Foreign Property Is A Flight From Reality
Harvey Jones thinks we should steer clear of overseas property investment.
In recent weeks I have been furiously deleting email after email from property companies hyping the latest thrilling investment opportunity.
As you might expect, none of these opportunities are to be found in the blighted UK property market but increasingly further afield, in fact, as far as possible from these shores.
The press releases all follow a similar pattern. Property prices may be collapsing in drizzly Britain and beyond, but there are still plenty of overseas markets where canny investors can make merry.
Only the name of the country changes. Brazil, Cape Verdi, Croatia, Dubai, Egypt, Morocco, Northern Cyprus, Panama and Turkey are just some of the exotic names tickling my Inbox.
Foreign affairs.
Frankly, I'm amazed they think people still have the heart for this kind of stuff.
You would have thought that given the global property meltdown, the last thing most people would want to do is sink more of their precious money into bricks and mortar.
Have you felt it, this diminishing passion for property? Do you spend less time drooling over house buying websites, watching TV property makeover shows or dreaming of a second home in the sun?
I'm not completely cured, I have to admit. I still click on the residential sales section of local estate agency websites, mostly to see how much prices have fallen (answer: not as much as you might think).
And although I did browse a Spanish property website the other day, I could tell my heart wasn't in it.
So when somebody pops into my Inbox raving about the latest investment opportunity, I feel they've missed the point of everything that has happened in the past 12 months.
Our love affair with property is going through a sticky patch. I'm sure we'll kiss and make up, eventually, but the time isn't right yet.
Pound for pound.
In any case, who has the money to invest in overseas property, given the crumbling value of sterling?
Some cheeky property companies even use the weakness of the pound as a selling point. One property developer is advising British foreign property investors to look outside the Eurozone, to places where the pound will go further. Places like Egypt.
Given the weakness of sterling, I'm hardly confident the British pound can hold its own against the Egyptian pound.
I'm also not convinced that a two-bedroom apartment in in Egypt's "Red Sea Riviera" is such a great deal anyway.
I was in the Red Sea several years ago, and the Egyptians were pouring concrete onto their coastline at an even more reckless rate than the Spanish, and look how that ended.
Flight from reality.
And all these countries seem so far away. How often will you fly to your second home in the Maghreb or central America? No, really?
These developments may claim to be within five hours flying time of London, and served by plentiful cheap airlines, but how long is that going to last? If your cut-price carrier does a Zoom, you might find the only way to reach your prime residential gated development is on a leaky night boat from Cairo with a connecting mule.
And even if the airline does survive, five hours flying plus check-in and connections is an awful trek to visit your second "home", unless, of course, you are retired and plan to spend several months soaking up the sun every year.
But these companies are not just selling homes, they are selling "investment opportunities", because you can also make money by renting out your property to holidaymakers.
Presumably, you will do that via a local property management company, which, hopefully, will arrange and manage all the bookings for you. This involves both effort and risk, and personally, I'd rather put the money into a fixed-rate bond paying upwards of 7%.
End of the affair.
All these press releases work on the assumption that rising property prices are healthy for investors, because they will make money when they rise even further.
But the reverse is most likely to be true. The chances are you are buying at the top of the market, one step ahead of the liquidity squeeze. Unless you somehow think Egypt, Morocco and Panama will prove immune to the global contagion.
Right now, I would rather buy where prices are falling, although I'd wait a couple of years, until they have fallen even more.
Happily, I can't see many people being seduced by this foreign property proposition: we've all learned a painful lesson.
And perhaps that is why these developers are anxiously chasing investors halfway around the world, because they're needy and desperate, and as every lover knows, that is never an attractive combination.
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We are looking to retire to Panama (perhaps Boquete) and would welcome advice from readers. We are at the beginning stages of our research, so much to learn. Our funds are in Australian dollars (AUD is currently worth about .70US). [br/][br/][br/]Have we lost our minds?
