Property Investment International Blog

PropertySecrets goes bust / into administration

2009-08-12T07:29:00.003+02:00

For any confused Property Secrets clients the news is that on 10th August 2009 Property Secrets (and associated brands such as i-propertyassets) called in the administrators.

This is a sad end to a company that had a lot of potential and started its life with the right morals and went in the direction, until a combination of greed and bad management have seen it sorry decline.

Many clients were charged high fees and got worse than poor service, so its no wonder that most already found alternative arrangements for their properties.

Unfortunately the company leaves many employees, clients and partners owed money, and in such circumstances the prospects of getting much of it back are slim.

What the future holds for Property Secrets and their clients is uncertain. But for those who want any advice or help with their property in Central and Eastern Europe please get in touch.

www.propertyinvestmentinternational.com

Czech kitchens for property investors

2009-04-24T08:53:00.004+02:00

I had a client contact me yesterday who had been charged 437,000 CZK for a small-sized kitchen in a mid-level development. Either the kitchen was made out of pure gold studded with diamonds or the company charging him this amount was make a healthy margin.

I don't deny that property companies have to make a profit for the work they do in designing and installing a kitchen in an investors' property.

However, what I do find questionable is:
(1) charging huge prices and telling investors that such a high standard kitchen is required, when in most cases it is not
(2) once the investor has paid for the kitchen the property company then puts in the cheapest quality materials as possible to make as much money as possible, usually with the idea that the investor doesn't really know the difference and if they do they will probably never come to the Czech Republic to see it anyway. This kind of practice is widespread an immoral.

We have recently been selling a property in a well known development in Prague 7. This investor had gone for the best quality kitchen the property company was offering, and paid over 250,000 CZK for the privilege. When we viewed the apartment the potential buyer said he would have to remove the kitchen if ever he were to buy it as it was so low quality. The cheapest materials had been used for the work surfaces and cupboards, and even plastic handles were installed - all this for 250,000 CZK!!!

Unfortunately, this is not an isolated case and is just another part of the corrupt world of property companies ripping off unsuspecting investors.

So any investors out there who need a kitchen make sure you know what quality spec you're signing up for and shop around for a quote, then hold the property company to account that what you bought was actually installed.

[the image in this blog is one example of the cheap and nasty kitchen installed in some apartments - not integrated fridge/freezer, not many cupboards, poor quality appliances, all round low quality]

www.propertyinvestmentinternational.com

Should you walk away from your deposit in Romania?

2009-03-24T09:11:00.004+01:00

As I have both said and written in the past I believe the Romanian property market is a mess and believe it will stay like this for sometime.

I am glad I had the strength to resist the apparently quick profits available there as every property expert seemed to suggest, thus luckily I have no investments there.

But for those that have put a deposit down on a property in Romania there is a very important question many are asking themselves - should I just walk away?

Whilst this may be a very painful decision I believe that for most it will be the best option.

There are a number reasons why I believe that its better to move on than face a number of years of continued problems:

1. the Romanian property market is falling dramatically and thus it could well be a long time before you get anywhere near the purchase price for a sale of the said property
2. the Romania economy is a mess, this will not be turned around overnight and this will not help the property market
3. there has been a huge currency swing against investors meaning the remaining money to pay on a property is now larger (in one's home currency) than the original purchase price of the property - this makes the deposit less than worthless
4. the market is very oversupplied (not good for sales or rentals)
5. much of the property built in the last few years in Romania was both very poor quality and overpriced - not a good combination
6. there is still no sign of mortgages for foreigners in Romania, they are likely still to be some way off, and even when they do come in they'll be low LTV and high interest rates and expensive terms.
7. rentals are weak, the market is oversupplied, thus cashflow is likely to poor for a long time (combined with the potential for very high mortgages rates once they are available)
8. as you can't get a mortgage you'd have to pay the remainder of the purchase price in cash - i would have thought in this times there are far better returns to be had on the money than tying it up in a dud investment
9. if you do complete on the property you'll have to spend extra money on kitchens, furnishings etc
10. the ongoing hassle, time and energy spent on the investment will not be worth it, and it will require this energy every year for a number of years - not something to be underestimated.

Overall what you've got is a market where prices are falling fast, poor quality build and oversupply, a weak rental market, no resale market, no mortgage market and a poor currency.

In general I would recommend most investors just to walk away from their deposits in Romania - better to take the hit now than be faced of 5+ years of poor (negative) cashflow, having to continually subsidise a property that you can't sell (nevermind sell at the purchase price). Tough as it may be this is the reality.

Price Promise from Property Investment International

2008-11-27T11:22:00.005+01:00

We have recently introduced a "Price Promise" to ensure that our clients are getting the best prices possible in the market.

