The Property World in 2007
2006 was a good year for the overseas property industry and especially for buyers because there were more property choices and higher quality of properties as well. The standard of buildings even in the emerging markets is getting higher all the time and this is what people want. Many buyers are now buying for investment as well as lifestyle and this will become an increasing trend in 2007.
Investors are also looking to build property portfolios themselves so they can control their investments and reduce the annual costs of running . Aquarius Properties have responded to this demand by introducing their comprehensive wrap around service for clients who want to build their own Property Portfolio and this is covered later on in this brochure. This service allows clients to build a Property Portfolio in a hassle free way with the assistance of Independent Lawyers, Chartered Accountants and Aquarius Properties as their property company.
The locations which were popular in 2006 were Spain which is still a top location for British and Irish buyers, Portugal which is and probably will always be popular with the lifestyle buyers who go there on holidays regularly, Dominican Republic which is starting to move up in the popularity stakes, Poland , Bulgaria and Romania which are emerging markets with much potential.
Turkey is one of the countries with most potential in 2007 and after because there is an acute shortage of housing there and a huge young population all needing houses in the next few years as the economy booms ahead. The best locations are Bodrum and Alanya for tourist homes to let and Istanbul for investment in Buy to Let and capital appreciation.
Whats' in store for 2007
Dubai continues to grow and is truly an amazing location to visit, seeing is believing and when the new Sports City is completed sports tourism will expand in this area. The area is continuously growing with more people coming to the region daily. So long as they can continue to attract tourists and industry to the region the property market will continue to grow but the speculative days of buying a property and selling it on several times before completion are over for now. Yields are still healthy and this area is still a good long term investment location. This is despite the fact that the property market might experience short term peaks and thoughts because of high completions in a particular period. The new Dubai waterfront development which is the largest man made development in the world and which will be over seven times the size of Manhattan and expected to house over 500,000 people will be a very important development for Dubai. Located close to the new Jebel Ali Airport and with direct access to the Sheikh Zayed Rd, Ali Freezone and Abu Dhabi it is full accessible to the international world. It should attract even more people to the area and yields are expected to be very high there.
The government have managed to attract industry with their advantageous tax regime and individuals like it because of the weather and also because it's a tax free zone for the retired community. Now that freehold property title is available in Dubai in many zones including the new waterfront development and Sports City will mean a continued appetite for property in this market. If the past successes have anything to do with what might happen in the future Dubai should be a hub of activity in the years to come.
Brazil
Brazil is a new entrant to the property market but is taking off fast and mainly because of the prices and the fact that there are established foreign developers from Portugal and Spain establishing there and using the marketing outlets they have used for years in Europe.
Brazil is classed as a new emerging property market, which puts potential growth figures at their highest at present. Over the past five years, Brazil has seen property prices increase by approix 20% pa.. Last year, in some areas of north east Brazil, returns of 20%+ were not uncommon.
Now is the time to consider a property investment in Brazil. Property prices are low and look set to rise as the Brazilian property market and supporting infrastructure continue to mature at a very steady pace. Property experts are predicting this is the market for investment now before prices shoot up in the coming yesrs as the economy grows.
The cost of living in Brazil is much lower than in most European destinations and currently stands at 20% of that in the UK. As a result, the cost of maintaining and managing your property is very low and it is small wonder that Brazil is also increasingly popular as an expatriate retirement haven.
The property market in Brazil currently sits on the brink of a boom period while investment growth is inevitable in Brazil, especially in locations by the sea and in north east Brazil.
Many areas are being transformed into top class resorts with supporting infrastructures to boost the tourist industry. Brazil's tourism success is creating a huge demand for accommodation and shrewd property investors are acting early, purchasing bargain properties with a view to generating good rental yields. Meanwhile the market is gaining momentum and property prices are steadily pushing upwards.
Currency exchange rates are very favourable in Brazil today, making property investment a viable and attractive option to foreign investors who avoid losing vast amounts of money in their exchange transactions against the Brazilian Real.
Brazilian currency has recently stabilised and become far more competitive with other international currencies such as the US dollar. This has of course increased purchasing power for overseas investors in Brazil. The competitiveness of currency exchange also means that international businesses from the US and UK are establishing themselves in Brazil and are able to operate with far lower overheads, therefore creating increased productivity and profits.
