Megan Malone doesn’t need to be told that flats in Latvia are rising in value faster than anywhere else in the world – because she owns one. The freelance educationalist, who lives near Brecon in mid-Wales, bought her 1920s two-bedroom apartment in the Latvian capital of Riga for just £35,000 in 2003. Now it has more than doubled in value.
“Actually, I missed the boat. Two years earlier and that amount would have bought a five-bedroom mansion,” says Megan, whose flat in a managed block in the old part of Riga was extensively improved by the former owner. “But when I knew Latvia was going to join the EU, it seemed the right time to buy.”
Few could doubt Megan’s shrewd purchasing skills at choosing a location that, at the time she bought, had scarcely been heard of by most in the UK. But she is not alone, as Britons increasingly become a nation of risk-taking property hunters.
Today, literally millions of us own foreign homes while hundreds of thousands buy in highly unusual locations, driven by the desire to own a place in the sun and grab the maximum capital uplift when – with luck – it becomes a global hotspot.
“Jet-to-let is the new buy-to-let,” says Liam Bailey, research guru at estate agent Knight Frank. “People want a holiday home but they regard it as an investment too. Find yourself a place overseas before it has a step change and hugely appreciates, and you’ve got a bargain.”
Bailey is the author of Knight Frank’s new Global House Price Index, which is due to be published tomorrow. The Sunday Telegraph has had an exclusive preview of the figures, and the good news for Megan Malone is that Bailey’s research – which looks at parts of countries where Britons are likely to buy property – has Latvia at the top of a 30-nation league table for capital appreciation.
“Apartments in Riga have risen more than 45 per cent in a year,” Bailey notes. “It’s a levelling up that’s affecting all markets in the former Eastern Bloc. Wage inflation, growing prosperity and easier access to mortgages have all contributed to rapidly rising prices.”
Arc Properties, a Putney-based estate agency specialising in Riga and other east European locations, says British interest has mushroomed in the past 12 months. “Most people want to buy off-plan because prices are cheap and they get a lot for their money,” Rebecca van Lierde-Molinoff of Arc observes. “A few want period properties. They’re all banking on rental income.”
Although much of Latvia is forest-covered, the main tourist attraction is the pretty walled Old Town in the capital, Riga. It might seem the obvious place to buy, but Megan Malone recommends buying nearby. “Old Town flats are very small,” she says, “so don’t be fooled by the beauty of the area. You get a lot more for your money in surrounding areas.”
Intriguingly, 75 per cent of Arc’s buyers don’t even visit Latvia. They just buy there as an investment. The properties are used either as holiday homes, which are rented to tourists, or for long-term lets to locals.
Other east European high fliers in Knight Frank’s league table include Bulgaria and Estonia, up 20Â·5 per cent and 12·9 per cent in the past year, while far-flung places like South Africa, Canada and New Zealand also do well with increases of 14·3 per cent, 11·8 per cent and 10·6 per cent respectively.
Bailey himself tips Germany as the likely best performer next year from his current league table of 30. “Germany is Europe’s largest economy and the world’s largest exporter but its property market is still under-performing. We expect sustained growth from 2007.” Meanwhile he is working on including more east European countries in his analysis. “Accurate data is difficult in this region,” he says, “but we should shortly be getting robust figures for some new countries.”
These include Slovenia and Slovakia (“Probably the two countries with the best potential for large-scale growth in eastern Europe”) plus Russia – or, at least, Moscow. “It has huge potential for growth and will rival London as the world’s most expensive city in five years,” Bailey claims. “But few can afford even today’s prices, which are already extremely high.”
All of this is music to the ears of Britons traversing the globe in search of bargains. There are no official figures held on foreign property ownership but there are some fascinating indicators. In Spain alone, Britons own 69,284 second homes, according to the Office of National Statistics (although as that figure includes only those declared to the Inland Revenue, there may be many more).
The Department of Pensions says 871,000 Britons are retired and draw a state pension while living permanently overseas – and there are as many people again who have retired abroad who are either below pensionable age or choose not to take a pension at all.
