Property clinic
Our experts guide you through the highs and lows of the international property market
TELLING IT LIKE IT IS – OUR INTERNATIONAL PROPERTY EXPERTS GIVE THEIR TOP TIPS FOR CRACKING THE MARKET
QI WANT TO FIND THE BEST PROPERTY INVESTMENT I POSSIBLY CAN. HOW DO I GO ABOUT IT?
| Mark Stucklin runs spanishpropertyinsight. com – a comprehensive property information website – and regularly writes the Spanish Property Doctor column for The Sunday Times |
GOING with the latest trend can befinancially rewarding, but usually only if you get in and out early. The problem for most people is that they only get to hear about the latest thing when it is already too late.
A more sensible course of action is to work hard at your own research, and only listen to sources of information and advice that youfind credible. Up until recently, many investors in Spain made little effort to question the variables and assumptions that lie behind all investment decisions. A lot of people failed to question the claims made by companies who had enormousfinancial incentives to exaggerate the investment potential of their products. Unsurprisingly, many investors hit the wall in Spain, but the companies selling the investments made hay. So use your brain, be sceptical about all sales claims, and don’t be lazy about research before you start playing with your hard-earned savings. That is the only way to make educated investment decisions.
If you are looking for high investment returns, then you have to accept a correspondingly high level of risk – something that few property sales companies will venture to point out. And although many people who stand to gain from talking up the next big property investment will try to convince you otherwise, the truth is that nobody knows where the high returns are going to come from next year or the year after. By all means invest in property, but take a medium to long-term view. Go for quality locations, and diversify as much as you can, which means looking at both the city and the country. A place in the sun can also help to diversify your portfolio, as well as giving you pleasure as a holiday home, but keep in mind that there are likely to be exchange rate risks.
| David Cox is the director of Property Frontiers and author of Where to Buy Property Abroad: An Investor’s Guide. +44 (0)1865 202700; propertyfrontiers.com; aninvestorsguide.com |
YOUR starting point should always be research. If a property market is set to see price rises or if yields are good, there must be a reason for that. And if something is genuinely happening in a market to make it more appealing to investors, then you should be able tofind out about it. Property markets are as complicated and intricate as any other but there are some obvious things to look out for when evaluating a market. Property markets, the price of property, and rent are all determined by supply and demand. A good investment will always be somewhere where there are genuine reasons for demand for property to exceed supply; that is what causes price rises. There are many factors that could affect demand, such as a rising population, immigration, local economic growth, increasing tourism, and infrastructure projects that increase an area’s desirability. Equally, in an area where supply is cut (say by new planning restrictions) prices may also rise.
The key is to be wary of false booms – situations where prices are rising because prices are rising. People are ultimately the determinant of prices – if more of them want to buy somewhere, then prices will rise. However, people don’t always make the right decision; they are also prone to following trends. A good example is on the Bulgarian coast where property prices have been rising dramatically. It is my belief that this is a false boom. People continue to invest there because they hear rumours that other people have done well. When faced with something like this, you have to ask yourself how many people are really going to move to, or holiday on, the Bulgarian coast? After all, it has an extremely short summer and a very cold winter. It really isn’t the new Spain. Current demand is created by speculators and when the buildings are complete and predominately empty, we may see quite a dramatic price drop.
Property investment is a subject, a science and an art that you can study like any other. If you are prepared to do so, then you are much more likely to make good decisions.
There most certainly is a way of doing it. However, it is not likely to be in a typical home-in-the-sun destination. A market such as London’s has constant demand, an active economy and a transient population. Metropolitan locations like this will always sustain demand and if you want to achieve returns like those of ‘90s London, then you need to identify cities with similar characteristics. Ideally, you should look for places where demand is locally-based because markets where most of the demand comes from overseas investors, can be fragile. My tips for the markets as they stand at the moment would be Shanghai and other Chinese cities like Chong Qing. These cities have very strong underlying drivers of demand and the Chinese economy is also doing well. Elsewhere, investors could look at Japan and Germany, where the markets are beginning to recover from just over a decade of depression. Other emerging markets, which have strongly-driven domestic economies – such as Brazil, India, Argentina and Thailand – may also prove good investments.