"We guarantee to deliver you the best price possible for all of our property services and guarantee to beat the quote of any other property company."

As well as working hard to deliver first rate property investments this price promise also ensures that our clients get great prices on their kitchens, furnishings and only 9% property management fee in the Czech Republic.

Perhaps we should have called this a "value promise" as we truely offer the best value investment sourcing, completion service, kitchens & furnishings, letting & management and resale services. And it is true value that we aim to deliver to our clients across our range of services.

If anyone has a quote for one of the above property services why not drop us a line and see if we can beat it.

www.propertyinvestmentinternational.com

Czech Resale Property

2008-11-23T12:25:00.004+01:00

One of the effects of the credit crisis has been we have seen a large increase in the numbers of investors who wish to resell their Czech property.

The Czech Resale Market

Throughout 2008 (though in particular the second half of the year) Czech property prices have slowed down from the heady growth of the previous couple of years.

Developers have had problems with their financing and combined with slowing demand on the Czech market have seen them slash prices in order to increase their sales.

Developers have been offering various discounts (up to around 10% off) and incentives such as free kitchens, free parking spaces or cash back etc etc.

Thus prices for new build property have seen some decline and this trend is only likely to continue.

Panelak prices have also seen falls as sellers have to price their properties more realistically.

Demand for Czech property has for sure dropped and with the economic outlook worsening in the Czech Republic (a country that is heavily dependent on exports - particularly to Germany that has just gone into recession) the outlook for 2009 is not pretty. I expect prices to soften further.

Many investors are seeing this as a good time to sell before the situation gets much worse and whislt the GBP/CZK exchange rate is favourable (giving around a 30-40% gain on the currency alone for investors).

How can PII help?

We are lucky to have, in our group of companies, our own local Czech real estate agency (which is a completely separate brand from Property Investment International).

We put all our resale property through our Czech agency and the results have been impressive.

We are getting investors a great price and a quick and hassle free sale (we do all the paperwork as part of the service).

For anyone interested in selling their Czech property don't hesitate to contact us to find out more about how our resale service can help.

www.propertyinvestmentinternational.com

Czech & Polish Property Management

2008-11-23T12:05:00.004+01:00

As part of our newly introduced "price promise" we have just reduced our rates on our Czech & Polish property management services.

Our Czech property management service now just costs a crazyily low 9% of the monthly rent (+VAT) making it the cheapest property management service on the Czech property market.

Not only is our Czech property management service the cheapest on the market we believe it is also the best.

Our service is completely hands-off, which is quite unusual on the Czech market. Allow me to explain ...

Most Czech property management services still require you to check that you've received the rent every month, pay your own community charges and pay all other utility bills (such as electricity) and deal with all the paperwork involved in running a property - we, however, do all this for you!

This effectively means that, after the initial set-up of the service, all you have to do as an investor is sit back and watch the money come into your bank account every month and take a look at our regular property management statement report should you wish to.

We keep a detailed log of all incoming and outgoing related to your property so that you can see exactly what is going on every month and makes any tax payments a straightforward proceedure.

Our head office is based in Prague giving us vital on the ground presence, knowledge and expertise. We have a great team in place who sort out any problems immediately and answer investors queries promptly.

We also provide the same property management services in Poland.

Simply contact us to give our property management service a try.

Prague Property Management Czech Republic

2008-11-02T11:29:00.005+01:00

Our property management service in Prague (Czech Republic) is proving extremely popular.

Now that there are a number of new off-plan developments completing in 2008 demand for a cost effective property management service in Prague and other cities in the Czech Republic such as Brno, Ostrava and Hradec Kralove is very high.

We only charge 10% + VAT of the rent per month for a complete hands-off service where we look after all aspects of managing the property even including making sure all the necessary bills and service charges are paid and all communication with the tenant not to mention monthly accountancy.

We are the lowest cost provider on the Czech market for property management, yet we deliver the highest level of service a one which is truely hands-off - all you have to do is check your report which we send you once a month.

As well as property management our local Czech real estate agency facilitates all the lettings and resales, thus providing a complete packages of property services for investors in Prague and the Czech Republic.

Please get in touch if you have a property in Prague or other cities in the Czech Republic to find out more about our unique Czech property management service.

www.propertyinvestmentinternational.com

EU Cards in Czech Republic

2008-10-30T13:51:00.003+01:00

We have long been the cheapest provider on the market aiding foreigner property investors to get EU cards in the Czech Republic.

However, is soon expected (ie early 2009) that the Czech Republic, after a 5 year grace period, will comply with the EU regulations and remove the necessity for foreigners to obtain an EU card or set up a company to be able to buy property in the Czech Republic.

