CHAPTER ONE: INTRODUCTION

Synopsis:

Chapter One of Where to Buy Property Abroad: An Investor’s Guide provides a basic introduction to international property investment. The chapter looks at the history of investment from its beginnings in the rise of tourism in the 19th Century, to the extension of affordable air travel in the 1960s, to the huge interest in emerging market property and in further-flung destinations over the last few years. Motives for buying are considered and the rise in property investment is charted over the last ten years. The chapter considers the reasons why property investment is now more popular than stocks and shares, and examines the growth in international support for investors before giving an overview of the World’s property markets.

Extracts:

“Over the last 30 years, more and more people have purchased a second home, some for their own personal enjoyment and some purely for investment. In the US this has led to the evolution of prime second home destinations such as the Gulf Coast of Florida and the snowy peaks of Aspen. For those of us that live in the less geographically diverse British Isles, we have tended to head to the sunnier climes of the Mediterranean. By dint of geography then, the international property industry is much more developed in the UK as people wanting a second home in the sun have had no choice but to buy abroad. However, motivations are changing. Recent decades have seen significant domestic property booms in the UK, US, Australia and Ireland. A coincidence of circumstances (mainly related to easily accessible mortgage financing due to heavy competition in the banking sector) has democratised the ownership of real estate. Ordinary families have become landlords; re-financing their own homes to build a portfolio of properties that generate a healthy return.

As a result of these recent booms, property investment has overtaken investing in equities in terms of popularity (particularly in the UK and Ireland), but…”

“Many international property buyers may be investors, but there are still many other buyers whose primary motivation is different; perhaps they are looking for a holiday home or even to relocate. Whatever the motivation though, the investment considerations discussed in this book play an important part in the decision making process. Even people whose main motivation is to enjoy a holiday home in the sun must consider whether or not their purchase is a sound investment. Few people can afford to buy a holiday home that is a bad investment. The concepts discussed in this book are therefore as relevant to holiday homers and relocators as they are to hard-nosed investors…”

“When buying a property abroad, for any purpose, there are many questions to answer. Should you buy in somewhere like Spain or France where there is a long history of foreigners buying property, or an emerging market where prices may be much lower and potential returns much higher, but the process more complicated and the investment potentially riskier? Is an off-plan development better than an older house? Are rentals for ski chalets higher than for beach houses and how do you find out about banking, taxes, fees or how to find the notary or estate agent who can give you the best service?”

“Why is property investment a topic of such broad appeal? Well there are several reasons but one of the most significant is that the Western World has just been through the biggest property boom in history. This means that there is a whole generation of people who have experienced what a good investment property can be. They also have a great deal more funds available to invest as the values of their own properties have risen so dramatically. In fact, over the past decade house prices have boomed in almost every developed market with the exception of Germany and Japan. House prices in Australia, Britain, Ireland, the Netherlands, Spain and Sweden have all risen by more than 50% and the value of property across the United States has climbed by over 30%...”

“With developed economy markets at their current high, is now a sensible time to start investing? There is no straight answer to that question as some developed property markets do still present a good opportunity despite recent levels of growth whilst others do not. What is certain though is that there are many property markets across the globe that have not yet reached these levels of growth and it is these emerging markets that are rightly catching investors’ attention.”

“Today, countries recognise the value of outside investment. Over the last decade, barriers have been lowered and the right to buy extended to foreign nationals by many countries.”

“Ten years ago, buying outside of France or Spain without detailed personal knowledge of the country meant leaping into the dark. This is no longer the case…”

“The lower costs in Eastern Europe have been a pleasant surprise for many buyers, who still raise finance off the back of their homes. The average amount of money that people expect to spend on a second home is close to £160,000 – an amount which would fall nearly £20,000 short of a one-bedroom flat in Barcelona, but would buy a newly built three bedroom house with two bathrooms, a private swimming pool and a sea view in even the most popular corner of Turkey.”