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Hi JBstar,[br/][br/]The answer to your question is yes, I have actually sold a property for more than what I paid for it. I bought 2 properties in Dubai, both in Dubai Marina, one I sold and the other I kept for renting out. I bought both the apartments off plan. I am now in the proceeds of buying 2 more off plan properties.[br/][br/]My advise to anyone who wish to purchase in Dubai is to look at a number of factors.[br/][br/]1)Location[br/]2) Size of the apartment [br/]3) View from the apartment[br/]4) Facilities Available (i.e Gym, Sauna, swimming pool etc)[br/]5) Proximity to areas like Internet city, knowledge village, American university, Proximity to the sea and shops, bars restuarants. A this is where you get corporate purchases and rentals from, as they have UK employees either on secondment or are permanent.[br/][br/]6) Good investment areas ( Dubai Marina, Jumeirah Beach Residence,IMPZ, Avoid areas like International City(Nowhere near Dubai)[br/][br/]7) Avoid studios (to small, not good for rental as people who rent are either single or families) 1beds and villas are a good investment)[br/][br/]As for you collegues comments go, have they been in Dubai long or are they just following other peoples comments,[br/][br/]My advise is to do your reaserch thoroughly.[br/][br/]Good websites to look at to give a fair idea of the market are:[br/][br/]www.gowealthy.com[br/]www.bhomes.com[br/]www.remax.co.uk[br/]www.yourmove.co.uk[br/]www.key2dubai.com[br/]www.diamond-investments.ae[br/]www.phoenix-dubai.com
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Robinbigmore - excellent post. I cannot wholeheartedly agree will everything however.[br/]Harvey's item is poorly researched bordering on piffle and doom merchant nonsense.[br/][br/]Your comment on living and investing in the same country should not be hooted down and is generally absolutely sound advice.[br/][br/]Most would-be investors (I don't include the lifestyle investors here - they have different motives for purchasing elsewhere in the world)looked abroad because they could no longer afford to invest in their home country (blighty). Even with the current drop the market is way overpriced. If I could purchase a block of flats here for the price of an average house in Germany I would of course be putting my faith in the UK.[br/]The simple fact is I can purchase in Germany with a sitting tennant - and they tend to stay put if you treat them fairly. I have a management team who have never let me down and I can reach those properties faster than I can get to most areas of the UK.[br/]I have investments in several areas of the USA and apart from the travel time they have been and continue to be excellent value for money. My northern France properties fall into the same category as the German ones (although this area is now too pricey when compared to Germany).[br/]I have building land on Sicily which will sit in my land bank for a long time to come.[br/]The only time I have ever come unstuck in this field is when I thought I was cleverer than my trusted local adviser - expensive mistake and one he never loses an opportunity to remind me of (I will never repeat this grave error of judgement).[br/]LOCAL ADVICE IS ALL IMPORTANT - Yes I'm shouting very loudly about that one.[br/][br/]Dowantescape - I am not the one to advise you on N Africa - I am aware of what is happening along that coast am watching it expectantly.[br/]The Kings of Morocco and Tunisia are trying to drag their countries into the modern world, however, I am not convinced they have total support in their own realms. We have witnessed far too often how one religious crazy can upset the apple cart and bring it all to a shuddering halt. I will gladly run the risk of losing out on the millions some will make by jumping in now. I think this risk is balanced out by the possibility of losing millions if the aforementioned religious crazy turns my lovely villa into a donkey stall for the local market traders.[br/]If you are going over for lifestyle purposes I guess there are different factors involved but the risk does not diminish.[br/]I'll wait for the market to mature - take a far smaller profit, be content with that and sleep easier as a result.[br/]It all comes down to your attitude to risk - if you cannot afford to lose the money and shrug your shoulders and smile about whilst doing so then do not invest there.[br/]If the risk gives you a buzz - well good luck. But you will not find me in the next seat to you on the plane (if there are still any planes going there)Re-read Robinbigmore's post and factor in the good advice he's offering.[br/]Europe still has investment opportunities. They will continue to be the mainstay of my investment efforts. Now I guess it's down to who you wish to listen to.[br/]The broker/agent/developer offering 100% return by next year with guaranteed rental at 25% for the next year and the glossy mags and the TV station adverts. Or do you want to calm yourself down take a reality drink and listen to someone like me who promises 4-8 yeilds with annual growth more likely to be in the high single figures, never likely to get your pulse racing but also likely to give you a good nights sleep not worrying about losing your pile.[br/]Your choice.[br/]I am amazed at the ability of the punter to be won over by what must be clear to them is hype, nonsense, overexaggered claims and the celebrity gushing sincerity about the prospects (frequently plucked out of the ether and designed to get the hook into the mouth of the unwary)and the reason they do it is because.......... the punter falls for it time and time and time again, and then comes onto chat forums and tells everyone that overseas investment is not a good idea.[br/]Enough, I have a business to run.[br/]Good luck with whatever you decide to do.
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08 October 2008