This will mean even cheaper transaction costs and less hassle when buying property in the Czech Republic, hence it is a good thing.

The restrictions on foreigners owning Czech agricultural land will remain place for another 2 years however.

Theoretically, if the restrictions are scrapped, only foreign property investors completely on off-plan units in the next few months will need an EU card. If you find yourself in this position please contact us for more information.

www.propertyinvestmentinternational.com

Which countries in Central & Eastern Europe could be most affected by the Credit Crisis

2008-10-17T09:01:00.003+02:00

Iceland's economic and banking woes have been splashed all across the news in the last couple of weeks, and quite rightly too as the situation is a mess (but a great/cheap opportunity to travel there as their currency has been hammered).

In light of the crisis in Iceland I thought I'd take a look at which countries in Central and Eastern Europe are the most at risk in going the same way, and thus which property markets you may want to avoid.

Starting with the worst first, in order:
1. The Baltics (Estonia, Latvia and Lithuania)
2. Hungary
3. Romania
4. Bulgaria

The Baltics in particular have had a huge property bubble that has been busting for a while now, the banks have tried to tighten up lending but they've been a little late and their actions have only speeded up the demise of the housing market. These are small and vunerable economies that have grown too quickly over the last 5 years and have not done enough to temper and sustain some of this growth.

Hungary has been a mess for a while, their economy just never did perform as well as some of their neighbours and the political malaise does not help. The Hungarian property market has not even seen some of the price growth that the Baltics countries have, and has poor mortgage finance for foreigners. Much of the nations mortgage borrowing has been in Swiss Francs leading to huge currency risks that could see people unable to afford their repayments if the exchange swing against them. Only recently has the Hungary started to impose restricts on this kind of lending, again too late.

Romania is another candidate for an economic mess. High, but unsustainable, growth and wild policies by the government that has tried to grow the economy too quickly. This has led to huge risks that the economy could falter. Mortgage lending to foreigners has never been very good and now has been stopped by the national bank pending a review. Romania is not a place I'd want to invest at the moment.

Bulgaria follows similar lines to Romania, though perhaps not as accute. Though their banks have only just recently started to tighten up their lending practices on the heavily over-inflated priced property on the beach and in the ski resorts. Time will tell as to how their banking sector will fair.

The other country I might mention in this list would be Ukraine, whilst not in the EU there are still similar banking and property sector risks as described above.

The Czech Republic, Poland and Slovakia should fair a lot better. Although I see their economic growth rates slowing, both their economies and property markets are more robust.

The world is definitely changing and no-one really knows how things will develop over the next year, but one thing is for sure now is a good time to have money in safe solid assets and cash ready for the opportunities that will abound when the world once again settles down.

www.propertyinvestmentinternational.com

Nigerian property and land

2008-10-12T15:42:00.005+02:00

The Nigerian property market is not something I normally write about, but as I try to keep my eye on as many of the world's property markets as possible I thought it would worth mentioning some interesting facts about whats taking place in the Nigerian property market.

A land reform act passed in 1978 gives the Nigerian government ultimate ownership and thus control over most of the countries land.

Under this act the Nigerian government owns almost 95% of the nations land, with much of the remaining 5% being untitled.

The population of Nigeria is around 140 million people, a figure which is expected to double by 2050.

In the capital, Lagos, the population is expected to increase from the current 15 million to 23 million people in only the next 5 years!

With such huge increases in population demand for property and land is very high in Nigeria and is on the increase.

With such demand for land there is unfortunately a huge abuse of power taking place, as it does in many countries but particularly in Africa.

People who have invested their life savings and work into building their own home are now seeing them being ripped down by the government. Huge swathes of the city are being cleared to make way for new developments.

The government is selling the land at a huge profits to developers. These developers then build new homes, many of which are priced in the million dollar plus range, and also make huge profits.

Whilst this is good business for the government and developers is a human rights tragedy.

Reforms of the land laws and the introduction of western style mortgages have been expected for sometime but are slow to materialise.

In the short term things are unlikely to get better. Demand for housing and land is only going to increase as is the greed of those in power.

The rental market similarly has huge demand, often tenants need to be able to come up with 3 years rent in advance just to rent a home.

I'm a big fan of investing in cities with increasing populations (though particularly in more developed nations) and with the demographic changes taking place in Nigeria it could be a great place to invest if one can get secure title on the land and has family connections in the country.

That said, I feel the Nigeria is a little risky for me and I'll concentrate more on my day job of Central and Eastern European property.

www.propertyinvestmentinternational.com

Czech vs UK property shows

2008-10-10T15:11:00.001+02:00

Exactly two of weeks ago I attended a property exhibition here in Prague called ForArch.