In the year of his election in 2003, President Lula decreased inflation to 16% while today inflation stands at an all-time low of around 5.7%, firmly indicating a safe and secure economy in which to invest.
Brazil's economic expansion and low inflation levels could well result in central bankers in Brazil dramatically cutting their lending rates. This, in turn, would result in much local property market activity, with a reduced cost of borrowing making loans affordable for Brazilian citizens. The increase in profitability of certain major Brazilian companies (eg. Unibanco, Brazil's private sector bank and Eletropaulo, power distributors) as well as the successful expansion of international companies in Brazil (eg. Arclor and InBev, the world's largest beer producer) further boost the economic prospects of the country, bringing with them a positive effect on real estate investments. Furthermore, Spanish and Portuguese developers as well as major hotel and resort groups have now arrived in Brazil and are currently investing millions of euros on tourist developments aimed at the European market.
Poland will continue to grow in 2007 with many of the cities including Warsaw, Lodz, Cracow, and Gdansk growing in popularity with property investors for buy to let property. For investors looking at the residential property market in Poland there are a number of opportunities available to them to explore. Firstly home ownership in Poland is quite low at the moment and as the population slowly becomes more affluent as GDP increases and unemployment figures drop, so the number of Poles wanting to buy their own home should increase.
As the Polish government is directly committed to increasing GDP further and improving the living standards of its citizens, it's fair to say that over the medium term demand for property for sale from the local population will increase and this should increase property prices suggesting that an investor who buys now and holds stock for the medium term should reap returns in terms of healthy capital growth.
To fuel this local buying demand there's good availability of mortgage finance in Poland; to date the mortgage market has not been overly exploited and this means there remains strong lending potential which in turn means that those who want to buy can afford to do so.
This should give an investor even more long term confidence in the Polish residential property market.
There is currently a very strong rental demand for accommodation that is actually surging in cities like Krakow and Warsaw where good employment opportunities exist. These cities are witnessing unprecedented levels of inward local migration as people move from outer lying areas to get work in the cities. This means demand for accommodation exists and an investor can achieve decent rental yields in Poland at the moment which will likely increase in 2007.
Similar trends are likely to occur in Slovakia which was also in demand in 2006 and is a highly rated property location for investment. Slovakia, ideally located in Central Europe has one of the fastest-growing economies in the region and was nominated by the World Bank in 2004 as having the most rapidly improving investment climate globally.
Real Estate investment in the capital Bratislava are stable and growth is larger than the national average. . Equally, the Tatras mountain regions offer excellent conditions for growth with the letting market being limited to the ski resorts. Demand is set to stay higher than supply due to Slovakia's strict protection rules for national park areas which cover much of the country's ski zones.
Turkey
Turkey is one of the most interesting markets because it is an emerging economy with great promise. It has a young population where over 73% of its population are under the age of 35% and it its economy is growing fast and this is creating a demand for properties. GDP growth in 2005 was 7% and is forecast to slow from about 5.2% in 2006 to 4.5% in 2007
Mortgages are only being introduced in the next few months and this will have a positive impact on the property market. There is an acute shortage of housing in Turkey and this shortage will continue for some time to come. Over 600,000 new homes are required annually and supply is falling well short of that figure.
Tourism is and will continue to be very important to its economy and in resorts like Bodrum on the Aegean coast there is a need for properties to let to the tourists in the Summer months. There is also a shortage of hotel accommodation in this area. The Alanya area has far more hotels and is better able to accommodate the rising tourism markets.
As the economy in Turkey grows so will the wealth of its people who will start purchasing modern homes to live in.
Buying in this market now could result in lucrative gains in the future.
The best locations to purchase in for investment are the tourism area of Bodrum which is an upmarket location just starting to be developed as well as Istanbul which would be suitable for buy to let properties. Expect yields of around 5% in this market but substantial capital gains in the future. It is important to remember that when purchasing property in Turkey one should think long term and hold the property for at least 5 years. Buying to flip is not advised in this marker where new developments are coming on the market all the time. Also if you sell after 4 years you incur no Capital Gains Tax in Turkey under the current legislation.