“No one knows the definitive figure but it’s big and getting bigger,” claims James Hickman of Caxton FX, a currency firm specialising in overseas home purchases. “Homes in old favourites like Spain are expensive now and, because there are so many of them, they’re difficult to sell. Cannier buyers wanting good returns are looking for places that are undervalued and may soar in the near future.”
And Hickman’s top tip? It’s another vote for Germany. “It hasn’t risen much in value for over a decade and that must change soon,” he says. “I’ve had one British client who’s snapped up a terrace of 16 flats on the edge of Berlin for a total of €370,000 (£250,000), with each property pre-let and giving an annual yield of 14 per cent. Now that’s a good buy.”
But Germany’s problem may well be that it’s just too close, too easy to get to, for us increasingly-adventurous property colonialists. Distance and time are not necessarily obstacles when it comes to a Briton bagging a bargain in the sun, it seems.
“There are Caribbean and South American countries that are good investments, especially for holiday homes,” Liam Bailey says. “The markets are not always as transparent as in Europe and North America, but prospects in areas with high levels of tourism are generally good.”
A 12-hour flight from London to the Venezuelan tourist haven of Isla Margarita hasn’t deterred Carmel Daly-Fletcher, who runs The Skyrack pub next to Headingley cricket ground in Leeds. She and her husband, Paul, have remortgaged their home to buy three villas on Margarita, the cheapest of which is £61,000.
“You can’t get a two-up, two-down for that in this country, or in Ireland or Spain,” she explains. “There’s no value left to realise in those property markets so you have to look far away at emerging nations.”
Carmel isn’t put off by the threat, however distant, of the properties being confiscated by nationalisation-mad Venezuelan president Hugo Chavez. Instead, Carmel sees the long-term likelihood of a financial killing. “There are direct flights now from Gatwick and Manchester, and Margarita’s a popular holiday destination for Norwegians, Germans, the Danish and wealthy Venezuelans,” she enthuses. “We’re getting a six per cent guaranteed rental income and a month’s holiday there each year too – we’ve got a winner.”
So if a tiny island off South America is an attractive investment for Britons (and be honest, could you find Isla Margarita on a map?), is anywhere out of bounds? This summer has seen the first holiday homes on Mauritius and buy-to-lets in Las Vegas go to Britons; this autumn there will be new schemes launched at Buenos Aires in Argentina and Gdansk in Poland, again with sales drives in this country.
You have to go literally to the ends of the earth before you find a continent that remains a flight too far for the Brits: Australasia. Two New Zealand developments for sale over here – one at Wanaka and the other at Tui Creek, both on South Island – have so far struggled to find British buyers for properties priced at £400,000 and over. And two UK exhibitions of Australian investment properties had disappointing audiences, estate agents say.
“Australia and New Zealand are currently just for those permanently relocating,” says James Hickman of Caxton FX. “Many people seem willing to buy in the most unusual of places. But unless you’re moving permanently, the other side of the world is a step too far for investment or holiday homes – well, for the moment at least.”
‘We have winter sun and a solid investment’
Retired businessman Stephen Parker-Swift isn’t content just to buy a home overseas – he’s building his own to get a dream property in what he reckons is a dream location. By mid-September he and his retired wife Diana will have completed their five-bedroom villa next to a golf course at Franschoek, about 40 minutes east of Cape Town and in the centre of South Africa’s glorious wine country.
“We live in Salcombe in Devon, so the need to go away in the summer is limited. Why would we when it’s lovely at home? But we wanted a location which would be sunny over the British winter and would be a solid investment,” says Parker-Swift, who bought the plot four years ago but held off building to see the scale of development nearby as the golf course was built.
The couple, who plan to use their new home for no more than three months a year, looked at different countries but plumped for South Africa. Despite its being almost 6,000 miles from Britain, they say the country is “only a bad night’s sleep away” and, with little time difference, there is no problem with jet lag.
They are also undeterred by South Africa’s reputation for crime. “About 80 per cent of the local residents are permanent and the development has good security,” Stephen says. “Of course there are problems – but that applies to everywhere in the world.”
Source: Telegraph Property