The ForArch exhition was a combination of property for sale, furniture, kitchens, fires, building materials and so on, and took place in the new exhibition halls in Letnany, Prague, where there is a new stop on the metro line C.

What really struck me was not that it was slightly different from a UK property show but that the place was absolutely packed full of people (and this was on a Friday morning!). It was so busy it was almost annoying.

This is in sharp contrast to the recent property shows in the UK which have either been cancelled or, like this years Property Investor Show, a complete disaster due to such a low turn out.

I'm not suggesting you should invest in a certain market just because how busy their respective property shows are but it does give an interesting indication of the relative demand for property today in the two countries.

www.propertyinvestmentinternational.com

Romania mortgages warning for foreigners

2008-10-07T11:05:00.001+02:00

Yesterday I heard rumours that due to the world credit crisis and Romania's own rapid credit expansion the Romanian national bank is tightening up on the ability for Romania's bank to lend to foreigners.

It seems that Bancpost has already "temporarily" (read indefinitely) suspended giving mortgage loans to foreigners.

This is a devastating blow for those looking to a get a mortgage in Romania as Bancpost are (were) currently one of the largest providers.

I have long been very cautious about investing in Romania, especially with so much hype and speculation having taken place there over the last couple of years, and this just furthers my hesistance to invest there.

Mortgage finance has always been very difficult to obtain in Romania for foreigners and even when one does get it the terms are not good at all (ie max 75% LTV and high 7-8%+ interest rates).

Prices are now either stagnant or falling in many Romanian cities after the unsustainable boom and the rental market is shaky at best.

Medium term the market has a lot of potential, but for now I would still not invest my own money in Romania what with high risks, falling prices and poor mortgage finance.

Given the situation of the world economy at the moment I don't see many more Romanian banks jumping over themselves to lend to "risky" foreigners, especially at a time when prices are falling.

Quite the opposite in fact ... I see the ability for foreigners to get mortgages in Romania being very difficult for quite some time to come - despite all the promises I've seen from various companies over the last couple of years.

Romania is a classic specualtive market - where the risks are high and uncertain but the potential rewards good - but now with further restrictions on mortgages in Romania many investors are going to have an increasingly difficult time making their investments turn into something profitable.

www.propertyinvestmentinternational.com

Letting Czech property a busy task in September 2008 especially to foreigners

2008-09-28T17:22:00.001+02:00

We have had an incredibly busy month renting out property for clients in the Czech Republic.

September is traditionally a busy rental month when people come back from their summer holidays and students are hunting for accommodation - and September 2008 has proved no exception.

Demand for renting property in Prague and the Czech Republic still remains healthy.

I have even managed to increase rents recently on some of my properties which are in better locations - perhaps a sign that prices in the Czech rental market will see some more growth in the future (especially given inflation and wages are rising around 7-8% per annum).

Overall, I still think the rental market will be fairly static for another year and in areas which are suffering from oversupply prices will soften. That said the Czech rental market is still in good condition.

At Property Investment International we have rental/lease contracts in both Czech and English to cater for the range of nationalities in Prague.

Recently, we seem to have been using around 80% of our rental contracts in English.

As well as tenants from England and the United States our recent range of nationalities have included Norwegian, Swedish, Finnish, Turkish, Saudia Arabian, Korean, Russian, Slovak, Greek and Spanish to name but a few.

Which just goes to show how the Czech Republic (and Prague in particular) still seems to draw a huge range of people, from students and tourists to international business men.

All of which can only have a positive affect on the Czech property market and the Czech economy.

Next month Property Investment International will also be launching a new redesigned website for our local real estate agency brand, which will further help us facilitate lettings and resales in the Czech Republic and keep our hardworking team even busier :).

www.propertyinvestmentinternational.com

czech property news september

2008-09-27T08:25:00.002+02:00

A taster of some Czech property news in September:

Erste: Czech Republic is safe real estate harbour

The bank group Erste in its survey of Central European real estate companies stated the Czech Republic along with other Central and Eastern European countries is still a safe place for property investments. In contradiction to countries of a former Soviet Union and Western European countries, the commercial property market in the region will slow down but not stop.

Interest in luxury apartments still growing

According to the Czech News Agency, interest in the luxurious apartment segment is still strong and growing. The real estate company Engel & Volkers announced a 21% increase of interest in the expensive flats segment. Also, the development company Satpo Development revealed that for the first eight months of this year they have recorded an increase of residential units sold in range of several tens of percents.

