Assetz® News - Assetz Property Investment Tracker Q2 Summer 2007

Assetz Property Investment Tracker Q2 Summer 2007

26th June 2007 |

DOUBLE YOUR MONEY IN POLAND WITH A 100% RETURN ON INVESTMENT

Detailed research from Assetz, the UK’s leading property investment specialist, brings together all the key investment criteria for the UK and overseas property hotspots to form a quarterly investment Tracker.

Investors double their money in Poland…
Poland has held on to its position at the top of the Tracker in the second quarter of 2007, with returns of 100% enabling investors to double their money in a year. This figure has fallen back on the last quarter (165%) due to capital growth for last year levelling out at around 20%, but with minimal deposits of just 20% required, Poland is expected to hold a strong position in the table for the rest of the year. The price of a typical two-bedroom apartment is currently just £50,000, with excellent local demand for property as well as foreign investment.

New entry Cape Verde makes its mark…
The newest entry to the Tracker, Cape Verde, located off Africa’s west coast, is about to make a big impact on the emerging market scene, with newly introduced mortgages creating huge opportunities for investors. Purchasing costs are low - in the region of £75,000 for a two-bedroom apartment - with high rental yields possible of 9% and strong capital growth of 11% over the last 12 months. After the initial burst of investment, the rate of growth has slowed slightly, but the introduction of borrowing has meant that investors need only invest 25% of the purchase price rather than 100%, vastly increasing their total returns. With low cost airlines introducing new routes to the islands, tourism is set to boom over the next five years.

All change in France as new presidential reign begins…
New French President Sarkozy’s pledge to create a nation of homeowners will be implemented through a number of tax breaks and with mortgage rates remaining low, the new presidency could spark a mini-property boom in France. Multiple French lenders have reduced the minimum deposits required from 15% to 10%, leading to increased returns on cash invested, which are now totalling 59% for the last 12 months.

UK continues to perform well on the global stage…
The five major UK house price indices currently show an average of 11.1% annualised growth, revealing that the average price of a home in the UK has leapt by over £20,000 in a year. As a buy-to-let destination the UK continues to prosper, lying in third place in the Tracker with gross yields of 6% and a total return on cash invested of 68%. Despite recent interest rate rises, the UK remains a low risk investment destination with very reasonable purchasing costs compared to much of Europe.

Bulgarian tourist hotspots show signs of overheating…
Bulgaria maintains a strong position in the Tracker with a total of 71% return on cash invested, but Assetz advises caution to investors, especially in the tourist hotspots such as Sunny Beach and Bansko where there is a severe oversupply of apartments. Local agents are reporting a lack of demand resulting in weak rental yields being achieved and the resale market is still unproven. However, average prices have increased from 17.3% to 22.5% annually in June 2007, possibly due to a number of ‘prestige’ developments coming onto the market.

Stuart Law, Managing Director of Assetz comments:

“There is a significant trend developing in the global property market. The start of a general slowdown in the rate of capital growth is occurring worldwide, while simultaneously mortgages are becoming increasingly competitive and lenders are requiring smaller deposits for property purchases. Consequently, investors are able to leverage their money more effectively, investing less, borrowing more and therefore as a result of gearing, benefiting from much higher overall returns on cash invested.

“This is countering the effect of slowing growth, with the general outlook for the global property market remaining extremely good for the medium to long term. The rate of growth in many countries, such as Poland and Bulgaria, could not continue at a rate of 20 – 30%, and a reduction to a more stable and realistic rate of growth was necessary.

“Cape Verde is looking like a very interesting prospect, as tourism levels soar and the introduction of mortgages opens the floodgates to investors. As with all emerging markets, it is important to take a long-term view and ensure there is a strong rental demand to cover costs.

“Due diligence will become even more important during this next phase of the global property market’s cycle, and investors must be more selective to ensure they are not only buying in the right country, but in the right town or city, in order to benefit from the highest returns.”

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