BRICs Property – no longer the big attraction for Property Abroad? MIPIM thinks not

March 14, 2011

Property Hotspots Abroad -Property Venture® weighs up the battle of the “PIGS” against the “BRICS”

In 2010 the property World seemed divided between two camps the “developed” property markets like Europe, of which the weaker nations were dubbed the “PIGS” and the Emerging overseas property markets, often referred to as BRIC nations.

Recently, Robert White of  Real Capital Analytics, at the property MIPIM conference states: ” Instead of the famous BRIC countries – Brazil, Russia, India and China – the CBTPs, namely China, Brazil, Turkey and Poland, are an emerging force in the property sector” speaking with the Hürriyet Daily News & Economic Review on Tuesday at the International Market for Property Professionals, or MIPIM.

So have we gone full circle or are we seeing new markets emerging for overseas property investors?

Well individual European property markets vary dramatically, with country annual growth ranging from – 14.8% in Ireland and – 3.7% in Spain, to stronger European countries like Poland at 8.1% growth and Turkey at 2%. Economic growth bodes well for property markets, since the wealth generated creates property demand and acts as a driver of the property market.

So herein lies the rub, there is a complex property story within the European continent and within each country. So Europe is not an all, low-growth property zone.

Buying European Property? The PIGS and BRICs

PIGS_Spain PropertyEvents in 2011 can’t help, but be shaped by the troubles encountered in the Eurozone, with the financial bail outs, the banking review and the establishment of a permanent Eurozone financial, rescue mechanism.

In addition, the interrelated nature of the banking systems around the world, will impact over the next few years, when property buyers want to raise finance, as well as watching exchange rates.

On the face of it, the emerging economies look a better bet, however they will need resources to grow, both money and raw materials (witness the spate of lead thefts to supply china with base metal requirements). Some emerging markets have not yet got a proven, “foreign property buyer” track record. Sustainability of the domestic, property markets will also be a key question to bear in mind, as well as how foreign property buyers are treated by regulation.

Overseas property buyers need to consider their attitude to risk and reward. Emerging markets might be considered higher risk than European markets. They also have scope to overheat, just as we have seen with rapid property growth in some countries in Europe, so the same fate could happen outside of Europe, take Dubai for example.

Buyers of Property Abroad – what does this mean for them?

A country need not be showing booming property growth right now, for it to be a good investment opportunity, but it must have the potential to recover in the medium term. This way property can be bought at keen prices and has the scope to grow as an investment.

Choosing the bank a buyer deals with, could be as important as the country chosen to buy in, for 2011 and beyond. Banks with low exposure to weaker economies and bad debt may be worth seeking out.

Overseas property markets Property Venture® suggests are the hotspots:

Poland Property

Low labour costs and proximity to important markets are making Central and Eastern Europe an attractive manufacturing destination and Poland is key to this. Salaries in Poland are significantly below those of Western Europe – a software engineer costs about €1,500 a month – while the workforce is quite skilled. There is an expectation it will take 15 to 20 years before wages catch up to western levels.

Even China is investing in Poland. For example part of China Shanxi Yuncheng Plate Making Group, (one of the world’s leading makers of printing cylinders), is being built in the ?odz Special Economic Zone (LSSE). The cylinders will be used as part of the production of packaging materials for food and pharmaceutical sectors.

It has also established itself as a prudent lender and has less exposure to some of the European debt we have seen in 2010. Poland’s exposure to the debt of other European nations at €6.4bn and reciprocally the European banks’ exposure to Polish debt is €48.3bn, much lower than that for Spain (FT /CEBS analysis).

Poland is expecting GDP growth of 3.5% in 2011. Property investors, seeking capital growth and promising rental prospects should think about Poland. As international employers seek to bring subsidiaries to Poland and recruit more people in city centres and special economic zones, like Krakow and ?odz, demand for property rises.

It is expected overseas investment in Polish property will be over €2bn in 2010, compared with €700m invested in 2009.

Turkey Property

From a property perspective Turkey is an exciting market to consider in 2011/12. In Istanbul, yields can be as high as 7%. And in some places in Turkey, Villas with shared swimming pools can be as low as €120,000, buyers can seriously look at buying a villa, for the same price as an apartment, in other countries. Property prices are generally undervalued by European standards.

Turkey is another economic success story.  Its economy is expected to finish 2010 with growth of over 6% continuing into 2011. As the economy grows, the wealth generated will have a positive impact on the property market. With annual house price growth of 2% in 2010, this buoyancy is expected to be sustained.

Turkey has become a critically important market for German business, while Germany is a crucial export destination for Turkey – and the bond between the two countries is strengthening.

Property Venture®, is an independent, UK-based agent for overseas property who helps people buy holiday homes and investment property in Europe, more easily and safely than they can on their own, because they offer grounded common-sense advice. Their focus is mainly in Europe: Holiday Homes in Spain, Properties in Turkey, Poland Property, Morocco Property, Property in CyprusBulgaria property and Montenegro property.

As overseas members of the professional body: National Association of Estate Agents, the NAEA, this means they have been subjected to the membership criteria and have signed up to the professional code of conduct, established to help potential buyers or investors, buy overseas property with confidence.

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