Investing in real estate abroad - 2012

Rellox is mainly dealing with residential properties and we also assume that we are speaking about private investment opportunities (ie individual properties rather than huge projects for institutional investors). Rellox is selling hotels, but these are typically over 500.000 EUR, so we are not going to cover hotels either.

With regards to purchasing building land. The best deals are to invest in agricultural land, woods or other non-building land, which would be later on converted into a building land. But again, this is usually a suitable investment for a big investor/developer, who is able to invest the initial capital and negotiate the land conversion with local authorities...and to invest in land with a longterm investment plan. The principles of buying land are basically the same in Poland or elsewhere in the world. Also, please note, that in many countries, foreigners cannot buy a non-building land.

The following information is therefore only related to individual residential properties.

1. What kind of properties are best investment abroad?

» What kind of properties are best investment abroad?

2. Which countries are currently the best place to invest in real estate? Why?

» Which countries are currently the best place to invest in real estate?

3. In which countries is not worth to invest today? Why?

Greece? Many people think that Greece may be the ideal destination to invest their capital in real estate. The year to year decrease of property prices (2010 – 2011) was only about 5% in the whole Greece, according to the Bank of Greece (however, there is a lack of reliable statistic data, so the drop of prices could by higher). In some cases, especially in case of the luxury properties, the property prices went down by 50%, so there may be good deal available. But think twice before investing in Greek properties. Is the political and economy environment safe to guarantee a return on investment? No. Is there going to be a market for a resale? Very complicated. Is there enough market for a rent-out? Could be but the tourism market went down in Greece in 2011 and the outlook for 2012 is not much brighter. The most important issue though is the Greek political and economical future within the euro zone. The most probable scenario, as it seems at the moment, is the exit of Greece from eurozone and return to Drachma currency with a devaluation of Drachma. The important factor will be the exchange rate of the new Drachma againts PLN or EUR. And nobody can say what the rate is going to be.... All in all, Greece is a very risky environment and is rather suitable for buying a property for a personal self-usage rather than investing with a return on investment.

Please see attached an overview of the price changes in several countries around the world. It may seem that best countries to invest in real estate are India and Brazil, where prices have grown by double-digit numbers during 2011. However, these hot markets are probably set to correct the property prices. Isn´t it a better strategy to look at the down-falling real estate markets, which are on a turn-around to recover? Furthermore, most Polish clients will not be investing in these destinations like Brazil or China despite the compelling investment case anyway. First, these are far remote destinations and most clients have no connections to those countries and their culture. Second: It is good to remind that most of the investors in real estate are conservative investors, who are not looking for a short-term speculation but rather for a secure mid-long term return on investment.

HOUSE PRICE CHANGE (inflation-adjusted)

Country

Year-on-Year
2010               2011

q-o-q
Q4 2011

India-Delhi

NA

25.26

6.62

Brazil-Sao Paulo

16.97

19.79

3.93

Norway

4.29

7.01

-0.75

Hong Kong

18.87

5.32

-5.24

Switzerland

0.8

4.9

1.89

South Korea

-1.48

2.94

1.10

Iceland

-4.18

1.84

1.08

Germany

1.55

1.53

2.27

Indonesia-14 Cities

-3.21

0.85

0.36

Singapore

13.06

0.28

-0.67

New Zealand

-4.58

-0.01

3.36

Turkey

-4.8

-1.73

-3.02

China-Shanghai

-1.9

-3.23

-0.78

Croatia

-6.65

-3.26

-0.87

South Africa

-0.23

-3.27

-2.33

UK (Nationwide)

-2.7

-3.39

-2.07

Israel

14.22

-3.6

-1.83

Japan-Tokyo

6.14

-3.69

-0.53

US (FHFA)

-5.41

-5.54

0.06

Netherlands

-2.64

-5.77

-2.07

Slovak Republic

-3.14

-6.88

-1.69

Australia-8 cities

1.94

-7.7

-1.05

Portugal

-4.49

-7.78

-3.42

Taiwan

9.7

-8.74

-2.45

Bulgaria

-9.51

-8.99

-2.46

Spain

-5.93

-9.27

-2.86

Greece-Athens

-10.4

-10.43

-5.89

Ireland

-11.80

-18.08

-5.65

 

Comment

The obvious answer is that the figures illustrate which countries are experiencing high growth and which ones are not.

India and Brazil appear to be the world’s strongest markets, the Asian bubble is coming to an end and life has been pretty shit if you bought property in Ireland and Spain in 2007.

But what does it mean for the investors? For one thing it shows us where we’ve missed boat. For example, considering going into Brazil right now would probably mean only to be hit by housing correction.

The most interesting part of the table is the lower half combined with what is going on at the margin (are things getting better or worse?). Housing markets always work in cycles and timing is so important in overseas property investment.

The US and Croatia are the only countries in the bottom half where the numbers are improving.

4. What is the minimum amount I have to be able to invest in property abroad in the country (of those recommended countries).

Austria – from around 60.000 EUR
Switzerland – from around 250.000 CHF
France – from around 120.000 EUR
USA – From around 50.000 USD

5. Good investment examples

» Real Estate: Income Opportunities for Aggressive and Conservative Investors

6. Bad investment examples

» Investing in foreign real estate: What should you avoid?

7. What overseas investments are considered as the most risky nowadays?

The speculation on a property value increase. As a general rule, do not buy in overheated markets, as there is a very good chance of the property prices correction. And obbey countries with an unstable political and fiscal environment – like Greece.

Would you like to meet with us to find out more about foreign investment opportunities that might be of interest to you? Contact us.

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