Emerging markets will be investor favourites in 2008

In its second Annual Global Property Hot Spots roundup, currency specialists HiFX reveals an increase in enquiries over the past 3 years to less traditional overseas property destinations like Bulgaria and China while interest in old favourites such as France and Spain has declined.

The Global Property Hot Spots report, based on analysis of enquiries received by HiFX, has found France and Spain to be consistently at the top of popular destinations for Brits buying abroad in recent years. However, the lead of these traditional holiday home countries is being lessened by new emerging markets where investors are vying for properties which will deliver quick growth. Interest in Bulgaria in 2007 was double what it was in 2005; the number of enquires relating to property in China has increased from zero in 2005 to 3% in 2007, which is more than were received for more traditional destinations such as Portugal and Cyprus.

A ten year bull run

Over the last 10 years, the Western world has enjoyed the biggest property boom in its history, creating a whole generation of potential property investors. Over the last decade house prices have boomed in almost every developed market with the exception of Germany and Japan. However, with developed economy markets at their current high, investors are increasingly turning their attention away from the traditional markets like Spain and to the emerging markets, such Eastern Europe and, new for 2008, even farther flung destinations such as Brazil, Egypt and, the canoeists favourite, Panama!

Interest in France and Spain declining but still leading the pack

According to the report interest in Spain has decreased by 2% since 2006 and is 10% lower than interest levels in 2005. Interest in France remained steady from 2006 to 2007 however enquires last year are down 7% compared to 2005.

Mark Bodega, Director at HiFX, who help over 30,000 people buy property abroad each year, explains “It’s easy to see why investors in particular are turning their backs on Spain and examining new markets at an earlier stage in their growth cycle. In August 2007, the national median price for property sold to overseas buyers in Spain was approximately €250,000. In Bulgaria the average price was closer to €60,000!

“With an abundance of low cost airline routes, short flight times and the great weather both countries will always be a favourite with British buyers and we expect them to remain so in 2008. However, overall, their lead is closing as the investor population continues to turn its attention to emerging markets in 2008.”

Credit crunch will not squeeze French property market

The well documented global credit crunch will also affect property tends in 2008. However, unlike in some overseas property markets, experts are predicting the squeeze will have far less of an impact on the French market. Approximately 95% of French loans are fixed rate and French banks are traditionally more conservative when it comes to lending money to both French and international buyers. As a result French economists are not predicting any big rises in interest rates. Overall, prices across France are not expected to rise significantly this year, nor are they likely to crash. However, as always, there will be regional differences.

Spanish Market Overview

Talk of a Spanish property crash has been much discussed, but according to HiFX, is not happening. Over supply has however affected the more popular Costas and, as a result, some areas of Spain are cooling and seeing market corrections. At the same time, however, less traditional inland regions are becoming more popular with savvy buyers.

Bodega advises “Buyers in Spain should cut through the current hype and think carefully about the property they are buying in order to make the most of the current market conditions. Only certain areas are suffering a slump due to over supply, whilst others still have much to offer. Even for those looking for capital growth in the short term there are plenty of opportunities to be had in the lesser known Costas such as Tarragona, in cities, and inland; for example in Jaen, Jerez and Cordoba.”

HiFX predict new comers to the Global Property Hotspots list in 2008 will include Panama, Egypt and Brazil. Some fast facts on the next hot destinations:

Panama

already popular with retirees
a good year-round climate and long coastline
20-year exemption from Panamanian property tax for residential properties
growing tourist industry
major construction already underway
cheap living costs

Egypt

year-round sun
wealth of history and world–class holiday resorts and attractions
low stamp duty; death succession duty of 7 per cent and no capital gains tax payable on the sale of property
growing economy
five-hour flight from the UK.
good rental yield potential combined with low purchase prices

Brazil

Huge economic growth predicted however property prices remain low

Buyers Beware!

Bodega concludes “Buyers should remember that their choice of where to buy really depends on why you are buying and on the degree of risk that you are willing to accept. Wherever you do decide to buy, be it Guildford or Granada, it’s imperative that you do your research and ignore the hype. We also always remind people that they would never agree to buy a property in the UK if they did not know how much it was going to cost them; if you agree to buy an overseas property without fixing the exchange rate at the outset, that's exactly the gamble you’ll be taking.”