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Expat Investor : September 2007
Fast Facts 77480 PROPERTY INVESTMENT September 2007 EXPAT INVESTOR 23 Mortgage monitor -- a market view David Buchanan, Business Development Manager with Irish Permanent International, places a spotlight on the UK mortgage market for expatriate investors. Dalmatian island bolt-hole Home-from-home insurance Lifestyle, lower cost of living and climate are prime motivators Global Spaces has launched Kavanjin in the town of Sutivan on the Croatian island of Brac. The scheme comprises around 85 luxury one, two and three bedroom villa- style apartments overlooking the roof tops of Sutivan and onto the Adriatic Sea. With its crystal clear waters, marina, surrounding islands and beautiful beaches, including the world-famous Golden Cape at Bol, Brac boasts a plethora of themes to attract a range of interests, from beach lovers to sea-faring sailors and wind surfers. Sonny Gowans, CEO of Global Spaces, says, "The island of Brac offers a first-rate location and a powerful case for investment due to the limited amount of new build property currently available in the local market. Kavanjin is situated in a perfect holiday location in one of the world's top nautical destinations. "What's more, with the country's expected entry into the EU in 2008/09, Croatia will continue to enjoy an ongoing period of capital growth increasing property prices further." Global Spaces confirms that each of the apartments at Kanvanjin will be built with care and consideration for the local environment with materials reflecting local Croatian architecture. Each apartment will come with a private terrace and a parking space. A communal and family friendly club house and pool will further accentuate the local Mediterranean lifestyle. With local amenities as well as beaches, restaurants, cafes and the Sutivan At the time of writing, the Bank of England Monetary Policy Committee (MPC) raised interest rates once again in July 2007, voting 6-3 to raise the base rate further to 5.75%. This represented the fifth increase in the base rate since August 2006 and most commentators now predict a further increase could be expected in coming months as we near the peak of the current interest rate cycle. Halifax House Price Index (HHPI) issued on 4th July 2007 confirmed house prices increased by a 0.4% in June 2007, the second successive month of growth of less than 0.5% and annual house price inflation is standing at 10.7%. The increase in mortgage rates since last summer and negative real income growth are expected to cause annual house price inflation to slow over the coming months. HHPI believes house price growth will continue to be supported by solid fundamentals in the UK economy with the underlying rate of economic growth above long-term average. In Piraeus Bank recently conducted a survey amongst people planning to buy overseas property within the next two years and, more specifically, those countries in South Eastern Europe where the bank has a presence. The survey revealed the most popular motives, and the areas where these potential buyers are most likely to buy within that region. Overall, Greece made it to the top of the popularity stakes with, nearly 20% of those surveyed finding it the most appealing property destination. Cyprus came a close second followed by Bulgaria, Egypt and Romania. Reasons for purchasing showed that those who preferred Greece and Cyprus were mainly looking for holiday homes, while the majority of people looking to purchase in Bulgaria are doing so to gain from the anticipated capital growth of the property. Nearly half of respondents to the terms of the housing market, the ongoing shortage of housing supply is expected to continue to support house prices so a widespread fall in values is not being forecast. However, the increase in mortgage interest rates since last summer and negative real income growth are expected to cause annual house price inflation to slow over the coming months. In general, IPI has seen the market remain buoyant, with interest from offshore investors remaining strong for UK residential investment property. The UK property market is still viewed as a sound long-term investment, although recent base rate increases will no doubt continue to put pressure on yields and rental cover going forward through 2007 and into 2008. In response to the current market conditions we are seeing lenders introduce more innovative products for the buy-to-let investor. For more mortgage infor mation from Irish Per manent Inter national, enquire through the fast fats number below. survey stated they expected to pay a purchase price in the range of 100,000 to 250,000. Interestingly, reports Piraeus Bank, more people indicated a budget of 101,000-- 250,000 for Greece than for Cyprus, even though, comparatively, Cypriot property is more expensive than that of its Mediterranean neighbour. Overall the survey shows that the main motives for buying overseas are lifestyle, climate, and a lower cost