Property clinic
Is it better to buy a beach retreat or an urban bolthole? Plus the latest property news
David Cox is the director of overseas property investment specialists Property Frontiers and author of Where to Buy Property Abroad: An Investor’s Guide. +44 (0)1865 202700 ; www.propertyfrontiers.com; www.aninvestorsguide.com
OUR PROPERTY EXPERT SHARES HIS TIPS ON BUYING OVERSEAS – PLUS SOME OF THE LATEST PROPERTY NEWS
CITY OR BEACH?
WHICH OFFERS THE BETTER INVESTMENT?
BOTH URBAN AND coastal properties can offer excellent investment potential. While cities offer a wider range of speculative opportunities and cater for business clients, the tourist market, students and commercial tenants alike, beach properties satisfy the tourism and lifestyle markets and are always in demand among those purchasing for personal use.
When making any investment, location and occupancy potential are vital considerations. Sun, sea and sand may appear to offer a guarantee of success but in areas such as Sunny Beach, Bulgaria, the summer season only lasts for four months and the weak winter market means that properties often lie unused for much of the year. Conversely, a Caribbean property, with 365 days of sunshine a year, a good supporting infrastructure and full amenities, will have year-round rental potential. Furthermore, coastal properties in emerging markets may appear to be good value but the number of people likely to be buying into them means that rental yields are going to be low. If you do decide that you want to invest in a coastal property, I would ensure that you buy in an area that has other strengths. Whether they be nearby historical attractions or a town with shopping and nightlife facilities, this will help evade the stagnancy that can envelop summer venues in low season.
Similar deliberations are necessary when considering city investment. Although the rental and resale potential of properties in cities outperforms that of properties in the countryside, prices can be more volatile due to limited land supply and higher rates of population mobility. Gaming cities such as Las Vegas, which attract tourism on a huge scale, tend to offer significantly overvalued property, and, as a result, make the likelihood of a bubble in the market increasingly probable. On the other hand, Macau, on the southeast border of China, is a much newer property market, currently supported by major infrastructure improvements, and is therefore considerably lower in price. In addition, its gaming industry, although 30 years behind Las Vegas’, already produces a higher revenue than its American equivalent. These statistics, coupled with Macau’s vibrant cosmopolitan life, make it an excellent candidate for successful investment.
Another factor to take into account is the availability of finance. Mortgage allocation is often a vital part of the purchasing process. In Malaysia and Poland, high LTV (loan-to-value) mortgages are common, whereas in Romania and Bulgaria mortgages aren’t available. The interest rates in Brazil are also currently too high to make this a viable option.
The debate between city and beach demands careful consideration as each location has the potential to offer satisfactory returns. Before making any decisions, adequate research of the market and its investment potential is crucial, but my tip would be to stick to cities and major towns if you are looking for the most profitable option.
THE SHOW WILL GO ON
NOW IN ITS
16th year, The Homebuyer Show is being held on 2-4 March 2007 at ExCeL in London. The UK’s largest and longest-running property show for investors and owner-occupiers, it’s a magnet for buyers on every rung of the property ladder. Around 14,000 visitors are expected to attend the 2007 show, lured by a broad range of UK and overseas property on offer from 300 exhibitors and more than 100 talks by industry experts. www.homebuyer.co.uk
