quite high at 5.9 per cent, but with capital growth strong at 20 per cent and a surge in demand for property by local people pushing up prices, Turkey is making an impression on international holiday home investors."

The survey carried out at A Place in the Sun Live identified a range of established markets to perform well in 2007, but also brought attention to upcoming regions such as Cape Verde, Morocco and Montenegro.
Overseas homes in Egypt are set to be a top property investment for Brits in 2007, experts are predicting.


Egyptian property experts at the Homebuyer Show note house prices rose 50 per cent over the last two years, with 20 per cent growth predicted for 2007.

The country is also experiencing a tourism boom, with the number of visitors going up 25 per cent from 2005 to 2006.

Other factors that make investing in property in Egypt attractive include the sunny weather, the many historical attractions, highly rated diving locations and resorts, and average rental yields of 11 per cent in tourist areas.

Investors also benefit from low rates of stamp duty, death succession duty at seven per cent and no capital gains tax.

"We expect the property market in Egypt to grow substantially in the next few years," commented Jennette Bradbury, Egyptian Experience managing director.

"After many years of economic reform the area is ripe for investment. With record levels of tourism, the property market in Egypt offers excellent investment returns, from both rental yields and property price rises."

The most popular property investment area in Egypt is the Red Sea coast, in particular Sharm El Sheikh.