Where to purchase overseas property in 2012
February 28, 2012 Leave a comment
When planning an overseas property purchase, it is important to be clear about your motives for investing. In particular, you must decide if you will be purchasing a property that will also be used as a holiday home or are buying purely as an investment, as this will significantly influence your choice of property.
Assuming that your intention is to invest purely for profit, where are the best places to buy in 2012 ? The answer to this question really depends on your attitude to risk.
If you prefer to take a conservative approach to property investment, then countries close to home, with well established property markets and robust economies represent the best option. The continuing problems in the Eurozone mean that many countries on the continent, such as Spain which has serious issues with over supply, will not be the best locations to invest in this year. However France remains an attractive option.
France has been the most popular overseas investment location with British buyers for many years due, in no small part, to the country’s reputation as a safe haven for property investors. France’s economy remains strong and was one of the few Eurozone economies to experience growth in the last quarter of 2011.
The French property market is less vulnerable to economic problems than most because of its prudent approach to mortgage lending. Borrowers are usually only permitted to take on mortgages where their monthly repayments do not exceed one third of their gross income. As a consequence, there has been much less of the reckless lending seen in other countries in the pre credit crunch years, and therefore fewer problems for borrowers and lenders now.
The mortgage market remains in good health and with rental yields improving over the last two years, and modest capital growth expected to return in the next few years, France is a good option for the risk averse investor.
Investors who are happy to take on a higher level of risk in the pursuit of greater returns should look to emerging markets for investment opportunities. At the present time no country fits the bill better in this respect than Brazil.
Brazil is already one of the world’s fastest growing economies, and this growth will be further boosted by the benefits that result from the country hosting the 2014 football World Cup and the 2016 Olympic Games. Add in to the mix the fact that Brazil has a serious shortage of good quality homes to house its rapidly growing middle classes, and a relatively well developed mortgage market, and it is easy to see the attraction of Brazil as an investment location.
Rental returns in excess of 10% per annum are easily achievable and the potential for capital growth is outstanding. Brazil is expected to be the world’s fifth largest economy by 2016, yet land and property prices are a fraction of those in most developed countries. Some experts believe that property prices in the country could increase by over 200% in the next 10 years.
However, investing in Brazil comes with considerable risks attached. Corruption and crime remain widespread in the country and buyers need to take particular care to ensure that the money they invest is protected to the greatest extent possible.
For those looking for a ‘middle ground’ investment location, somewhere that achieves a balance of fairly high returns and reasonably low risk, the Caribbean provides an excellent option. Very little land that is suitable for development remains available on the small islands of the region, meaning that demand is high and prices rise steadily almost all the time.
Luxury resort developments, such as Caribbean Quay in St Lucia, provide the ideal investment vehicle by tapping in to the lucrative holiday let market in order to achieve strong rental yields, in addition to steady capital growth. Investing in islands such as St Lucia, Barbados and Antigua has the added advantage of the safety afforded by the robust legal and judicial systems that were introduced to the islands by European powers in the colonial era.