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
Article Source: http://www.valuablecontent.com
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