Investing overseas in hard times – where to look
Friday, 2 December 2011 3:22 PM
Good news. There's an upside to the global economic malaise – cheap overseas property investment opportunities.
Brett Tudor from IPS, the below market value property specialists, takes a look at some of the most distressed property markets in the world – and whether they are a potential investment hot spot or dangerous territory.
Ireland – Our neighbours have had a difficult recession and property prices have declined by 8.5 per cent in the first six months of this year.
That leaves them at a huge 50 per cent below their 2007 peak. Falling rental yields and distressed sale auctions are now commonplace, meaning there are some real bargains to be found.
However a note of caution should be sounded, as property prices could continue to go down in such an uncertain economic climate.
Verdict: Some bargains available in auctions.
United States – The USA has the dubious honour of being the birthplace of the sub-prime mortgage crisis.
In some states, such as Florida, there appears to be no end in sight.
However in the USA as a whole there are signs that the market could have reached rock bottom and the only way for house prices is up.
It would take an experienced hand to pick the right place to invest to guarantee a return though.
Verdict: A market only for the experienced.
Hungary - Moody's, the global analytics company, have just downgraded Hungary's rating to Junk status.
That is pretty bad news for Hungarian property prospects. The decision comes on top of rising interest rates (the base rate now stands at 6.5 per cent).
This rise is starting to impact upon the market, with an increase in the supply of distressed property.
Verdict: Even in the good times the market in this country was uncertain.
Greece – Being the star of the Euro crisis is quite a dubious honour. Greece is flirting with bankruptcy and may become the first country to exit the Eurozone.
Investing in property in the country is obviously a high risk gamble for anyone but the most experienced investor.
There is potential for you to get your fingers severely burnt, especially if Greece returns to the Drachma, which could result in around a halving of current property values.
Verdict: Not worth the risk.
Bulgaria - Property prices remain in freefall in the capital Sofia, the ski resorts and even on the coast.
Many British and Irish investors are now trapped in a market where tenants are hard to come by.
There are even issues surrounding ownership of properties with tales of unfortunate investors sitting outside the gates of properties they once owned.
Verdict: This market has further to fall in 2012.
Cyprus – Beautiful as Cyprus may be, it is also beset with problems. Falling property prices, a lack of clear data, transparency and corruption, oversupply and poor quality developments all contribute to make it a risky investment.
Banks also appear to be unwilling to offer any incentives to overseas investors, making Cyprus one to avoid for now.
Verdict: Things will get worse before they get better.
Spain – There has been huge pressure on Spain's property market since the price crash in 2008. Oversupply and an economy on the brink of needing a bailout has continued this pressure, even in fashionable resorts like Marbella.
It is now possible to buy a property at 60 per cent below market value with 100 per cent finance. If the banks are willing to lend at this amount with no deposit then they must be confident that this market has finally hit bottom in the more desirable coastal areas.
Verdict: Invest now if you want to grab a bargain in coastal areas. Properties are unlikely to get cheaper.
Portugal - Like most countries in Europe, Portugal has been hit hard by the sovereign debt crisis.
Portugal's cities are a definite no-no as the population struggles with austerity measures, however the government is actively encouraging overseas investors to come and invest in prime coastal resorts such as Vilamoura.
Compared to Spain the gap between supply and demand is less pronounced. That gives the possibility of a healthy return if you've invested in discounted property and economic conditions improve.
Verdict: Whilst it can be difficult to secure mortgage finance, it is not impossible and there are some good opportunities to invest in high spec coastal properties.
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