Sim Property Newsletter Oct 2008 - where to invest?

With many stock & property markets tumbling around the world economic fear is widespread and many investors are looking for a safe haven for their money.

Naturally property is high on the preferred asset list, but in these troubled times which property markets should investors be investing in?

My view is that today it is actually quite difficult to find a property market (anywhere in the world, not just in Europe) that is both low risk, has good finance and will provide capital growth. This is unlike 5 years ago when many of the world�s property markets were on the up and you almost couldn�t go wrong (though many still did, eg Bulgarian coast).

Markets snapshot today

Czech Republic	Price growth and demand has slowed since last year, but mortgages remain cheap and market fundamentals good. I am still investing in the Czech Republic.
Poland	Price have been soft/falling all year and this will continue until the end of the year. Similarly to CZ fundamentals remain healthy, taxes are being reduced and growth will come back. Now could be a good buying opportunity to pick up a property at a good price & I�m on the look-out.
Slovakia	Recent very high price growth is set to slow. 2009 and will be a much quieter year. Fundamentals remain strong, but I still prefer the Czech market due to better finance & better rentals. If you haven�t invested already you�ve missed the boat, for the time being.
Bulgaria	The coast and ski resorts are now a disaster zone. In Sofia if you have bought at a good price then ok, shame most foreign investors have overpaid. Some institutional investors are selling. Nevertheless medium term prospects are good.
Romania	Has potential, but still a really messed up market for many reasons. Prices are too high and are stagnant or starting to fall, market fragmented, poor finance, uncertain rents, high risk.
Albania	Perhaps one of the few countries in Europe that has genuine prospects for high capital growth � low prices, mortgages available (including interest only) and good domestic demand. Not without its risks though.
UK	Prices will continue to fall this year and into next year. The will undoubtedly be some great opportunities in the future, but my suggestion is to have patience for the market to fall further first be investing.
Americas	USA � huge price falls, but is a large and diverse market so opportunities will always remain. Like the UK market I would wait for the market to fall further. Canada � I was in Canada this summer and prices have definitely hit a peak. I see prices falling in the short term, though not as bad as in the US. Panama � certainly the best place to invest in the Americas still. Huge offshore banking, low taxes, large ports, trade and investment.
Asia	Prices in much of Asia have hit a peak or are falling, including China, India, Singapore etc. Perhaps the only markets I would consider would be Cambodia (like Albania in Europe - huge potential but immature market) and Mongolia which is a commodities driven market that will continue to grow and provide investors high returns but for a lot more risk/uncertainity.

Please contact us for more market views or visit our Countries pages for more information.

News

In the last couple of months we have updated our News pages, which also now include blogs which I try to write once every 2-3 days on various property topics.

Despite the slowing global property markets we should be thankful we are not letting agents in Sydney, Australia, where it is reported that there are only 739 properties for rent in the whole city. Being a city of 4.5 million people (a number which is rising at 1,400 people per week!), this is leading to 30-40 people trying to view each available property, clients breaking down in tears, agents being attacked and the police being called.

Now that�s what I call good demographics.

Similar influxes of people are taking place in developed cities such as London, Warsaw, Prague where people are in search of jobs. As well as in the less well developed nations where poor people from the countryside move to the city in search of a better life, such as in many Asian cities like Phnom Penh, Ulan Bator and across much of China and India.

Demographics are a key driver to property & rental price growth.

Investments

We are still working hard to find good investment opportunities.

Due to the toughening market conditions very good off-plan deals (by my picky standards) are increasingly harder to find. Though, recently, we have seen developers becoming more flexible, as they too adapt to market conditions � for example we have managed to further improve the terms on our Residence Prokopova deal to 10/90.

Despite market conditions, we still have some well priced properties in the Czech Republic and Poland in the pipeline. Albania could also be an attractive option for those wanting a higher risk/reward investment, but because of the higher risk one has to choose the location carefully.

Sometimes I think I am too fussy sourcing properties and I never see ourselves promoting a large number of deals a month like many other companies.

Recently, we have also been successful in sourcing buy-to-sell and buy-renovate-sell properties in Prague, that have provided very healthy returns. This can be a good option for those investors nervous about future market growth prospects and what high ROI in a short space of time.

Services

Demand for kitchens, lettings, management and resales has been very high over the last few months.

Many investors have been looking to cash in their profits which have been further enhanced by the strengthening koruna or zloty relative to the British Pound or Euro.

We are proud to offer a �hands-off� management service in both the Czech Republic and Poland, which is proving very popular. Especially when our prices undercut the competition considerably � 10% +VAT in Czech and only 5% +VAT in Poland.

To further facilitate lettings and resales in the Czech Republic we have recently launched our own local real estate agency brand, run out of our Prague office, which has already successfully completed some rentals and resales.


Any comments on this newsletter would be warmly received.

Happy investing,

Simon Tweddle.