Foreign hot spots revealed for UK property investor

"Whilst we have witnessed property prices overseas coming down in many countries and areas, we know, not all countries have been affected to the same degree, or all the areas within a country. With some major economies around the world struggling to shake off the recession, investors might be wondering where to find an attractive overseas property market, or whether such a thing still exists at all.

"Poland, Spain, Morocco, Cyprus, Bulgaria and Montenegro all offer attractive options but the diverse nature of each country and specific regions have their own pitfalls, if not researched properly.

"The fear of the unknown overseas market is enough to put many buyers off, the prospect of buying overseas without understanding the culture, language or idiosyncrasies of the country is a daunting challenge. There is no doubt that being well-informed, means buyers are well-armed BUT drawing on the expertise of an overseas property consultant can make the process far more effective, by advising buyers of the pitfalls upfront, so that there are no unnecessary surprises."

Hot Spots for the UK Investor

Poland

* Achieved positive economic growth in the second quarter of 2009, with Gross Domestic Product (GDP) rising to 1.4% year-on-year in quarter two.

* Has become a serious alternative to outsourcing skilled labour, competing with the likes of India.

* Has attracted major blue chip firms to invest in the country, including P&G-Gillette, Microsoft, Dell, Ikea, Siemens Bosch, Coca Cola, Daewoo, Unilever.

* Enjoys significant inward investment through lower standard of living and geographically proves to be an important location, as a major distribution point at the heart of Europe.

* Has received substantial EU funding to invest in the infrastructure of the country, building a major network of roads, linking Northern Poland with the South via the A1 (Gdansk to Katowice, towards Vienna) and East with West via the A2 (linking Berlin, via Posnan to Moscow, via Warsaw).

* Poland’s GDP is predicted to grow by 2-3% in 2010 (IMF, lower forecast, BZWBK higher forecast)

Morocco

* Easily accessible from the UK, and matches investors’ expectations with a steady economy and healthy property market.

* Government-led reforms have strengthened the country’s economic position and allowed it to sail through the global financial crisis relatively unscathed.

* The government’s strategy is to steer the economy away from its dependence on agriculture, to create jobs and find new engines of growth.

* Investment in infrastructure, property and tourism has diversified the economy, while policies to control prices have restricted inflation.

* Foreign direct investment has escalated, encouraging Moroccans to buy into their own market – an estimated 80% of remittances from expatriate Moroccan workers now goes into property.

* British buyers, have the added advantage of a favourable exchange rate into Moroccan Dirhams, giving sterling real buying power.

Spain

* Official statistics from the Ministry for Housing show National average prices have fallen 8% over 12 months, from €1780 m2 to €1634.7 m2 today (Sep 09 v 08).

* Around 1.6 million apartments and houses are on the market, (over 300,000 under construction and a further 1.1 million with planning permission that must legally be built within two years).

* Of these properties the ratio of holiday homes to resident worker homes vary, but as much 50% of the total of unsold stock, could be for the holiday home market.

* At current levels of demand it could take until 2016 for the property market to recover.

* Property price declines have been more accentuated on the coast, however, inland prices have held up.

Bulgaria

* After impressive growth between 2005 and 2007, the property market started to level off at the end of 2008 and fall in 2009. GDP growth in Bulgaria is expected to slow in the next year.

* New buildings and sales of flats have been affected by the financial limitations imposed by banks.

* Lower loan to values are being offered, which has affected demand and most of the buyers came from the countries hardest hit by the crisis, such as the UK and Ireland.

Montenegro

* The Montenegrin economy has achieved impressive results over the past several years.

* Ambitious reforms, substantial capital inflows, dynamic developments in the banking sector, position Montenegro as one of the fastest growing European countries.

* Average annual GDP growth in the last four years was around 8%.

* Montenegro fell into recession in the first half of 2009 when the economy shrank by 3.5%.

* The global economic crisis has affected the two largest exporters in the country, KAP (Aluminum smelter, Russian-owned KAP, is the country’s largest exporter, with 40% of industrial production) and Nikšićka Željezara (Steel mill).

* The Prime Minister, Djukanovic believes Montenegro will enter the European Union by 2014 amid signs the EU is overcoming expansion fatigue, after 2004 integration of Eastern European countries.

* The Government has ambitions for a number of government tenders in forthcoming months, including tender for the development of Montenegro’s longest beach in Ulcinj.

* Tourism revenues account for a quarter of GDP. But tourist numbers declined in summer 2009 amid a collapse of the Russian economy, which for a long time represented a key Montenegrin target market.

Cyprus

* Cyprus has weathered the worldwide economic recession considerably better than Europe, despite some recent sluggishness.

* The president of the Republic has been in talks with the leader of the Turkish Cypriot community over the past year and the negotiations seem to be at a critical point. There is the prospect that the political problems of the island might be solved, although this will not happen overnight.

* Cyprus is part of the euro area, and therefore the euro is likely to be the common currency of the unified Cyprus as soon as a peaceful solution is negotiated.

* The Greek Cypriot government is pushing ahead with its plans to upgrade tourism facilities in the southern part of the island.

* Cyprus property market remains reasonably robust. Although growth – unsurprisingly – slowed in 2008, the market is broadly-based and therefore well-placed to cope with the global economic crisis.

* There is a healthy domestic property market and, while Western Europeans may be thinking twice about overseas property investment, an influx of buyers from other countries such as Kazakhstan and Russia means that the Cypriot property market has not been hit as hard as some others.

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