Buying Property Abroad Hotspots
If only we all had reliable crystal balls and could see where the next property boom was about to happen wouldn’t we all be in clover? Well, we’re going to bring you the next best thing, a round-up of the areas that the experts consider will deliver the best capital growth over the next few years.
What Are You Looking For?Before embarking on this journey, it is important to know what constitutes a good deal for you. If its pure investment you’re after, it won’t matter where the property is or what sort of property it is. If you are looking for a property that you want to use yourself occasionally, then that changes the nature of what you are looking for. For example, a two-bed apartment in Warsaw may not do it for you as a holiday treat for the family every summer. This means that the criteria for what is ‘best’ are different for each individual.
What is Your Level of Comfort With Risk?The other factor that affects an individual’s choice is their level comfort with risk. All emerging property markets carry some element of risk; a stable economy one day might be undermined by a military coup the next. It is up to each buyer to determine whether or not they will risk investing in a market where the capital gains may be strong, but the risk of losing all their money may be just as high.
Buy-to-LetIn pure investment terms, buying an apartment or house in a growing, vibrant city is tipped as the best way to make decent capital return, and while you’re waiting for that return to materialise, the rental yields should more than pay for any borrowing or costs associated with the purchase.
Central and Eastern EuropeAmong the central and eastern Europe countries who have just joined the EU, or are vying to join, Prague in the Czech Republic and Sofia in Bulgaria have enjoyed capital gains in the region of ten to twenty per cent in the last few years and are classed as a medium risk. On the riskier side, Warsaw and Krakow in Poland and the Baltic states of Latvia, Estonia and Lithuania are enjoying growth about ten percent higher, but with the attendant risk of an over-heated and over-supplied market.
For the greatest return and edgiest feeling in the stomach, the word is now that the capital of Albania, Tirana, is the best long-term hot spot in Europe. Only gamblers need apply.
Global AppealFurther afield, some South American cities are attracting the attention of foreign investors as economies stabilise and memories of military dictatorships fade. Brazil offers Brasilia and Rio de Janeiro as two cities where property values are rising, but it’s important to check out the immediate area of your intended purchase, as crime and general unrest are still problematic in many zones.
Year Round Leisure Market OptionsIn the leisure market, the best gains are to be seen in resorts where the possibility of year round rentals enhances the yield. Golf is a major factor here as in many countries it can be played all year round. Florida, with the market apparently at a standstill and the dollar very low against the pound, could offer a great return if you believe the US market will recover long term.
Ski resorts in some countries also offer water sports and other outdoor pursuits that can turn a ski apartment into a near all-year rental proposition. This can be seen for example in Bansko, in Bulgaria, where golf courses are springing up a short distance away from the ski slopes.
Climate ConditionsIn some other countries, the geography makes it possible to offer year-round rentals simply because the climate is so good. Possibilities here include Brazil again, on the northeastern coast, Malaysia, Goa (on the west coast of India) and Cape Verde.
This last location, a group of islands in the Atlantic off the coast of Senegal, is being touted as a cheaper alternative to the Caribbean. Local laws regarding development have just been relaxed, but there are mumbles about some developments being illegal, and if sea levels begin to rise, as is feared, that sea might start getting uncomfortably close to your investment. In all the areas mentioned above, although the climate may look good on paper, make sure you know whether there are other elements that might interrupt your rental periods, like monsoons, or typhoon or hurricane seasons.
Leaseback SchemesOne aspect of international property purchasing that might tempt a buyer into an emerging market is the promise of guaranteed rental returns. With these arrangements, usually offered with new-build or refurbished properties, the property is leased back (they are sometimes called ‘leaseback’ schemes) to a management company, usually run by the resort developers, who then manage all aspects of letting, from marketing to changing the sheets.
What to Look For With LeasebackIt’s important to realise that you may be paying over the odds for the property and its furnishings, but consider that the management company is responsible for letting the unit and may not be able to if they do not have control over the fixtures and fittings. You also have to commit for a number of years, anywhere between nine and twenty, which again is reasonable for a guaranteed return.
You can find apartments offering guaranteed rental returns of between 8 to 10% in Malaysia right now. The risks, of course, are that the capital gain at the end of the term is not as much as predicted, and the possibility of the developer or management company going bust. It is essential to do hard research before committing.