The Traditional Favourites
Over the last five to ten years, UK investors buying property abroad have
generally stuck to the traditional favourites Spain, France and Italy. With
prices a fraction of those in the UK and a guarantee of more sunshine, these
markets offered plenty of scope for capital appreciation, rental return and
holiday home use. However as prices have steadily risen in these
countries, yields have hardened in response and an eventual over-supply
particularly in parts of Spain has occurred. In today’s environment property
investors are looking further East for yield and capital appreciation
opportunities.
Emerging Markets
A year ago ten more countries joined the EU, expanding not only the
Union, but the hunting ground of the international property investor. Most
investors have come to the conclusion that the market cycle here in the UK
is at it’s peak, and the more sophisticated investor has already started
moving his money into the new EU countries. Many astute investors started
buying there a year or two before EU accession, particularly in more
developed cities like Prague and Budapest where the real estate markets were
relatively more mature. So prices in these cities had already increased by
up to 25% in the year up to May 2004, however there is still a long way to go
especially in the other capitals of this region.
It’s Just Economics!
Putting your money into an emerging market surely has to be profitable
because by the very definition of ‘emerging’, you should assume growth, and
therefore return. EU accession is a massive catalyst to the growth of an
economy as the EU is committed to backing these countries in a bid to
creating comparable economies to those of it’s current members. Government
incentives, new political regimes and tax reforms are creating an ideal
climate for foreign direct investment, higher employment and GDP growth,
which all directly affect the property market.
The relative attractiveness of the older EU capitals from a corporate
location point of view is changing according to a DTZ report on the Emerging
EU economies. The report concludes that Bratislava, Berlin, Prague and
Budapest will be the main beneficiaries in this new economic geography
mainly due to their location and catchment areas, the associated low costs
especially labour, skills base and the economic growth prospects of these
four cities. In less than a year since the 10 countries joined the union
this is already evident, particularly in Bratislava as Slovakia wins some of
the biggest foreign investment contracts in the region.
Going Forward in 2005
I think most would agree that for long term steady growth complemented by
relatively few risks investing in bricks and mortar at home in the UK cannot
be beaten for a good solid pension plan. Over the last 10 years the more
adventurous have strayed off the beaten path to Spain, Italy and France in
search of holiday homes and to diversify their portfolio. There is now however
a new and far more exciting playground for us property investors which is
sponsored by the European Union, has the most diverse culture in the world, it’s
experiencing unrivalled GDP growth and it’s property market is currently way
undervalued.
Not only has the UK property market levelled out, it looks to stay that way
for the next couple of years and the traditional overseas investment spots
seem to have lost momentum and have been overshadowed by something bigger.
The pioneers have cleared the stones from the road to Eastern Europe and 2005 is a
great time to arrive at the party!
Bruce Stronge is one of the founding partners of Slovak Investments, a company
offering the complete Slovakian property investment solution for foreigners.
Newsletters, European property market news and new deal alerts are available at the
company website http://www.slovakinvestments.com
There are probably very few forms of investment where you don’t need money to make money.
When you try borrowing money from your local bank to purchase shares in that bank you will most certainly be shown the door in a polite way! This will quicly prove to you that you will need your own money to attempt making money on the stock exchange!
On the other hand, if you ask them for a sizable loan to purchase a property, they will probably do everything they can to make it possible for you to use their money to invest in your property…
How can you get going to make money - using mostly the bank’s money! - through property investment in South Africa?
The first thing is to start a savings plan to build up a deposit if and when needed.
Many developers do ask a deposit to ensure the buyer is serious. You do not want to be in a position of having a wonderful property investment opportunity and no cash deposit at hand!
On the other hand, you should keep in mind that paying a deposit is not a legal requirement in South African property law. You may therefore want to try and avoid paying a deposit in a property investment transaction.
Secondly you should look into increasing your buying power by joining forces with family or friends.
The size of the bond is determined by the size of the repayment you can service. As a rule South African banks won’t want you to use more than 30% of your income for that purpose. As an idividual you will therefore generally be limited.
One way to overcome this limitation is to form an investment club with family members or friends. Your combined income will then be used by the bank in determining the loan.
Structuring a close corporation or trust correctly can therefore empower you to invest in a much bigger way - while still using the bank’s money!
Then start doing your homework about what kind of property you want to invest in, what the purpose of the purchase would be and whether you will be able to achieve with it what you intend to.
Are you buying to live in, to speculate or “flip” soon after buying, or to renovate and sell?
In all instances you should carefully investigate the costs involved before getting into a deal, to ensure as best you can that you aren’t overpaying and therefore undercutting your eventual profit or capital growth.
Property investment is essentially a long term investment. Huge profits can be made in a short period, but massive fortunes are build up over decades. Opportunities will always be there; do not shortsell yourself by thinking you must build Rome in one year!
For more information visit
www.Property-Investment-South-Africa.com
Neels Theron of http://www.articlesnap.com - where he makes original Private Label articles with a special Rewrite Kit available - researches, writes, and publishes full-time on the Web.
Tag: property investmentLooking to quickly build a million pound property portfolio? You could try a high risk and speculative technique that has been used over recent years by investors hoping to make big profits from property.
The technique relies on re-mortgaging and negotiating good discounts on off-plan property to take a
Tags: buy to let, off plan, property investment, property investor, property portfolio