Crisis pushes down demand of new flats

The real estate crisis which has already reduced demand for overpriced prefab flats, is now affecting the market for some new flats. In order to boost stagnant sales, developers with inferior projects have started to offer discounts or financial bonuses to buy equipment. The companies offer discounts ranging from CZK 50,000 to CZK 150,000 on kitchen equipment, or a free parking space in a garage, worth up to CZK 300,000. Customers are more demanding and selective in what they will accept. They consider the price, quality, location, architectural concept and other such factors. Overpriced, low-quality projects of poor architecture design can be found in some less desirable locations, and the times when customers would buy almost anything are gone.

Mortgage market update

The first half of the year showed a 20% y-o-y decrease in total amount of total mortgage loans in the Czech Republic. After the record years 2006 and 2007 when people borrowed 100 billion CZK and then 140 billion CZK, a the expected decrease in mortgage volumes has taken hold. However this year’s 60 billion CZK loans show the actual demand for an own flat is still strong. Moreover thanks to the recent cut in interest rates the volume of mortgages is slowly increasing. All told, a total volume of 125billion CZK in mortgages is expected for this year.

Basic interest rates of central banks

Japan	0,75%
USA	2,00%
Czech Republic	3,50%
EU	4,25%
Slovakia	4,25%
UK	5,00%
Poland	6,00%
Hungary	8,50%

Spending decrease threatens panel houses

A decrease in spending budgeted for the support of high-rise apartment houses (paneláks) might cause the development of new social ghettos. Well-off people will be able to move out from there soon and lower income people will take their place, said Vít Vaníček, the head of the Union of Czech and Moravian Housing Cooperatives (SČMBD). A program for paneláks run by the State Fund for Housing Development (SFRB) will soon have no money left in its budget, according to fund director Jan Wagner. This year, the Czech government approved only Kč 1.5 billion for the program, which is about a third of last year’s amount.

Beroun: residential complex with over 600 flats

The development group Crestyl is readying for construction of a new residential complex called Berounske strane. The project will bring to the market around 621 flats and will have a total size of about 48,000m². The first phase should be finished in 2010. The number of inhabitants in Beroun increased in the last three years by 1,000 people and local municipality expect that in the following five years the total population should increase by another 5,000 people.

www.propertyinvestmentinternational.com

Croatia property buying to get easier

2008-09-21T10:28:00.001+02:00

The Croatian government is set to lift the current restrictions on the EU citizens buying property in Croatia on 1st February 2009.

Currently most buyers/investors have to set up a Croatian company to buy property in Croatia. However, from next year EU nationals will be able to own Croatian property in their own name (apart from some rural land).

How will this affect the Croatian property market?

Croatia is primarily a second home destination and does not attract as many second home buyers as the likes of, for example, Spain or France.

This is primarily due to:
- access being more difficult (ie flights),
- weather not as good, particularly in the winter,
- property prices that are already high and
- until very recently the complete lack of mortgage finance available for foreigners.

The lifting of restrictions is likely to see some increased interest in the Croatian property market though (relatively) high prices and poor mortgages still remain very large barriers to a flood of foreign investors in to the Croatian property market.

Mortgages in Croatia

Until recently it was not practically possible to obtain a mortgage in Croatia as a foreigner.

There are signs now that some mortgage products are becoming available, though not with very attractive conditions (eg 50-60% LTV, 7%+ interest rate, and only 15 year terms). As they are not used to dealing with foreigners investors can further expect a long complicated and difficult process to be able to obtain a mortgage in Croatia.

Croatian property market predictions

Over the next year I see the Croatian property market, on the whole, continuing to stagnate.

With the prospect of EU membership in, potentially, 1-2 years time things in medium term should be looking up for the property market in Croatia.

However, for the moment I see no real reason to invest in property in Croatia when there are far better and safer markets elsewhere in Europe, unless of course you wish to buy a holiday home then the decision making process is somewhat different.

www.propertyinvestmentinternational.com

Is the Slovakia property market boom over

2008-09-20T10:43:00.001+02:00

Despite strong economic performance the Slovakian property market showed little growth between 2005-2006, primarily due to an oversupply of property on the market.

The oversupply situation began to recitify towards the end of 2006, resulting in 2007 seeing a 24% average growth across Slovakia.

This property price boom has continued in Slovakia well in 2008. The latest property price data below shows some remarkable growth figures:

Latest Slovakia property price data

	Aug 2007	Aug 2008	Price Growth
BA I	€ 2,485	€ 2,837	14.19%
BA II	€ 1,800	€ 2,087	15.98%
BA V	€ 1,894	€ 1,972	4.13%
Kosice	€ 1,047	€ 1,312	25.33%
Nitra	€ 972	€ 1,265	30.17%
Trnava	€ 1,081	€ 1,450	34.21%
Zilina	€ 1,022	€ 1,223	19.63%
Presov	€ 788	€ 1,081	37.19%

Can this Slovakian property boom continue?

