1. Analysis of Overseas Property Investment

[harrison]

Hi all,
I've been doing an analysis of various overseas countries' property markets. This analysis includes a scoring system based on a range of important criteria when considering overseas property investment.
In summary the results look like this (scores are out of 100):
Country Score
1 Slovakia 75.50
2 Germany 61.00
3 Cape Verde 55.00
4 Hungary 53.50
5 Cyprus 56.50
6 Bulgaria 50.00
7 Dubai 49.00
8 Spain 41.50
Only these countries have been analyzed at present - more to follow. If you'd like to read document just let me have your e-mail address.
I would appreciate everyone's thoughts on:
1) The criteria and weightings I've used.
2) The final results - is Slovakia really so much better an opportunity than the others?
3) Anything I've got wrong in the detailed analysis, or where you are surprised by my scoring.
Or any other comments you might have.
I look forward to everyone's views.
Thanks
Harrison

 

[ismael]

Analysis of Overseas Property Investment

Hi Harrison,
I am an expat based in Munich, Germany and been in Germans since 1998. I think it will be on of the safest investments bets over the next 10 years. Prices have bottomed, building has reduced significantly, and available building land is increasingly hard to find in the best areas of Berlin, Munich, Hamburg, Frankfurt, D?sseldorf.

The Government just sold some 170,000 flats to foreign investment, so investment pros are now entering the market, inveterate rates are low, and people are now looking at buying. Germany has on of the lowest home ownerships in Europe at approx 40%, with most preferring to rent. So rent yields are 5 to 10%. With immigration from Eastern Europe, population is forecast to grow from 85M to 110M in next 10yrs. From 2020 there will be a population decline due to aging population. But all the signs are healthy. Merkel is new Chancellor (PM) and has stated she wants higher home ownership and liberalization of banking and employment rules. Environment is similar to UK market in 1970s when Thatcher turned UK into a home owning society, and we know where that lead us. This can only make it easier to buy due to mortgage competition, and an improving economy. German economy is forecast to grow around 2%, not a lot but same as UK, and first time for 5 years!

The smart money is already flowing in. I would advice people to move before the crowd to get the best opportunities.

Also for your analysis, cost of buying can be kept to 5%. This is 1.5% ground tax, and aprox 3.5% purchase cost which is for Solicitor etc. If you use a "Makler" or agent they charge 3.49% commission. My advice is buy privately and you can save the 3.49%. Other costs are flights which are cheap with Ryan Air and DBA.
Many Thanks
Ismael

 

[jacab]

Analysis of Overseas Property Investment

Hi Harrison,
Thanks, Stephen for your thoughts. It's good to know someone with first hand experience of a market.
How would you say the property markets are different in the different German cities? The Eastern European cities (Berlin, Dresden) seem attractive since you can get more for your money, but maybe there are other factors to consider.
Re costs - its hard for someone for the UK to avoid using an agent, unless you can tell me of an easy way of finding property without one? My research suggests that agents often charge 6-7% commission - perhaps it depends on region or property type.
Thank you
Jacab

 

[Markus_A]

Hi Harrison,
Thanks, Stephen for your thoughts. It's good to know someone with first hand experience of a market.
How would you say the property markets are different in the different German cities? The Eastern European cities (Berlin, Dresden) seem attractive since you can get more for your money, but maybe there are other factors to consider.
Re costs - its hard for someone for the UK to avoid using an agent, unless you can tell me of an easy way of finding property without one? My research suggests that agents often charge 6-7% commission - perhaps it depends on region or property type.
Thank you
Jacab

Hi Jacab,

You are right that most agents in Berlin will charge a commission of up to 7%. If you cannot find a motivated seller and have to go the estate agent route, remember that the commission ('Courtage' or 'Provision' or in German) is often negotiable and differs by region. Most federal states allow a maximum of 3% (ex VAT),with Berlin and the surroundding state (Brandenburg) being the exception at 6% (ex VAT).

The estate agents elling property in Germany must have a license according to german law. A trustworhty and licensed estate agent will also be member of either of the two large national estate agent associations (RDM and VDM).

Further, an estate agent must declare commissions upfront, hence in every ad, online posting or other media. Simply stating the commission in the property synopsis (Exposé) is not sufficient.

