Off radar property locations may offer the best long term deals
With optimism rising that some global property markets are now showing signs of bottoming out and even recovering, real estate investors are poised to start spending again and many are looking for bargains.
Some will naturally stick with more established markets while others will be looking for the next hot spot and venturing further afield. The choice is vast. Also some may look at central and Eastern Europe where bargain prices are on offer and others may consider somewhere like Scandanavia which tends to not be on the mainstream property radar but may offer good deals because of the global recession. South America is also set to become of more interest to real estate investors.
Here Property Wire looks at property markets that may not be at the top of the list for real estate investors and looks at what they have to offer.
Scandanavia is often considered too remote or perceived as too expensive and rarely features in a property investment portfolio. But the average property price in Sweden, for example, is €155,000 and ski resorts there are becoming increasingly popular due to concerns about global warming affecting traditional winter sports areas like the Alps.
Certainly most resorts in the Alps have had a super winter season this year with snow falls exceeding expectations. But if the latest warnings about climate change are to be believed then in 20 years time it will be very different so long term investors interested in ski property may be tempted to look elsewhere.
Sweden has over 25 ski resorts including Åre, which hosted the FIS Ski World Cup finals, Storlien on the Norwegian border and Vemdalen, home to Klovsjo which was voted Sweden's prettiest village by travel writers. With a long guaranteed snow season from November to April many resorts are expanding and more and more apartments are coming on the market.
Those investing in Sweden include Danes, Germans and Norwegians, all of whom find the property prices cheaper. Official figures show that property prices in Sweden fell around 2% in the fourth quarter of 2008, the first annual decrease since 1996. Falls were higher in Greater Stockholm and Gothenburg where property prices declined 5%.
As the Swedes prefer renting to buying, property investment in Sweden provides plenty of opportunities for buy-to-let, particularly in the cities. For instance, Malmo, situated a bridge journey away from Copenhagen, is popular with commuters to Denmark who prefer to live in Sweden where the property is cheaper.
'Sweden is definitely an unusual addition to a property portfolio and not one that most people would think of. Its surprisingly low property prices and a reasonably healthy property market make it worth exploring,' said says James Gonzalez, analyst Obelisk International.
Norway is one of the most expensive countries in the world and oil prices fuelled a property boom but when oil started falling last year so did property prices. According to a research report from Aston Lloyd, Oslo is growing as a centre of industry and financial services for the region, yields on property have been strong and consistently beat returns from the Stock Exchange.
Although oil prices are rising again analysts do not expect a recovery in the property market until later this year or early next year. However, Tim Francis of Invista Management said; 'Risk adverse property markets such as Scandanavia may lead recovery in the short term.'
There are no legal restrictions for foreign investors in either country. Capital gains tax is 28% in Norway and 30% in Sweden and also applies to rental income which is considered a form of capital gain. However, if your property is a holiday home and you have owned it and rented it out for at least five years before selling then there is no tax payable in Norway.
Chile is often overlooked on the world economic map and is almost always overshadowed by the bigger South American players like Brazil and Argentina. However in the midst of a global recession Moody's Investors Service has recently upgraded Chile's investment profile. It is the only country to be upgraded by Moody's since the worldwide economic downturn began.
According to Chilean finance minister, Andrés Velasco, as well as being the only country to receive an investment upgrade, Chile is also the only nation to possess almost of a third of its GDP in liquid assets.
Behind the Chilean recipe for success is copper. Chile is the world's largest producer of the metal and profits from sales of this prized natural resource have been prudently saved by the Chilean authorities.
There is a strong demand for housing from the fast-emerging middle class, particularly in the capital, Santiago. Prices have fallen in the economic downturn, offering bargains to those with the money to invest.
Rodrigo Orlandi, a lawyer with FAF International, a Santiago-based branch of First American Title Insurance Company, estimates that the residential real estate market in Chile has plunged as much as 40% last year. But Central Bank interest rate cuts and homebuyer subsidies had helped offset the losses.
In Viña del Mar, a coastal resort with a Mediterranean feel about two hours from Santiago, an apartment with an ocean view would have cost 80 million to 100 million pesos. Now, some apartments sell for as little as 50 million pesos while houses in the area cost 70 million to 100 million pesos.
It is also cheap to build a new property in Chile as construction costs are low. US buyers are increasingly looking to Chile according to Charles Spencer of Spencer Global International Consulting as it is cheaper than favourite retirement destinations like Mexico.
Other buyers may have owned vacation homes in Argentina, Panama or Costa Rica, but are looking to Chile because it is believed to be more stable than other Latin American countries.
The country's real estate market has shown stable growth over the last ten years but Chile isn't for property flippers as annual growth rates are low. But it one of the most economically advanced countries in South America. As well as a free trade agreement with the US, Chile is part of the Asia–Pacific Economic Cooperation forum. And unlike many countries in the region, Chile doesn't suffer from corruption.
Foreigners have the same rights as Chileans when it comes to real estate transactions. International buyers can purchase property anywhere in the country outside of areas considered important for national security. There are no residency or citizenship requirements but foreigners are required to obtain a tax number before legally buying property.
In Eastern Europe Bulgaria has seen a property price slump so there are undoubtedly bargains to be found for real estate investors. But the key question for those thinking of investing in Bulgaria is how long the decline is likely to last and what the country is doing to move out of the economic gloom.
The outlook is positive according to researchers from Aston Lloyd who point to huge investment, both internal and foreign, that bodes well for the future of Bulgaria's economy. Major infrastructure programmes will boost tourism. The country's €2 billion transport plan for 2007 to 2013 will see vast improvement to roads and railways and €80 million wind energy park is expected to be ready for 2010.
'Together with GDP growth, favourable fiscal policies and further plans for tourism and development, Bulgaria is not only going to make it through this recession, it appears that the country will be the least affected of all the economies that make up the Black Sea,' says Aston Lloyds latest report.
Its analysts are also confident about Romania and predicts that it may return as one of the most talked about emerging property markets in the near future.