Well the simple answer is that it has already started to slow down.

Affordability is starting to be stretched and properties are certainly becoming more difficult to sell.

I see this slowing trend continuing, despite the continued strong economic performance and Euro entry next year.

Much of the expected price growth due to Euro entry has already been priced into the market I believe.

The Slovakia market is still smaller and less well developed than in the Czech Republic, thus growth is more liable to spurts rather than a reliable steady growth. That said I think growth in Slovakia will now show lower and steadier growth than it has in the past couple of years.

As always, but especially in Bratislava, beware of the huge amount of property in the pipeline that should be built over the next 2-3 years.

Conclusion

The market is still well positioned medium to long term, however, if you haven't already invested in the Slovakian property market i would recommend giving it some space to consolidate otherwise there is a big danger you will be buying at the top of the market - not a good idea.

Given the choice I'd still rather invest in the Czech Republic, where the economic fundamentals are just as good if not better, rental yields are higher and mortgage finance is much better and easier to obtain.

www.propertyinvestmentinternational.com

Poland property market review update

2008-09-15T15:06:00.001+02:00

With last week's announcement that Poland plans to bring forward their entry in the Euro currency to 2011 I thought it was worth reviewing quickly the state of the Polish property market.

The Polish property market between 2004 and 2007 was generally recognised as one of the highest growth property markets in Europe (50%+ per annum in some parts).

The combination of low prices, high affordability and good economic climate etc etc that drove this huge price growth is now well known.

As with many property markets that boom such large price growth is usually very unsustainable and often accompanied media hype and unsuspecting buyer piling into the market just as prices reach their zenith.

And so is the case in Poland.

Towards the end of 2007 prices in many of the major cities slowed and moving into 2008 started to go into reverse gear, a trend which has continued month on month throughout the year (between 1.5% and 4.5% in August alone).

Prices simply grew too much compared with wage growth leaving affordability too low, thus demand has weakened substantially and sellers/developers are now having to price their properties more realistically (and often accept much lower than the asking price).

Average prices now stand around 8,000 PLN/sqm across the major cities in Poland.

The list below shows the average price of a new build development in August 2008 for each of the major Polish cities in PLN/sqm:
Katowice 7,060
Kraków 8,464
Łódz 5,798
Poznan 9,063
Warsaw 9,070
Wrocław 8,065
Tri-City 6,656
Average 8,091

My view is that these prices will, on average, soften further until the near the end of the year, which is no bad thing and will allow necessary consolidation in the market and allow the market to find its level.

The many of the fundamentals that drove the market between 2004-2007 are still in place.

Thus, once the Polish market has gone through its period of consolidation and whilst demand is still relatively weak (but prices more reasonable) buying opportunities for a mid-long term investment strategy will abound.

With the economy still growing well, wages rising, investment high, infrastructure improving, skills increasing, expected Euro adoption, Euro 2012 football championships, property supply still lower than what is needed in the country (further hampered by archaic plans laws) etc I see the medium term outlook to be quite rosy.

In a few months time it could well be the time to get back into the Polish property market and pick up some real bargins.

www.propertyinvestmentinternational.com

Is the Czech property market like the UK back in 2003

2008-09-11T12:51:00.001+02:00

The Czech property market has performed very well over the last couple of years.

There have been reports recently that this growth period is coming to an end.

My view is that yes property price growth is slowing after the heady growth of 2007, but that property price growth in the Czech Republic will still remain healthy over the next couple of years.

It reminds me a lot of the UK property market back in 2003, after a period of good growth every one said that it could not continue much longer and then was the time to get out.

What followed was a sustained period of excellent property price growth for around the next 3-4 years all over the country, making many people very rich in the process. Those who sold sold in 2003 missed out indeed.

The parrallels are similar today in the Czech Republic.

Price growth has been good and has slowed a little (relatively), but I believe there are still good fundamentals to the market.

Unemployment is still low, the economy continues to expand well (unlike in western Europe), prices are still affordable for many and interest rates on mortgages have come down again in the last 2 weeks, 100% LTV (and more) is still available around 5-5.5% interest rate.

Many Czech banks have reported that after the summer period demand for mortgages has increased yet again, and i see this trend continue over the coming years as household debt is still extremely small compared with western European levels.

Overall I still believe strongly in the fundamentals of the Czech property market (similarly in Poland too) and that the next few years will still provide investors with a liquid investment market with good solid growth, good rents and good mortgage finance.

