Saturday, 9 February 2008

Emerging Market's Top Ten Property Hotspots

I just read an article headlined: 2008 overseas property hotspots revealed. The article was based on recent research by property portal Homesgofast, and the countries listed as property hot-spots for 2008 were the countries most frequently purchased in by users of the portal: Brazil, Dubai, Egypt, the U.S. and Turkey. As far as I'm concerned there is a big distinction between what is popular with buyers on a portal and what can be predicted as a property hot-spot for the year ahead.

In my opinion what should be called property investment hot-spots are the places where investors are likely to make the biggest profit, and/or the highest rental yields, with the top hot-spots having the most potential for strong returns in rentals and capital appreciation.

While most buyers are looking to make some sort of return on their investment, some buyers are primarily buying a holiday home; it being let when not in use is nothing more than an added bonus. For those buyers, where they can make the biggest yields is of secondary importance to where they would most like to holiday.

According to my analysis of rising tourism, rental yields and capital appreciation around the world, the only country on that list that can truly be called a potential property investment hotspot is Brazil. I would include Brazil in my top-ten property investment hotspots for 2008, in fact it is number one on mine, if buyers aren't primarily focusing on finding finance in the country they are buying in my list is in this order:

  1. Brazil
  2. Cambodia (Phnom Penh)
  3. Philippines(Manila)
  4. Canada
  5. Argentina
  6. Costa Rica
  7. Thailand's island: Koh Samui
  8. Thailand's island: Koh Phangan
  9. Malaysia
  10. Albania

For those who are looking for finance the list would change a little in that Malaysia and Canada would move to take position 1 and 2.

One thing I did agree with from the article was the up-turn in people looking to buy property at the lower end of the price scale, that is because the lower priced properties offer the most potential for high rental yields for letting when not in use.

Brazil, Cambodia, Philippines and Canada are in the top-positions, because they have the combination of high quality property priced at far less than they should be on the global market, and the potential for massive and sustained growth in the next 1-5 years.

Property in those countries has a good chance of being worth 25% more than you paid for it after the first year and even having doubled in price after four years. In the current market, investments like that, with the potential for excellent short-term gains are going to be all the rage with so much talk of credit crunches etc.

Why I would move Malaysia into the top two for those looking for finance abroad is because, although property costs comparatively more, Asia's potential for strong sustained growth is world renowned, and foreigners being able to get 70% LTV mortgages from banks in Malaysia makes a purchase there accessible to a lot more investors.

Saturday, 2 February 2008

Brazil Property: Samba All the Way to the Bank

Currently several regions in the world have in common the fact that they contain multiple emerging markets. One region though, has something that none of the others share. In Latin America, the emergence of Brazil, Panama, Costa Rica, and Argentina have an energy; like the Mardi Gras has spilled out of Rio de Janeiro and they are sambaing into some of the world’s most economically vibrant property markets.

Across those four countries the level of new development, rapidly rising land-prices and high rental yields lead me to start believing that Asia now has competition as the world’s main growth centre, and as the region most likely to see strong and continued growth over the next ten years.

Brazil especially is making the headlines, and again it is Brazil’s reputation for a carnival atmosphere that has turned it into one of the world’s most popular tourism destinations, and the world’s most popular destination for young male overseas property investors.

The Mardi Gras is probably the most popular and best known street carnival in the world, but Rio de Janeiro is world famous for its nightlife that retains the Mardi-Gras atmosphere all year round. Young male property investors are also flocking to Brazil for its tropical climate, world-class beaches, world-class football and world-class women.

Brazil is not a new emerging market, in fact the capital Rio de Janeiro is semi-mature having been popular with foreigners, both for property investment and tourism for a while now. But as is a trend with emerging markets, growth begins in the capital, but only in the strongest and most promising markets does it spread to other parts of the country, as is currently the case with Brazil.

So now, those who have a little bit more to spend for the security of buying in a semi-mature market that has proven itself capable of seeing continued and strong growth, will buy in Rio. But those looking for an entry level property will buy in one of Brazil’s emerging hot-spots.

A particularly good place to make an entry level investment is Carapibus. A quaint little fishing town surrounded by world-class beaches. Its recently increasing popularity with tourists has prompted the Brazilian government to launch a major spending plan, that could well see Carapibus become one of the world’s most popular tourist destinations.

Tuesday, 29 January 2008

Emerging Market Croatia's Sudden Explosion

Liam Bailey explains why he couldn’t have an emerging markets blog without covering Croatia.

Almost all the Eastern European countries, especially those with Adriatic coastlines, are benefiting from that coastline, their proximity to established and popular countries and things like entry into the EU and NATO. But on the most part this is not just a sudden explosion, but a path of emergence that began with the break up of the soviet Union and the fall of the Berlin Wall. With one exception: Croatia has and will be a sudden economic explosion.

When the soviet Union collapsed, the Berlin wall fell and the Eastern European states began to see growth, Croatia was at war. Just as Albania’s growth takes on a new pace as they tensions with Kosovo look like finally being resolved, Montenegro’s economy expands upon splitting from Serbia, Croatia’s government has been struggling to bring about economic and political reforms to fully capitalize on the opportunity for growth.

Since Croatia’s recession in 1999 the economy has bounced back as though on a spring, with GDP growing at a solid 3% since 2001, and reached 4.8% in 2006 up from 4.1% in 2005. Croatia is set to gain entrance into the EU in 2009, similar countries in the region have grown massively upon entering the EU, countries like the Ukraine and Estonia.

