The seven property hotspots

14 August 2008

Property and investment company Aston Lloyd has unveiled its top emerging property investment hotspots, in a report based on in-depth studies from central banks and ministries called ‘The 7 property hotspots’.

Joe Upchurch, director of Aston Lloyd said: “The obvious attraction of buying in an emerging market is that prices are generally low and if you are buying purely for investment in the areas we have identified, things are bound to change. We have highlighted the negatives as well as the positives - each area is not without risk but with due diligence, you should be able to avoid the pitfalls. Owning something in these areas may not impress your neighbors just yet, but in a few years they may well be jealous.”

Below is a snap shot of the report:

Slovakia
Key emerging market in the European Union, the country’s property prices have risen by 100% since 2004, its capital Bratislava has 129% of the EU average GDP.

Where to invest: Central Bratislava where yields are high. Gross yields on 100 sq m and 120 sq m apartments are around 10.1%.

Watch out for: Minor land issues caused by unsolved heritage disputes prior to 1989 may require a prolonged acquisition procedure.

China
Home to 21% of the world’s population and forecast to be larger than the US economy by 2045, already the world’s second largest economy based on Purchasing Power Parity.

Where to invest: Shanghai with an increasing demand for high-end property. Beijing - influx of foreign workers for the Olympics that will further raise housing prices. Investment into city’s infrastructure expected to sustain price growth.

Watch out for: Consult with solicitors on precise property rights as given the communist government’s policies, certain property rights are not guaranteed.

Concerns about sustainability of the boom mean that investors should mitigate risk by buying in the central business districts rather than Olympic focused destinations.

Northern Cyprus
Plans for reunification with the Republic of Cyprus, combined with average annual economic growth of 12.7% since 2003 and annual capital appreciation of 25% over the past 2 years, Northern Cyprus is a key property hotspot.

Where to invest: Bogaz – the coastal fishing village is the hot spot for investment. It is popular for its beaches, sought after restaurants and its strategic location near Famugusta.

Watch out for: With the division of the island in 1974 and the forced removal of residents in certain areas, some claims to property may exist if the island division is settled and displaced northern Cypriots return from the South. Buy through a reputable investment company who guarantee no such claims exist on the property under sale.

Ukraine
The second largest economy amongst the former Soviet States, with a predicted sustained GDP growth of 5% per annum through to 2010. Ukrainian property in some areas is now priced higher than Warsaw and Amsterdam. Great potential for property investors for some time to come.

Where to invest: Kiev, has a growing expatriate community, and an increasing demand created for high standard builds in the capital. Prices have been driven up by demand. Supply to meet demand has not been sufficient, indicating that there is still room for investment.

Watch out for: Levels of corruption are high so a competent solicitor is essential. Taxes are also moderate to high. Gross rental income stands at 15% while leasing a property is subject to 20% VAT.

Bulgaria
A full member of the EU and tipped to receive over £8.8bn in EU development funding to 2013.

Where to invest: Sofia, the capital city and home to majority of Bulgaria’s 200, 000 millionaires, prices rose 35.21% in 2007 – a strong property investment.

Varna is the summer capital of Bulgaria. Euro 30 million invested in villas, apartments, shops and marinas. A lucrative area to invest, particularly in the holiday sector.

Watch out for: Closing costs are high (VAT, municipal tax, notary fees, registration fees and agent commission are paid by the buyer). Costs incurred by the buyer can therefore be up to 25%. There is also rental income tax so investors should make sure their investment returns profitable yields.

Turkey
Average annual growth rate of 7.3% since 2004, Turkey has established itself as a leading emerging market for property investors. Burgeoning tourist industry and planned reforms ahead of its EU accession, poised to become one of the world’s top 10 economies by 2050.

Where to buy: Belek, Turkey’s golfing mecca with plans to add up to 15 golf courses to its range of 5-star golf retreats over the coming years, Belek is bathed in sunshine for 320 days a year. Property investment has increased by 40% since 2005.

Bodrum, the yachting and tourism hub of the country where property prices have risen by 30% over the past two years.

Altinkum is cheaper than Bodrum yet 90 minutes drive by car from the prime investment resort town offering varied opportunities for on-sell and lettings.

Watch out for: check the planning so you don’t have ugly builds near your investment; ensure that property for sale is accompanied by title deeds and make sure you get a competent solicitor to explain the terms before making the decision to purchase.

Poland
Poised to become the manufacturing hub of Europe, it has experienced economic growth of 6.3% since 2006 with a low inflation rate of 2.5% in 2007. The country’s housing market is significantly larger than other European emerging markets and mortgages are easier to obtain.

Where to buy: Warsaw, high housing demand and profitable long-stay rental properties.

Krakow, well suited for rental investor with a housing supply that does not meet the demands of its high earning population.

The Tri-City - three adjacent towns of Gdansk, Gdynia and Sopot lie on the coast of the Gdansk Bay of the Baltic Sea and attract considerable inward investment from companies looking to recruit due to its wealth of educated professionals. Sopot ranks as Poland’s ‘best places to live’ by Polityka magazine.

Watch out for: Growth in Warsaw potentially unsustainable; increased due diligence on behalf of investors as some vendors offering inflated prices taking advantage of the boom in foreign speculative buying.

Editor’s comment
While these destinations may offer the prospect of higher property investment returns, the associated risks of buying properties in these countries are also a lot greater. Proceed with caution.