Lewis issues warning for overseas property investors – don’t believe the hype!

Reflecting on Barclays’ predictions that double 2005’s 2.2 million overseas buyers will invest in property in the coming years, Property Secrets’ CEO Neil Lewis issued a warning that UK buyers are still making fundamental mistakes when buying their investment property abroad.

As 82% of Barclays’ surveyed customers were buying property as an investment rather than as a holiday home, Lewis highlighted poor location selection driven by a limited strategy, flawed research and a over-hyping of markets as the main contributors to disappointing investment performance.

“The perception that a property located near to a beach equals a safe and profitable investment incredibly still prevails. A case in point is Bulgaria, where in the past year there’s a massive oversupply of beach-front property on the Baltic Coast standing empty and unsellable – yet UK investors continue to buy.

“This highlights a real lack of strategy. Investors have made their purchases without due care and attention to the coasts poor rental and resale markets. This then guarantees a limited and totally inflexible exit strategy”.

Of the total number of Barclays’ overseas buyers, 48% were dissatisfied with advice provided by a third party. Lewis points to the legal uncertainties many investors face as an additional cost and a barrier to expected rate of return.

“Investors are often left in the dark over the contracts they sign due to inconsistent translation and subjective interpretation. This results in hidden costs, less than air-tight contracts and no control over issues like indexation”.

And it isn’t just the legal pitfalls that beset investors. Property investment companies have proved equally culpable.

“In 2005, we warned against investing along the Bulgarian coast and ski resorts. When there’s as much hype as seen about Bulgaria, my advice would be to show caution and conduct comprehensive research and due diligence before committing.

Lewis sites soft and hard factors as the core research criteria that should form the foundation of a successful investment. The ‘hard’ factors relate to the economic and tangible factors such as infrastructure. The ‘soft’ factors address rather the non-quantifiables such as the feel of a location, or emotive factors such as a name, or a reputation.

“We find that the ‘soft’ factors are the ones most hyped – such as a potential bid for a major sporting event or the perception of a district amongst the local market – and it is this that highlights any gaps in research.

“My advice would be to conduct detailed research into the ‘hard’ and ‘soft’ factors that make a good investment great”.

Property Secrets’ team of researchers provide independent analysis into Europe’s markets. Using the data to source new investment opportunities for its clients, Property Secrets has quickly developed into one of the leading voices in European property research and investment.