How to spot a hot property
Since the Spanish property boom of the late 1980s and early 1990s, many people in the UK have been on the look-out for a holiday home in the sun. In realising a considerable amount of equity in their property, they appeared to become property investment specialists over-night. The only problem is that effective property investment requires much more than striking it lucky in one market. It’s about calculating risks, estimating growth and return.
Let me put it this way: when you view a house or apartment that you are considering buying, do you see the nice south-facing balcony and the walls painted in your favourite colour? Or do you visualise a balance sheet weighing up expenses against income?
Clearly, you must take factors such as decor into account because, although you are buying for investment, you will need to be able to sell on at a profit to someone who has another use for the property. But you need to look at every aspect of the investment, weighing up the pros and cons, the profit and loss, the income and expenditure. No investment is without its weaknesses, but you must be able to evaluate these so that you can make a measured judgement.
In my experience, the most successful investors will only view the property for a few minutes before deciding to proceed. The reason is that they had already satisfied 95 per cent of their requirements through extensive research before visiting.
So, where to buy? This is the question that everyone wants answering. The fact is, there is no one single location or country but a range which offers different pros and cons. Whenever there is a programme promoting Bulgaria on the television, our company receives over five times the average amount of visits to our website.
I am not going to give my prediction for the next big thing, nor am I going to tell you where to spend your money. (Although the answer would probably not surprise you).
But here are some tips on how to decide on which country and location to invest in...
- Budget. Many people will tell you that location is the most important aspect. Well, if you can’t afford a property, then there’s certainly no use looking at it. If a location offers lower-priced property, it opens up the market to other buyers who may want to buy with the small amount of equity they have in their current residence.
- Tourism. This is the key ‘driver’ for many markets. Why would people want to visit this country in the first place? Obviously, every country has a capital city, but not all have impressive golf courses, exciting ski slopes, spectacular coast-lines and so on. Choose a location which has wide appeal. Also, bear in mind that some countries have longer letting or tourism seasons than others.
- Growth. What is likely to happen in the next five to ten years that could have an adverse or beneficial effect on property?
- War and political conflict lead to widespread uncertainty and will cause property prices to fall. On the other hand, EU accession, Olympic bids, hosting major events or new tourist attractions will lead to increased investment and higher property prices. It is important to look at the country as a whole, and not just the property market. What state is the local economy in? Is there room for further growth? Find the answers to these questions.
- Rationale. Why are you buying? In an emerging market, it’s difficult to accurately predict the money that will come in from rental income. People should only invest in emerging markets in order to appreciate their capital, not for short-term gain.
- Location. Every country has good areas to invest in, and bad areas to invest in. Buying a house 20 kilometres from the coast just because it’s cheaper is not necessarily a good investment. You need to be able to sell it on, and it must have appeal to a wide audience.
- Property investment is one of the safest and most profitable ways of making money. Others investment mechanisms range from those which offer little return to ones which are pure gambles. Property investment offers a happy medium and an investment that can bring huge gains, if you do your homework.
Michael Johns is Managing Director of The Right Move Abroad, who specialise in investment in emerging markets; visit their website: www.therightmoveabroad.com.