I ponder the question a lot whether I should cash in my gains from the last few years in the Czech Republic, but I fear this would be foolish and I will continue to buy properties in the Czech Republic when I find ones at the right price in the right location.

www.propertyinvestmentinternational.com

German property top investment location

2008-09-09T10:26:00.002+02:00

I recently read a report on the German property market by Invista Real Estate Investment Management in which they rate Germany as the top real estate investment market in Europe (closely followed by France and Italy).

I have to say the report was a complete load of rubbish.

The German property market (and coincidently the French and Italian property markets) is the one of the last places i'd put my property investment cash!

There are a number of very good reasons for this ...

1. Economically Germany still has a lot of problems. Growth is very slow, unemployment very high and there is a complete lack of confidence.
2. Taxes and regulation are very high and burdensome.
3. Property prices have been in decline since the mid 90's and in the last 4 years have stablised but have shown very little growth at all (maximum 5% in the best regions). There is little sign that prices will increase much over the next few years either.
4. Mortgage finance is appalling, especially for foreign investors. German banks are very conservative. LTV's are only around 50%, have high fees and are inflexible. This significantly reduces investors returns.
5. Buying costs are extreme. Often buying costs add a huge 12-13% on top of the purchase price of a property. Sales costs aren't small either. This means your property has to grow at least 13% before you get your money back (then the German government will still take a large slice of the profit). This makes the German property market very illiquid - not good - and increases investors risk substantially.
6. Whilst the rental market is billed as very good yields are still only around 4% these days, and as a landlord the laws are very much in favour of the tenants (who know their rights!).

I could go on but I think you get the point.

No price growth, huge buying costs, no confidence, high tax, high regulation, poor finance - I couldn't think of a much worse market to invest in!

Unfortunately this report is typical of such funds who try to apply stock market investment theory in the real estate market.

My advice is don't buy property in Germany.

www.propertyinvestmentinternational.com

czech property news

2008-09-08T17:32:00.001+02:00

Some recent Czech property news items:

More banks lower mortgage rates

ČSOB, Hypoteční banka, mBank and Raiffeisenbank in the last week lowered their mortgage interest rates by 0.3-0.4 percentage points, following a similar move last week by Komerční banka and Česká spořitelna. Bawag will reduce its rates today. For 20-year mortgages worth CZK 1.8 million, the cuts will reduce the monthly payment by CZK 300-500 a month.

Demand for mortgages on the rise

The country's leading mortgage provider, Hypoteční banka, reported loan volume of CZK 8 billion in July and August, an 11% increase year-on-year. Raiffeisen said that its own summer mortgage lending was up y/y by about 20%, and UniCredit reported 30% higher mortgage lending. Mortgage brokers and most banks confirm the rising demand for housing loans, as the year started out slowly but could end quite well.

Flat price not to decrease

According to the real estate company RE/MAX a reduction in flat prices is not expected within the next few months. As the economic situation is stabilised and the mortgage rates are lower once again, there is no reason for a slump.

Regulated flat rents in Prague could double

Regulated rents in Prague could increase on average by almost 46% next year. According to the Prague municipals it is expected that the rents in the higher standard flats will rise by 11 – 30 CZK/m² and the rents in the lower standard flats by 16 – 30 CZK/m². The rents for the flats owned by the city will then on average increase to 48 – 95 CZK/m².

CSO reports 25% y-o-y increase of flat prices

Average flat prices rose by 25.4% year-on-year in the second quarter of 2008. Prague prices grew more slowly at 19%, while the increase in some regions topped 31%, the Czech Statistical Office said. Prague inhabitants who want to buy a flat must prepare on average CZK8,500 more for one square meter than one year ago.

HSBC to enter Czech mortgage market

British bank HSBC plans to enter the Czech mortgage market next year, providing housing loans to individuals. This new product should be part of the expansion of HSBC on the local banking market. Currently more than 15 financial institutions operate on the Czech mortgage market.

RPG RE to invest CZK 17bn in reconstruction of flats

RPG Real Estate will spend CZK 17 billion on the reconstruction of more than 44,000 flats located in the northern Moravian towns of Ostrava, Orlová, Havířov, Karviná and Opava. The decision is opposed by a majority of the tenants who prefer to buy the flats and finance the reconstruction on their own.

www.propertyinvestmentinternational.com

Cambodia property market

2008-09-04T10:46:00.001+02:00

Early this year I had the good fortune to spend some time in Cambodia, and inevitably couldn't resist taking a look at the property market there.

The Cambodian economy is still recovering from the fallout of the Khmer Rouge conflict, but it is recovering fast and my view is the place will look completely different in just a few short years.

Many of Cambodia's roads are dirt roads which turn to mud in the wet season, even between major towns. However, this is now changing and roads are being built apace.

