| |
WHAT TO LOOK FOR WHEN BUYING OVERSEAS PROPERTY.
- If Cyprus is a country that interests you, it makes life a lot easier if someone can provide all the statistics and background information you need to help you carry out your own due diligence.
- Cyprus is a country that I believe offers excellent investment potential. It is a country where I have already bought investment property and a place where I intend to buy more in 2007.
There are hundreds of reasons why a certain property investment might perform well but over the years I have noticed that there are key drivers that seem to crop up time and time again. As I go through these drivers I have no doubt that you will be able to think of one or two good examples in each category.
1. Shortage of land.
It is impossible to avoid the fact that it is supply and demand that drives the property market. Shortage of land (or planning for that land), is what has created so many property millionaires over the years. If developers can build wherever they like and without restriction, then prices will never rise as much as when either land, or planning permission, is in short supply. A somewhat obvious statement you might think, but that's the property market for you. There is nothing I will tell you that you haven't heard before. Surprisingly though, few people focus their attention on the things that matter most.
2. Rising property prices.
Have you ever bought property in a falling market? No, few ever have - although those that do, and manage to get the timing right, are usually the biggest winners of all. Whilst I am first in line when it comes to taking a contrarian point of view, I generally look for an investment area where there has been steady and consistent growth in the years before I purchase in preference to an area where growth is either flat or erratic.
3. Preferential tax regime.
Any foreign country that offers a tax friendly environment will usually have a strong property market. Again we are looking for a history of tax benevolence, not some tin pot regime offering a lucrative scheme that will disappear the moment the next military coup takes place. When it comes to safe, tax friendly locations, you are probably already thinking of places like the Channel Islands and the Isle of Man where property prices have gone through the roof. There is no doubt that these islands would not attract this amount of attention were it not for the tax benefits they offer.
4. Population growth.
Unlike many drivers we look at, population growth is much easier to predict. Item one in this list is shortage of land but shortage of land is not enough if no one wants to live there, or indeed visit a particular location.
Population growth could be as a result of significant expansion in the local population or a temporary or seasonal increase caused by tourism. Either way there is an increase in the number of people wanting to buy or rent in a particular area which will result in a rise in property values.
5. Expansion in the economy.
House prices and expansion in the economy go hand in hand. Globalisation is changing the property investment map beyond recognition and new technology, particularly broadband, mobile phones and Skype, are opening up new opportunities around the world. With our capital cities bursting at the seams this is probably just as well. Today, since I have a bad cold and don't want to spread it around the office, I am writing this week's newsletter from home thanks to a laptop and internet connection. The truth is I could be anywhere in the world and it would not affect what I produce in any way (arguably I might get a better suntan if I wasn't in England but that's another matter).
6. EU membership.
This can be split into EU membership and Euro membership, both of which are strong drivers for property markets. You could fill several newsletters on this important issue but since we have discussed these issues before in great detail it is sufficient to say here that the alignment of regulation and services following EU membership has always resulted in a massive influx of investment money from outside the region.
7. Expansion in the infrastructure.
Here I look primarily at roads and airports, although UK investors will already recognise that even small scale expansion, such as a new tube station or railway link, is enough to create some amazing investment opportunities. When governments invest millions in airport or motorway expansion you can sleep safe in the knowledge that someone else has already done the due diligence and economic growth is just around the corner. With foreign markets, a new motorway or a new airport is the equivalent of a huge "Buy here now!" sign for any investor looking for capital growth.
8. Golf courses and marinas.
I have lumped these two together because they both attract the same thing - high spending individuals all year round. Any market that is currently a summer only market will immediately achieve all year rental status once the golfers turn up, providing the winters are mild. Golfers spend significantly more than the sun and sea visitor and, of course, the two million pound yacht owner spends more than both groups. Find new golf courses, find new marinas, and you would have to buy a complete dog of a property not to see capital gain and increased rental yields in those areas. Usually you will need to buy more up-market property close to these facilities to get the best gains, but as always the general lift will be enough to see most property in the area do well.
9. Cheap flights.
Even if you are looking at high end property investment then cheap carriers are still welcome. In recent surveys it has been shown that the biggest user of cheap flights is the well-heeled tourist rather than those counting the pennies. The rich seem to take delight in getting to their chosen destination for less money than it has cost them to park the Mercedes. Just the announcement of cheap flights is enough to harden up property prices and most of the major property booms we have seen in the last ten years have been built, at least in part, on the back of the work done by EasyJet and Ryanair. Whether you love them or loathe them, as a property investor it is impossible not to have cheap flights in your top ten of investment drivers.
10. Safe area, low crime.
High crime equals low capital gain. Whether it is violence or drugs, we have all seen great investment opportunities destroyed by high crime rates. Some countries have a history of low crime rates and these are the ones you should search out, particularly if you are not around to keep an eye on your investments.
11. All year rental market.
Why buy a property that you can only rent out for six months of the year when you can buy in a country where you can rent it out for 12 months of
the year? It's no good saying that you can use it for the dead period. If no one else wants to go there in November why would you? All year
rental markets are safer and more appropriate to the property investor. If you are buying a place for your own use and don't care about the rental income then fine, that's a different matter, but most investors are looking for the biggest returns they can get.
12. Favourable exchange rates.
And finally - the issue of exchange rates. Most investors are a lot more knowledgeable these days about the way the money markets work and that
includes exchange rates between different regions. The strength of the pound makes a big difference to your purchase costs and when we are only
looking for a ten per cent gain each year it is amazing how much difference a good exchange rate can make to your deal. Over the last six months the difference between the English pound and the Cypriot pound for example is enough to enable you to get your furniture package for free, or looking at it another way, around £5,000 off the price of your property.
CYPRUS - LOOKING FOR DRIVERS.
When you start looking at the above list of drivers and then apply them to Cyprus it comes as something of a shock to find that you can tick every box. I can't remember a time before when I could do that.
* A shortage of good plots near to the sea.
* Property prices rising year on year and forecast to continue.
* Probably the best tax regime in Europe with no Inheritance Tax and no Wealth Tax.
* Current population just over 1 million forecast to increase to 3 million by 2013.
* A growing economy across all sectors.
* EU membership acquired in 2004 and Euro membership expected in January 2008.
* Massive investment in roads and airports. Both Larnaca and Paphos airports undergoing huge expansion which will be complete by 2009.
* Five new golf courses are at the advanced planning stage and are fully supported by the government.
* Four large scale marina projects planned (up to 4000 berths) supported by a series of regional marinas along the coast.
* Cheap flights were announced just before Christmas by Monarch which will operate from Luton to Larnaca. The service will start in March of this year.
* Cyprus has one of the lowest crime rates of any European country.
* All year sunshine means an all year rental market which will be further boosted by the new golf courses.
* Favourable exchange rate if you are buying in Sterling.
So all in all, it is not difficult to see why Cyprus is an investment opportunity, and in particular why it is now is a great time to buy.
Can I take this opportunity to wish each and every one of you a happy,
healthy and prosperous New Year.
Until next time - happy investing.
Book a viewing trip now: http://www.investmentpropertyincyprus.co.uk/inspection.php
Best Regards
Cherry Clift
http://www.investmentpropertyincyprus.com
|
Cyprus Latest