Bulgaria is still a good investment location even though the property market there was no 1 in the UK last year, it is expected to continue to be popular in 2007. The economy in Bulgaria is expanding fast and the infrastructures are improving all the time. The best buys are in the Cities including Sofia the capital and in the ski resorts like Bansko where there is massive investment in the infrastructures and ski lifts as well as Golf courses. Tourism is growing fast in Bulgaria and they can hardly keep up with the demand for beds along the coast. The one weakness with this market is that the services supporting the property rental market are not up to speed yet and even though there are lots of properties in places like Sunny Beach they are not getting rented despite the demand because of the lack of rental and management services. Developers have recognised this and are not selling fully managed properties and these are the best buys for investors because occupancies are high throughout the summer months.
Places like the Dominican Republic where occupancy levels are at around 92% should be popular for investors in 2007. The government there are encouraging investors by giving tax free status to investors for ten years. This is a big advantage for Investors. The newest development called Punta Perla should sell very well in 2007. It won three awards at the Property Oscars in 2006 and is now recognised internationally as a top luxury world class resort. Property prices are expected to increase substantially in this resort following the official launch in early 2007. A new location beginning to sell now is St Lucia which is one of the smaller Islands close to the Dominican Republic in the Caribbean where prices are very cheap and the rental market is good. Like the Dominican Republic it gets a lot of American tourists annually. As it is an emerging market now is the time to purchase a property whether for lifestyle or Investment.
Morocco is also a hot location especially for lifestyle buyers who want a cheap place in the sun. British buyers have been busy there in 2006 and now the Irish market is beginning to purchase there. Like the Channel Tunnel between England and France, Spain will soon be connected by an undersea tunnel to Morocco, joining Europe to Africa.
The planned tunnel under the Straits of Gibraltar, could start as early as next year. It is estimated that up to nine million users a year could be using the tunnel and rail service by 2025.
The 35KM tunnel is set to boost property prices and demand for real estate in Spain and Morocco. Following EasyJet's recent announcement for flights into Morocco, Ryanair has just signed a deal with the Moroccan government. This follows six months of negotiations.
Travelmole reports that Ryanair will gain access to most regional airports in Morocco and in return has committed to opening up to 20 routes delivering one million passengers a year by the end of the five year period. Dubai developers signed a $19 billion deal with Moroccan government as well for the development of Tourism projects in Morocco over the next few years. Dubai Holding will develop projects worth $12 billion in major Moroccan cities over the next five years, while Emaar will be investing $6.8 billion in six projects - after signing a new $5.3 billion Memorandum of Understanding (MoU) with the King Mohammed VI, King of Morocco. All this investment as well as the investment in the infrastructure will have a positive impact on house tourism in this country and make it a tourist location of note worldwide. This is all good news for property owners and makes Morocco a hot property location in 2007.
A new area for investment is Egypt which has only come on the property scene, a very interesting market and one forecast to grow in 2007. Prices there are very low now and should increase over the next two years at a rapid rate.
A very interesting market is Brazil with its long coastline with beautiful golden beaches it has a natural attraction for a growing tourist business. The North East of Brazil is the new emerging area where most of the new developments are being built and prices are hard to believe. Fantastic growth in Tourist numbers over the last few years, with growth from 4.1 to 5.5 m since 2003. It is aimed to increase this to 9 million per year by 2007.It is becoming increasingly easy to get to with flights direct in only 9 hours from UK. A new airport is being built in this area to be finished by 2009 with capacity of 5 million per year. Fantastic climate with average temperatures of 28 degrees. Area is reported by NASA to have the purest air in the world!. Brazil is worlds 15th richest economy. GDP growth rates of approx 4% pa. The economic situation in Brazil presents itself as the most favourable in historical terms to undertake long term investments, especially with regard to property investments. For those putting together a portfolio it might be worth purchasing a nice apartment and holding it for 5 to 6 years.
The US market lost its lustre in 2006 however now may be a good time to buy when prices are lower and there is plenty supply. Aquarius have some prestigious developments in Miami and Chicago for sale to Investors who want a buy to let property. I don't expect this market to be very busy this year but astute buyers will include it in their portfolios.
I forecast a very busy property market for 2007 and the countries I expect to be most popular are the Morocco, Dubai, Egypt , Brazil, Poland, Slovakia, Bulgaria and Turkey for the lower priced properties up to €200,000 in value and the Dominican Republic, St Lucia Spain and Portugal for properties in the 200,000 plus bracket. I also predict that buyers will want to start building property portfolios in a more structures way and will also want good professional advice to help them on their way.
Noreen Hynes
Managing Director
Aquarius Properties
Marketing properties in over 25 countries worldwide.