Having visited the Master Investor Show in London a week ago, I was struck by the ardent views of so many city business people. Whilst none of them were there to promote investing in property, too many financial instruments to play with, what they said was relevant to the overseas property investor, particularly those considering buying in Europe.
Where to invest in overseas property? Some strands of thinking from the presenters
With Central Banks owning about 30% of financial products around the world and so heavily embroiled in the World’s finances, government decisions have a much greater impact on bond yields and wider investment returns. Gold prices have been suppressed by government holdings, sold in bulk and government bonds are no longer as attractive as they once were.
Corporate sector safer option?
Globalisation has lowered the cost of living, through global sourcing and supply chains e.g in the clothing industry, stock sourcing is usually from overseas, which keeps costs down, although not always happily for many workers, as witnessed in Bangladesh.
The Trade picture in many European countries has deteriorated over the last 10-20 years, importing much more than exporting and causing inflationary pressures. At the same time, there has been much political instability in Europe, major economies like Spain now has 27% unemployment (55% for youth) and is delaying austerity for 2 years, which impacts on the rest of Europe. We are now living in an era of a North: South divide, not the East-West of yesteryear in Europe.
World economic growth continues to disappoint. Debt pressure at consumer and government level in the developed world acts as a weight on growth. Even the developing world is suffering from weaker global demand and growth is starting to slow.
So where are investors to make money?
Well in the city, they are advocating investing in companies, not consumers or governments. At the same time they see developments in Europe.
Although Jim Mellon, Entrepreneur and international property portfolio investor, expressed concern that Malta and Slovenia would be the next cards in the pack to go, he was far more concerned for the prospect of France. With huge debts, high unemployment, dominance of the Public Sector and an inability to balance budgets. This would affect the Euro significantly and create the next wave of Euro jitters. This is more of a concern than either Italy (seen as richer, but just not efficient at tax collection), or Spain (which has made inroads to address imbalances).
European banks are considered more highly leveraged than the US banks were before the crisis. European economies can’t recover properly until bank balance sheets are mended.
Overseas Property Investment and Overseas Governments
A blog post I wrote not so long ago about “Should Overseas Property Folk care about Sovereign debt?” still seems highly relevant today. The country you are choosing to buy in, needs to have an element of stability and sustainability.
So which are the countries in Europe, that are still ok to consider? Well a lot will come down to matching up a country’s economic performance against your personal risk profile or appetite.
And drawing on some of Dr. Andy Richards’ thoughts (Entrepreneur, Angel Investor in Life Science sector) on how he invests, useful questions to answer about what you want out of investing are:
- Are you simply after Money?
- What level of risk are you prepared to take?
- What role does fun play?
- How Active or Passive do you want to be?
In Overseas property investing, usually just going after money can sometimes lead a buyer to seek out deals, with the best-looking numbers, on paper. Overseas Property deals quoting, too-good-to-be true returns, have not always turned out to be the best deals in reality.
In overseas property investing, it is always good to know what the limits are to your investment funds. Are you comfortable with raising funds on your own home, or is it a cash-only relationship?
Many investors get enjoyment and satisfaction out of clinching a good deal and adding to their property portfolio profit pool. If it simply makes you restless at night, then maybe this isn’t fun for you…
How much time have you got to do the research, due diligence and site visits? You might want help and want an agent who can help build your property portfolio or simply want overseas property deals introduced.
For me, investors looking for a medium risk, medium to long term investment could do worse than a country like Poland, due to outgrow Germany in Europe and Turkey with a foot in both European and Asian continents. For help in investing in property in Poland or investing in Turkey property, contact an overseas property advisor like Property Venture® who can help
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Tags: European property, investment property, overseas banks, overseas property, Safe-haven, sovereign debt, Turkey