Of couse you can always go the private route, at which point the costs of purchasing will be as follows:

0.8% - 1.5% Notary Fees
3.5% Purchase Tax

If not covered by Notary Fees: €2500-€6000 land registry entry fee (fees differ from state to state)

Finally, the bank may charge you 1% mortgage processing fee.

If you are looking for private deals, let me know as I know quite a few property owners (mostly apartment block owners) in Berlin and former East Germany. If I hear that one of them wants to sell, I can put you in touch - commission free.

Cheers,
Markus

 

[TH4S]

Where is turkey.

I shall repeat my self .Where is turkey. I shall repeat my self .
Where is turkey

Harrison.
I for one am not suprised of your scoring.Its been done a million times before and getting rather boring. Because it is aways wrong.

De Ja vue.

For a more accurate view.A Place in The Sun's 20 Best Money Making Locations

20. Dubai
19. French Riviera
18. St Kitts and Nevis
17. Marrakech
16. Florida
15. Down Under.Think they mean austrlia
14. Costa del Sol
13. Tuscany
12. Cape Verde
11. Barcelona
10. Normandy
9. Cyprus
8. Croatia
7. Teruel
6. Bulgaria
5. Limousin
4. Slovenia
3. Turkey. The country with something for everyone.
2. Cape Town
1. The Algarve

 

[Investy]

I purchased in Berlin 6 months ago. Also heavily buying shares in UK companies that are investing in German property.

Hundreds of UK investment funds are buying in Germany. Even long stablished ultra cautious 'Kenmore' group of Aberdeen. They like me started in Uk property years ago but recognise when its time to move on. Kenmore produced 40% ROE each year for the last 5 years. I expect the move into Germany which began in Dec 2005 to be even more profitable.

US investors also piling in such as 'Fortress' a private equity firm.

NEWS - Dresden for the first time just recorded lower unemployment figures (3.8%) than Cologne in the West. Due to employers relocating to the less costly East.

Im also buying in Morocco. I spend immense amounts of time doing research and I can say with total confidence that Morocco is THE play at the moment.
Compare to Turkey - much longer season (12 months as opposed to 6). Mortgages available. Aimed fully at middle class tourist market totaly unlike Turkey or Bulgaria. The worlds biggest developers are investing billions. As an example EMAAR the worlds largest is investing 24bn.
There is a ready second hand market by virtue of the fact thousands of Brittish and Spannish agents have 'hpped' accross and already have existing Spannish property market experience and infrastruture in place (Morocco is 7km from Gibralter)

The USA has signed a 'free trade agreement' with Morocco.

Huge unspoiled beaches.

All development limited to 3 stories, not the unplanned sprawl of Spain.

Companies such as 'The One And Only', 'Sandals', 'Virgin Group', 'Barcelo', 'Iberostar', 'Hilton' 'Apart hotels' and many others involved.

OK SO WHY ALL THE FUSS: Think about it. I fancy a bit of sun this December after Xmas. I dont like the grotty Cannaries and the flight is to long. Spain, Turkey, Portugal and Cyprus not warm enough.

Morocco however is only a 3 hour flight (Ryan air have just aquired the right to 20 routes) yet is warm enough in December for me.
The resorts being built are all 5* luxury amazing entities.

EXAMPLE: 'Mediterranea Saidia'. This is the first 'Plan Azure' site. Plan Azure is the Kings 2010 vision for Morocco and involves 6 large coastal resorts.
Saidia will open in 2010.
It has 3 eighteen hole championship courses ON A BEACH. Golf with own beach (ie dont have to drive to) in Spain means spending fortunes.

60 Premiership footballers have bought on thsi sight. This news will be released in the new year.

An 850 berth ultra modern mega marina is almost finnished.

60 designer shops will be built around the Marina including Boss, Gucci, Armani etc

6+ ON SITE international rental agents are available so selling and renting is easy

The beach is 29km long in total of which 6km is for this resort.

No further property is permitted for 15 years - so supply is limited once the 3000 units sold

Eleven 5 * hotels opening within the resort. 30000 people per week to stay on - site which means owners get free exposure and benefit from hotel marketing machinery

Even on cold days there is loads onsite including sports arenas, equestrian faciltiy, cinemas, bowling alleys, shopping centre, medina (purpose built),3 golf courses (again on site, you dont drive to them, this is important) to which owners and thier guests get cheap playing fees, 2 Carrefour supermarkets, Olympic standard pools, swimming lakes, spas etc etc etc

It wont look crowded though. The site is 7million m2 and will have 1.6m trees. The landscaping will be out of this world.