of living. Amongst those surveyed, approximately 70% plan to buy an overseas property within the next year, and they described their main goal as having a holiday home, achieving capital growth, and generating rental income. Over a third of those seeking properties in Greece and Bulgaria stated they require a mortgage on the overseas property in order to finance the purchase. Only 10% of people buying in Greece would consider doing so as a totally cash transaction. A further point of interest revealed by this survey relates to Bulgaria. Despite the market being driven by agents selling off-plan properties, 40% of respondents indicated that they are looking for resale property. The majority of people looking to buy there are seeking an apartment. Retirement was the least likely reason for purchasing according to participants in the survey, Cyprus having the highest number of those at 13%. Irini Tzortzoglou, Head of Retail Banking, tells Expat Investor, "Piraeus Bank has identified a growing trend amongst property buyers in South Eastern Europe which is supported by the findings of the survey, that is buyers of second homes are looking to enjoy the property for holidays with family and friends, at the same time as both gaining from steady capital appreciation and generating useful rental income which can be used to offset the cost of the mortgage". "In order to achieve this Utopia, buyers have to buy in the better locations, and take their time to look around to compare and contrast prices to ensure they get good value for money. Last but not least, buyers should obtain good, independent legal advice to ensure they are buying with clear legal title to the property". Piraeus Bank can help overseas buyers in Greece and Bulgaria through the buying process -- for more information on mortgages visit www.piraeusbank.co.uk Fast Facts 77481 marina just a short walk away, residents will also enjoy easy access to everything that this picturesque island has to offer. Brac is the largest of the Dalmatian islands of which there are approximately 1,200, offering one of the "world's best nautical locations". This attraction brings with it the kind of affluent tourist who likes to look for the perfect bolt- hole to explore the countless sights, islands and marinas. With regular flights to nearby Split from Gatwick and Luton, Brac is just a short ferry journey from the mainland. Alternatively, the island has its own airport for shorter trips. Prices at Kanvanjin start from around £85,000. For more information, visit www.globalspaces.com Over 800,000 households now own a property abroad in ever more emerging markets, presenting unique insurance dilemmas for Brits trying to protect their overseas investments. Overseas property specialist HiFX Insurance has responded to this increasing demand for a place in the sun or snow by widening its insurance protection to cover destinations such as Dubai, Bulgaria, Cape Verde, Croatia, Morocco, Poland and Romania. Mark Bodega, Marketing Director, comments, "Emerging markets present their own challenges, but there are some fundamental factors that people need to consider when insuring any property abroad." HiFX Insurance's top tips 1. Do not be tempted to use a normal home insurance policy and avoid disclosing that the property is a holiday home, as this could invalidate your insurance. 2. When arranging your cover, it is important that you carefully consider what you will be using your overseas property for. Will you be using it occasionally as a holiday home or residing there permanently? Or do you intend to let the property out to tenants? In particular, how long is the property likely to be empty? 3. Consider the language difficulties of local language insurance policies. Understanding the specifics of cover levels and making a claim in a foreign language can be tricky. 4. It is also vital that you have the relevant insurance in place by the time you exchange contracts on your property as often the notaire/notario will require your policy document before the sale can be completed. With the increasing number of cases of what HiFX Insurance calls "land grab", where local authorities reclaim the land that a property has been unwittingly built on illegally, it is important to bear in mind that most insurance rarely covers the reclaiming of land from ruling authorities. Therefore, anybody buying in Spain should do vigorous checks to protect themselves prior to buying. HiFX recently discovered that insurance was low on people's list of priorities when considering buying property abroad, whereas investment viability and the legal issues of buying abroad were ranked as the top considerations. Mr Bodega adds, "Adequate overseas property insurance is essential to safeguard the viability of your investment. Storm damage and burst pipes rank amongst our most common claims. Overseas repairs can be expensive and, in order to protect your investment, it is essential that any material damage is repaired by trustworthy, skilled tradesmen."
July August 2007