Being that the country Croatia’s benefits from its proximity to is Italy, one of the strongest markets in the world, both economically and particularly in tourism and real estate sectors, and being that Croatia’s strongest industry is already tourism, a large injection of EU money into the infrastructure and towards boosting the already strong tourism market, could see Croatia set new records for EU spurred economic growth.

Tuesday, 22 January 2008

The Future of the Emerging Property Market

The future of the has been called into question recently. On one hand bloggers and commentators on real estate forums are throwing theories about that the current press attention being given to banking problems in the U.K. and economic problems in the U.S. will see investment in emerging markets slow, and any money being spent being put into established markets. One, screen-named Kim on the Totally Property forum was even so bold as to say "I think the emerging market is now overplayed and we are saturated with new emerging markets that are cheap and likely to stay cheap."

On the other hand financial and global economy experts are predicting that the emerging market of Brazil will grow into the world's fifth largest economy in the coming years. What's the truth here?

I personally believe that emerging markets are just that: emerging. No matter how slow the global economies get, people will always be taking their yearly holidays, and rising tourism is what is fuelling the emergence of these under-developed countries. As people from the developed countries of the world, with more disposable income visit these countries and spend their money on accommodation and their holiday spends, this develops the economy.

As tourism increases tour operators start looking at the country and sending scouts to investigate its potential, the number of flights to the country increases and before you know it Hilton hotel chains are being built and taking on staff from the ground up. Like the massive sky scraping Hilton hotel complex in the emerging market of Panama's capital, Panama City. O.K. many of the most senior staff might well be relocated to run the hotel, but even if all senior staff are imported, how long is it going to be before bright young locals are getting promoted -- possibly even achieving a really high position should one of the execs get a better offer.

Promotion or not the amount of jobs a complex like that provides for the local community, who then have a lot more money to spend on accommodation, possibly rental or even buying their own homes. This all brings massive regeneration into the community and the economy.

Therefore, with emerging markets, fuelled by tourism as they are, if anything a slow down in the markets could well strengthen the emerging markets, on the grounds that, the current emerging markets have good climates, and low cost of living, so people can have a cheap holiday in the sun. That is an attraction even now, a low cost holiday in the sun, and on top of the that, off the beaten track, possibly exotic and somewhere different than all your friends have been. But this is a property investment take on emerging markets, so where does real estate investment, and potential profit thereof fit into my theory...

Well, the shrewdest investors will put their money into a swanky off-plan apartment or villa around the time that flights start increasing, major tour operators launch a new destination, and hotel chains like Hilton get in on the action. And that is generally the case, investment property agents like David Stanley Redfern see a market emerging and start to get property there onto their books as soon as possible. When property in an emerging market starts to receive interest from global buyers, this in itself causes prices to rise.

Whereas before property has had to be affordable for the local population, given enough global attention, property values will start to get closer to what the property is worth to global buyers with more money. Not just that, as the economy develops prices start to rise for building materials, builders and laborers start not only expecting, but needing a higher wage to keep up with increasing living costs, this all pushes up house prices.

Therefore a market's emergence has a kind of perpetual motion; once the emerging market wheel starts turning it very rarely stops. In short, once a market becomes known as an emerging market, and I don't just mean because Terrry down the pub says so. I mean once experts start calling a country an emerging market, and overseas property agents start offering property there amass, then the chances are prices are already rising across the board, and will continue to do so for the foreseeable future.

Saturday, 19 January 2008

Emerging Market or Not Malaysia is Hot Property

Some will say that Malaysia shouldn’t be called an emerging market because, as an ex-British colony it has been popular with overseas investors for a while, and because prices are already slightly higher than other emerging markets in Asia and around the world.

However, as Asia continues to be the world’s biggest economic growth hotspot, there is still plenty of room for economic expansion in Malaysia, specifically from the ever growing tourism industry, which will see house prices grow strongly in the coming years. For that reason, I have felt compelled to include it as an emerging market and also because in my opinion, for those with a fairly big overseas property investment budget it is one of the best places in the world to make an overseas property purchase.

The government has and is always taking steps to encourage foreign investment, and this has led to a whole host of benefits for overseas investors:

There are no restrictions on foreign ownership, in fact foreigners are automatically granted residency in the country upon completing their purchase. Many of the laws are left over from the British colonial era, which is reassuring for people because they can easily understand the laws governing their purchase, it also means the buying process is easier than in other Asian countries. There is no inheritance or gift tax, and capital gains tax has recently been abolished altogether.

This economically friendly environment and easily understandable judicial and financial systems have also led to another massive plus for an investment in Malaysia: western banks like HSBC, United Overseas Bank, and Standard charter have set up shop in the country. That and the fact that the big Malaysian banks like Maybank will happily provide mortgages to foreigners, mean that unlike many of the other emerging property markets, and/or highly desirable destinations, buyers can easily get 70% Loan To Value mortgages to finance their Malaysian property investment.

This unrestrictive and westerner friendly economic and judicial environment is also undoubtedly a reason for Malaysia’s booming tourism industry though probably not as much of an attraction as it’s tropical climate and the sheer beauty of the place. Take the beach front Nexus Resort, a five star hotel on Sabah beach Borneo. Set in lush tropical gardens the Nexus hotel has won 17 awards in five years of operation, including the Virgin Gold Holidays award. The resort has a golf course, spa and swimming pool.