I aquired a detatched with own pool fully furnished (even sat TV, towels and garden furniture) built into an island within the greens for £170k

Spains LAMANGA doesnt come close to this resort (no Marina, no beach etc) yet the same villa would cost £700k there.

The developers website (there are several developers in the one resort) is lejardindefleur

 

[Investy]

Where is turkey.

I shall repeat my self .Where is turkey. I shall repeat my self .
Where is turkey

Harrison.
I for one am not suprised of your scoring.Its been done a million times before and getting rather boring. Because it is aways wrong.

De Ja vue.

For a more accurate view.A Place in The Sun's 20 Best Money Making Locations

20. Dubai
19. French Riviera
18. St Kitts and Nevis
17. Marrakech
16. Florida
15. Down Under.Think they mean austrlia
14. Costa del Sol
13. Tuscany
12. Cape Verde
11. Barcelona
10. Normandy
9. Cyprus
8. Croatia
7. Teruel
6. Bulgaria
5. Limousin
4. Slovenia
3. Turkey. The country with something for everyone.
2. Cape Town
1. The Algarve

Smart professional investors and hedge funds are swarming into Germany. Cheap prices yet HIGH SECURITY - the holy grail of investment criteria.

There's an old expression in investing 'buy when no one else is'.

Investing in Turkey was a play 4 years ago. Cape Town was done to death over 3 years ago. The Algarve what a laugh. Ok to buy in these places but not if you are looking for top draw investment.

Investing isnt about spotting a huge well trodden band waggon and following it.

The pie is only so big. To make a decent return you have to be able to sell to the next man in the queue for more. If you buy into well trodden well inflated areas such as Portugal or Turkey there are 2 issues:

1) Prices have already inflated so the early days profit has already been had

2) Developers flood the established markets. This is why so many people have made a loss recently in Spain and Bulgaria. Over supply means the new buyers tend to buy 'off plan' and avoid second hand.

I agree Slovenia and Cape Verde are good plays.

Germany and Morocco are the best however. Not Marrakech though.

Its all about being able to sell to the next Man in the queue easily. Trying to sell in Marrakech is complex, there is no UK selling Agent prescence, its easy to get ripped - off.

For Morocco stick to Saidia the first Government / King backed mega development which is tighly controlled and geared at the Western markets.

 

[TH4S]

If you buy into well trodden well inflated areas such as Portugal or Turkey there are 2 issues:

1) Prices have already inflated so the early days profit has already been had

İnvesty
Turkey is so big. LOOK Go to Turkey!

You dont/ nor have to buy in inflated areas there is so much choice here.İ have been trying to advice clients/ customers for years to keep away from over inflated areas.

There's an old expression in investing Listen Watch and Learn.

 

[Investy]

I like Turkey but as an investment it didnt stack - up for me in terms of total returns which must include rentals.
The Plan Azure (Govt backed) Moroccan mega resorts not only have year round weather but combine several on - site championship golf courses with vast beach and world class sports and other facilities AND is a 3 hour flight.

On top of this you get several COMPETING rental and selling agentsON - SITE and 11 5* hotels giving 30000 guests on site at any one time (ie your next seasons renters)

No CGT after 10 years, no income Tax for 5 years, no IHT

 

[Murphy]

Investy -what would you do with £200k and lots of time?

Investy it seems you like pointing people in the right direction so here's a question. picture this you're not a complete novice or idiot - you've been made redundant so you've got time but not physical energy i.e. you don't want to do the actual physical stuff but you want to work -you've got £200k cash and could raise more in loans -buying a few things off plan and waiting is not your bag

what would you do at this current point in time?

 

[Investy]

Investy it seems you like pointing people in the right direction so here's a question. picture this you're not a complete novice or idiot - you've been made redundant so you've got time but not physical energy i.e. you don't want to do the actual physical stuff but you want to work -you've got £200k cash and could raise more in loans -buying a few things off plan and waiting is not your bag

what would you do at this current point in time?

The 'waiting is not your bag' is key for you I guess?

Given your desire to generate profits quickly you will need to find the very very best resorts that practically sell themselves and you will need to be in early.
Buying off - plan from developers requiring a maximum 40% and that have an absolute written guarantee enabling flipping is crucial.

