Buying Property

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Dear Overseas Property Mall,

I am a little confused about the state of the Spanish property market. I read conflicting reports and projections about Spain all the time and the newspapers are filled with doom and gloom alongside glowing projections. Should I invest in Spain or not ?

Yours sincerely,

Confused in Coventry

Dear confused in Coventry,

Your confusion is understandable. Several small and medium sized Spanish property developers have recently run into financial difficulties, some of the smaller ones taking deposits from customers with them.

The most recent casualty, Colonial, saw it’s shares plummet 40% in 2 days, seemingly for no reason other than worries that the Spanish property boom is over. The president and largest shareholder, Luis Portillo quit after this drop.

This follows on from two other medium sized casualties. Astroc saw their shares drop 85% in July last year causing the founder, Enrique Banuelos to quit and Llanera, a developer based in Valencia, filed for credit protection a few months later.

The Financial Times has a more in-depth look at these casualties here.

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We reported recently on the likely boost in French property in Paris and Lille due to the introduction of a new Eurostar train service. But Eurostar connects to more than just Paris. There is a direct service to Brussels in Belgium with connections on to Brugge, Namur, Antwerp and Ghent.

Brussels in now less than 2 hours from St Pancras station and is already seeing an increase in interest from British buyers keen to snap up a bargain before everyone jumps on the band wagon – or should that be railway carriage?

According to the Telegraph, Restored studio flats a few yards from the Grand Place can be picked up for as little as €70,000 (£50,000), and vast, contemporary loft-style duplexes in former industrial buildings go for €500,000 (£360,000).

The Association of International Property Professionals has recently completed it’s 2007 consumer survey and, perhaps not surprisingly, the biggest fear of British overseas property buyers is the fact they feel a high chance of being mislead, either by an agent or a developer.

According to the AIPP’s survey, 69% of consumers are worried about being given unreliable or misleading information and 44% said that being unable to independently check information is a concern. Only 17% are worried about being pressured using hard sell techniques and only 34% were worried about overpaying for property.

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As more and more well-developed overseas property markets reach saturation point, British property investors are starting to look further and further afield in the search for likely investment opportunities. South America, despite some political and social issues still to deal with, offers those opportunities. South America, like many other emerging markets sees the benefits of foreign investment and the governments are taking steps towards creating a more hospitable investment environment.

British property investors are taking a long, hard look at the New York property market. With the dollar at a 20-year-low, for British investors with pounds in their pocket, the Big Apple just got a whole lot cheaper. According to the Financial Times, Steven Toumbas, an equities investor from London, has always wanted to own a second home in the US. “America is the engine for the world,” he says. “Everyone wants to have a holiday home in Florida, or an asset in New York. It’s the place to be.”

Mr Toumbas began looking at potential properties in New York City in mid-June 2006, but felt the timing was not quite right. The pound at that point was trading at about $1.84. “I held back because I thought there would be further dollar weakness,” he said.

London once again defied the skeptics and remained on target for a 17% increase in value in 2007 despite falling prices in much of the rest of the country.

The Royal Institute of Chartered Surveyors reported that “house price growth remained negative for the second month in succession,” and “new instructions declined for the fourth consecutive month at the fastest pace since June.”

Having said that, London was the only region in their monthly survey to experience a rise in instructions, and according to the Financial Times House Price Index, “prices in London rose 1.1 per cent in August compared with July and the annual rate of growth accelerated to 17.6 per cent, from 17 per cent in July. This was almost double the pace of growth of the south-east, the area with the second-highest increases, where prices were up by 9.4 per cent over the year. The cost of the average home in the capital is £363,364, compared with the national average of £225,826.”

The FT index suggests that overseas demand, rising immigration and City bonuses are fueling the London price increases.

Some areas around the country were less fortunate with price drops reported in the North, East Midlands and Yorkshire & Humberside and stagnant prices in the North West, South West and East Anglia.

Whether or not London can maintain this continued growth in the face of credit squeezes, reduced mortgage lending and dropping prices in much of the rest of the country remains to be seen and many analysts are predicting a slow down or reversal before the end of the year. For the moment though, it looks as though London is shoring up the whole market.

Links:

The Financial Times

The Royal Institute of Chartered Surveyors

The Halifax House Price Index

The Land Registry House Price Index

The Bank of Thailand admitted it had intervened in the currency market late last week, after a sudden weakening of the Baht, caused by foreign investors shifting their money out of Asia, worried that Citigroup would be downgraded when the full effect of the US sub-prime mortgage crisis took hold.

One potential upside of the situation at the moment is to make Thailand’s property market a far more attractive investment opportunity. The baht reached 34 baht to a US dollar this week. Combined with political uncertainties over the upcoming election causing softening prices the Thai property market seems to be shifting into overdrive.

Clayton Wade, managing director of Premier International, a Thailand-based residential and commercial property consulting group, made some interesting comments in a recent interview with The Bangkok Post. “With the recent downturn in economic indicators and consumer confidence, many local investors have switched money from the stock market to a more secure sector – the Thai property market.”

Donald Trump

No one could accuse Mr. Trump of not being prepared to blow his own horn, in fact, he even took a stand against Forbes magazine when they included him on their Forbes 400, claiming that Forbes had underestimated his wealth by $4 billion. We hesitate to call it class, but it has a certain flair. Despite nearly losing his shirt in the 1990’s real estate crash, “The Donald,” managed number 117 of this years Forbes 400 with an estimated wealth of $3 billion, although according to the man himself, “I’m worth $7 billion.”

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According to “Emerging Trends in Real Estate Asia Pacific 2008,” just published by the Urban Land Institute (ULI) and PricewaterhouseCoopers LLP, Shanghai, Singapore and Tokyo rank as the three most promising Asia Pacific cities in terms of real estate investment prospects.

David Sandison, a Tax Partner with PricewaterhouseCoopers in Singapore said, “It is expected that even greater amounts of capital will be flooding Asia Pacific real estate markets in 2008. The real challenge for investors will lie in finding the right assets against the backdrop of yield compression and scrutiny by regional governments and tax authorities.”

Shanghai topped the list for investment prospects, edged up from its second-place ranking last year. Singapore received the highest rating of any of the cities included in the report in terms of overall risk.

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Even for us, it is sometimes difficult to sort the informational wheat from the chaff and we are looking at conflicting reports coming from the Indian property markets at the moment.

On the one hand, its all good news: Mumbai Billionaire Mukesh Ambani is busy creating what is likely to be the â”most expensive home” in the world. The Financial Times is reporting that “property prices have soared” and the Indian Government has now allowed direct foreign investment in all construction projects without prior approval, which means foreign investors are permitted to invest in wholly owned subsidiaries or in joint ventures with Indian real estate companies.

There are a few minimum requirements, such as minimum capitalization requirements must be met within six months of the commencement of operations and the capital must remain locked in for three years thereafter. Foreign-invested projects must include at least 50,000 square meters of floor space and at least half the project must be completed within five years of receiving statutory clearance.