Since being in Cambodia I have noticed that the Cambodia government is taking steps to make both easier and safer for foreigners and foreign entities to invest in the country with the aim of attracting considerable foreign investment, and not just in real estate.

It is also expected that the Cambodian government will soon make it possible for foreigners to buy real estate in their own names without the need to set up a company as it currently stands.

Without going into the economic details in this blog, we believe that all the signs are pointing to surefire growth period to come in the Cambodian property market.

Many international property developers have already made their way on to the scene recently in light of the changing regulations.

Particularly recently I have started to see property developments promoted not just in the capital Phenom Pehn but on the coast, in locations such as Kep.

I think there there is undoubtedly a lot of potential, but investors must be aware that the market is still very new and immature and will change a lot of the coming years - so it is not without its risks.

Given property price growth in many of SE Asia's property markets has either slowed considerably or are in reverse gear, Cambodia may be a place to look for those interested in investing in the region and can handle a little more risk and uncertainty.

The Cambodian property market is certaintly a market to keep a close eye on.

I'd be interested to hear from anyone who has experience of the market and what their thoughts are?

www.propertyinvestmentinternational.com

Prague 10% rental yield

2008-09-01T18:48:00.001+02:00

Last month I let a garage space that I own in Prague 5.

I managed to get a rent of 2,500 CZK / mth, with a years contract.

Given that a typical garage space costs around 300-400,000 CZK, this gives an approximate rental yield of 7.5 - 10%.

This is far higher than the yield from an apartment in Prague (typically around 5% currently).

I'm not suggesting going round buying a lot of parking spaces in Prague (though it might be good idea) as they are a little more difficult to rent than apartments and demand varies from location to location, building to building. Also there is a lot of hassle involved in renting each space for a small amount of money, so its not the most scalable strategy (unless you buy a parking building).

That said with the growth of car ownership in Central and Eastern Europe the trend will be for increased demand and higher prices of parking spaces, especially in the major cities, such as Prague.

Overall, I would always recommend buying a car parking / garage space when buying an off-plan apartment in Prague. Increasingly, more and more tenants ask for them and they certainly help resell an apartment more quickly.

www.propertyinvestmentinternational.com

Dubai property market cooling

2008-08-26T12:16:00.001+02:00

In Dubai there are now strong signs that the government is getting some sort of grip on the excesses of the Dubai property market - and about time too.

We have long viewed the market as quite high risk. The market has an unusual set of drivers and is not exactly the most transparent place to buy property.

The huge amount of building there inevitably raises questions about oversupply, but seemingly so far demand has outstripped supply.

Price growth in some parts of Dubai has been reported to be an almost unbelievable 79% in 2007, that is on top of already impressive growth figures in the previous years. High growth is continuing in 2008.

Now in mid-2008 the government is stepping in to to regulate off-plan purchases, mortgages and are implementing a whole raft of measures to cool the market. These are likely to do the job they are intended to do.

Like some of the buildings in Dubai the property market has seemed to defy gravity. With high prices and more heavy government intervention I would be even more wary of investing in Dubai than I have been in the last few years.

It remains to be seen where the Dubai property market will head next and whether the Dubai government can really use their oil money to turn a patch of desert into one of the world's true commercial and financial centres.

www.propertyinvestmentinternational.com

Albania property market

2008-08-14T16:14:00.001+02:00

Today we have cautiously upgraded our Property Investment Rating from 3 to 3.5 for the Albanian property market, read more here.

Whilst we still believe its a little bit wild for many property investors in Albania there is no doubt there are opportunities, finance available and a burgeoning economy.

Over the last few months there seems to be increased interest from large western companies in Albania - as it is right on the doorstep of the EU and principally has cheap labour.

We see the structural reforms that have been implemented over the last few years as ones that are here to stay and the economy should continue to grow and a long with it demand for housing.

We still recommend avoiding the coast (perhaps with the exception of buying land in prime locations).

Tirana, the capital is still the best bet for growth at the lowest risk possible in Albania. Though investors still need to go in with their eyes open, buy in the right locations that are not oversupplied, have secure title, not beset with infrastructure problems and from good developers.

The Albania property market may offer rich rewards if one can stomach the risk and uncertainity.

www.propertyinvestmentinternational.com

Czech mortgage rates

2008-08-13T14:45:00.001+02:00

After last week's reduction in the Czech base rate back down to 3.5% now could be a good time to get a mortgage in the Czech Republic at a good fixed rate.

My view is that not all the banks will pass this rate reduction on to their mortgage products, as it is widely expected that at some stage in the not too distant future rates will increase again as there is still inflation present in the economy.

Typical rates for foreigners before the reduction were around 5 - 5.5%.

www.propertyinvestmentinternational.com