Assetz® News - Built to last?

Built to last?

5th March 2008 |

One of the major themes for those looking to buy investment property overseas has been the question of whether they should opt for traditional markets or emerging markets. With so many new opportunities arising for investment in places where it would have been impossible not so long ago (eastern Europe being an obvious example) the temptations are many.

The argument for leaving behind established markets is that these can be saturated in places, offer nothing new and lack the potential for making money that an emerging, fast-growing market could offer. On the other hand, it has been suggested, with the existing markets investors could be sure that they were not leaping into the unknown. The chances of enjoying a huge, sudden return might be less, but so were those of losing one's shirt.

Speaking up for one of those established markets, French property firm VEF's spokesperson Cherise Williams suggested the main issue was not whether people could make money in the short-term out of new markets, but whether such markets could ever compete with the time-honoured traditions of France which ensured an enduring appeal.

She stated: "France didn't just appear out of the middle of a desert because of a group a rich developers. France has many sustainable qualities that many emerging markets cannot compete with … the heritage, the culture, the food, the lifestyle, the climate and multitude of landscapes all contribute to its long lasting popularity."

Ms Williams added that because of this there was rarely an emotional attachment to places with new markets but ephemeral appeal, from which investors would soon move their money on to other markets.

She concluded: "Once the capital appreciation starts to slow down in that particular market, the investor will either move on to other emerging markets or consider making a long-term investment with a view to retiring in countries such as France."

For all these reasons, it may indeed be that France offers a good long-term bet, along with other established markets such as Spain and Portugal. But it is far from clear that all emerging markets will fail to have a lasting appeal.

For example, Cape Verde, one of the most notable boom markets, may have a whole range of issues in its favour, not least for British investors. Being the closest tropical islands to Britain and in the same time zone may enable it to establish a lasting appeal as a sun, sea and sand destination in the way Spain is now. This proximity advantage will enable the archipelago to offer itself as a more accessible alternative to the Caribbean or the Maldives. Barring an earthquake somewhat more powerful than the recent one in Lincolnshire, this is an advantage which is not going to go away.

Commenting on the islands recently, Simon Conn, sales and marketing director at overseas mortgage broker Conti Financial Services, told the Independent: "Cape Verde is a good bet because, as an ex-Portuguese colony, it is politically and economically stable." While this aspect may be another good reason to back the archipelago, it could also be a good one to reject other emerging markets. Mr Conn told the paper there were corruption and planning problems in Turkey, property purchases in Thailand can only be done jointly with a national who must have the majority share and in Egypt raising finance is hard.

Recent figures for investment overseas by Britons have shown that both investment in traditional markets and new ones is high. Of the 242,000 purchases made by British nationals last year, figures from the Association of International Property Professionals indicate 25.4 per cent were in Spain and 17 per cent in France, Ready2Invest reports.

While this shows that the two main destinations for buyers (many for holiday homes rather than to make money) were the familiar top two, this still left the majority buying elsewhere. Add to that the fact that the number of purchases was 21 per cent up on 2006 and a clear picture emerges - that in a diverse market, both the long-standing appeal of traditional markets and the excitement of new ones are attracting plenty of investors.