I am aware of investors who get in quickly then flip after just a few months, indeed they tell me they have done this on the Saidia site in Morocco and some claim they have made £50000 after just a few months by flipping the better appartments and penthouses. I HAVE NO PROOF OF THIS.

A person I trust and have known a long time did this on 2 appartments in Spain a couple of years back, but again he chose an exceptional site.

You need to choose your countries carefuly. I woudnt attempt this for example in Romania as you might find your profits immovable for years whilst the state works out your Tax bill (if they find out)

Stick to the large reputable agents. Warning - every agent always tells me they have done 'due dilligence' on a developer. This is nearly always make beleive. Some will though, such as Superior of Bristol (I bought through them) or Savills International.

OK, where?

I would seriously consider the new MAGAZAN resort in Morocco. The people behind it are the same that own the 'Sun City' resorts which started in S Africa and I think also now own the world famous 'Sandals' chain.
You cant get much better than that and I think this resort is only just being launched now.

Id also consider the first Government / Royal backed resort in Morocco called Saidia (thats where Ive bought and beleive me Im fussy). This is the flagship resort. The King is always on site interfering - he wants this to be his world showcase so Im expecting something very special.

Remember Morocco is Dubai without the 7 hour flight. Flights are 3 hours to the North coast. Everyone from Thomson hoidays, to Richard Branson to James villas and the worlds biggest developer 'Emaar' are here. Emaar alone are spending $23billion on new luxury developments. Think about this, why have they chosen to spend so much in Morocco?
On top of this many international hotels are building in Morocco. On the Saidia development where Im buying, no less than 11 international prestigious hotels are building, again they are'nt stupid. Why arent they buidling on individual developments in Bulgaria, on this scale? Mmm

Resales are easy as the huge Spain based British real estate network is involved given Morocco is only 7km from Gibralter. THIS IS A KEY POINT.

If Morocco scares you (ie too unknown and new ust like Dubai once was) then try and source the very best resorts in Turkey, Motenegro, Portugal (the under developed bits such as the Silver coast).
Cape Verde is another possibility but it truly is third world so be careful.
FURTHER AWAY - Brazil looks good but I made a rule some time ago to stick to my own backyard and become knowledgable rather than try and cober the world.

GOLF - gives you access to a twin market. Saidia for example is having 3 18hole courses built along the beach. BEWARE; Many resorts tacitly imply golf is planned but then dont deliver.

SEASON - this is an important consideration. Bulgaria is suffering as the masses are now twigging the season is so short.

SUPPLY - what is your competition when you want to sell? To try and flip in crowded markets such as Spain is very difficult. (Morocco dvelopment is centraly planned, another very unique selling point as it means supply is still very limited)

FLIGHTS - As an example Morocco is expecting several low cost carriers, it appeals as the flight time is short.

I look at the economic and Political fundamentals as part of my research. As an example 97% of Moroccan kids are now in school where as only 55% were in 1990. 36% of the state budget is being spent on education, I think the highest figure in the world.


Anyway, Im no genius, perhaps others have some ideas, but please be aware that every one thinks thier development is 'luxury' but this is not usually the case.

My key: Only buy the very best in order to reduce risk.

 

[marmurr1916]

Interesting!

zzzzzzzzzzzzzzzzzzzzz

 

[prolan]

Where these lists all go wrong is that they give entire countries or regions a certain amount of points. All of us dealing in real estate know that it doesn't work this way.

ie: yes certain places in spain are about to stagnate or go down......but then other areas of spain can expect good growth.

yes certain areas in Brazil, Montenegro or Croatia might do well, but other areas should not be touched.

It's all a matter of doing research or paying someone and trusting them to do the research for you.

We are securing some land in Marocco: outside Marrakech (16 acres),south of Agadir near Mirleft (60 acres with beachfront) and north of Morocco near Tangiers (4 acres).

We have some great opportunities for TIER 1 investors or people who want to joint venture with us in property development projects with fantastic returns. Our preliminary figures do show a 200% return over a 3 year period ==> at todays prices!

For the more risk averse people we can offer a limited number of units at below market value (35 % discount) for pre-release sales.

Whatever you do...do not part cash without an onsite visit and good investment.

For more details contact me on: [email protected]

Regards,
christian