Property Investment Strategies

The latest issue of Industry Week included an article by Adrienne Selko on the advantages for companies of investing in newly developing industrial regions at an early stage of their growth in order to secure good sites and well built and well managed plant and warehousing. Does this theme suggest that there is scope for private investors in spotting the up-and-coming places with a view to residential real estate investments?

The July issue of Atlantic Monthly included an excellent assessment by James Fallows of industrialisation in the China’s Guangdong Province. Part of the article is a profile of Irish-born Mr Fixit, Liam Casey, whose business is sourcing suppliers for foreign businesses, at which he is highly skilled. However, although there are commercial real estate opportunities in Guangdong (science and technology parks, for instance), it doesn’t seem as if they will be open to overseas investors for while, and, as for residential developments, Mr Casey has been living in the Sheraton Four Points and other hotels for over 10 years. Although Shenzhen has a buzz, it is not a much loved city, business people visit but donĂ¢’t stay; even the thousands of workers aspire to return to their own region when they’ve made enough money.

The problems of first-time buyers have been extremely well documented so the results of a recent survey from the Bradford & Bingley Building Society come as no surprise.

In it, 2/5 potential first-time buyers are holding down two jobs, 42% are receiving help from their parents and 43% have even thought about giving up buying altogether.

In this current climate, buyers are having to come up with ever more innovative ways of getting on the first rung of the ladder, and an increasing number are buying their first property abroad. A recent survey from YouGov found that nearly half of 18 to 29-year-olds plan to buy abroad and that for two thirds of these it would be their first purchase.

There are two main strategies for buying abroad. Firstly, the so-called jet-to-let schemes in which buyers purchase a home abroad at prices far below the UK’s, and use the rental income to pay for a mortgage on a home-based property.

Another more recent phenomenon is ‘overseas and sell’. This is when first-time buyers purchase properties off plan, without viewing them, and sell on completion for high returns.

As in the UK, buying a property off plan can reap significant rewards. Often, particularly in property hot spots, prices can rise significantly between the foundations being laid and final completion of the house or apartment. If you sell promptly once the building work is finished, you only have to fork out a deposit, rather than the full amount. The returns made can be significant and sufficient to buy a house back here.