The nay-sayers have come out in force as regards the UK property market aided in no small part by the actions of a small cadre of rogue traders in the mortgage market - see this article in the Times. It will doubtlessly alarm the buy-to-let investor with significant exposure to the UK real estate market to see analysts predicting such dire times ahead and many will, quite rightly, be looking to relocate their investments to more secure markets - or, as a minimum, to ensure all their future investments are made outside the UK.
Is the UK a dead man walking?
Far be it from me to take issue with analysts who've spent considerable time poring over detailed figures and the results of building companies, banks and other affected entities. Nor am I about to do a Nigel Lawson and call them "City scribblers" but if you are into the UK housing market in a big way other than for your primary residence I would be cautious of giving too much credence to forecasters who routinely get their numbers wrong.
There are parts of the UK market that have been over-sold in the past decade (as is also true of parts of Spain and even perhaps Bulgaria) but that doesn't mean the whole thing is going to come crashing down like a "House of cards". Nor is the underlying mortgage market populated to any significant extent by the unscrupulous. There is likely to be some damage especially to investors who have bought small apartments in large new-build blocks in cities such as Leeds, Birmingham and Manchester. Some of the horror stories will sell newspapers well in the coming months but for the majority I would expect a relatively benign environment - little in the way of equity growth but if your property is already let to stable tenants short-term equity fluctuations are less important.
So where do I invest?
As always the answer to where one should buy property is location, location, location - whether buying in the UK or abroad. The position of the property, the level of "competition" from similar properties and the prospects for the region all impact on how attractive and hence rentable and likely to grow in value will be the property.
For many, new and dynamic overseas markets are providing a realistic alternative with some strong prospects for the near future. Examples include:
Brazil - the north eastern corner of Brazil is seeing a lot of activity and many who have bought there in the recent past have seen good returns already. The presence of a large tourist market (the US) on its doorstep and commitment from the government to invest in creating world-class destinations for the country make for a strong combination. Brazil has over 7,000km of soft sandy beaches to attract the international holidaymaker and they are coming there in increasing numbers - indeed, forecasters are expecting the tourist numbers to double in the next decade. Some forecasters even expect the Brazilian economy to rival the tigers of the East such as China and India, especially as it will soon end its dependence on imported oil.With so many factors in its favour and the relatively low cost of property there - a beachside apartment can cost as little as £40,000 - it is hardly surprising that so many international property investors are snapping up the new developments.
Germany - the driving factors in Germany are quite different to Brazil but no less impactful. Here the key driver is the comparatively low level of home ownership - for Germany as a whole the level is 42% in comparison to nearer 75% in the UK and in some parts of Germany this is even lower. Berlin, for example, has a very low level of home ownership at only 13%. Many investors, of course, expect this to increase now that the law on rental caps has been changed - tennants are likely to see rents rise a lot more than previously and the incentive to own the property will increase commensurately. This will push up prices in much the same way as the UK saw during the 1980's and 1990's when home ownership here rose from just over 50% to its current levels.Again, though, it would be wise to buy selectively as some of the former Eastern sector of the city is still rather drab and uninviting so hardly likely to appeal much to purchasers. Charlottenburg, in contrast, is highly desireable and properties there should be in any serious investor's portfolio.One other benefit of a German tenant as well, of course, is that they are typically fairly stable in terms of occupation and income - Germans have historically rented their apartments for many years and only reluctantly change employers. In many ways, the German attitude to their employer is closer to the Japanese model than the UK or US one - fierce loyalty given and received.
Turkey - Turkey has been held back in the overseas property market not least because of its own regime, perceptions that it is too Islamic, its continued occupation of Northern Cyprus and the consequent delays in becoming accepted into the club at the European Union. This has kept the lo-cost airlines away or, more accurately, made Turkey appear a less attractive prospect for investment than many other emerging markets.This is all changing - well, a lot of it is. Sure, they still occupy the parts of Cyprus they invaded in 1974 but the airlines are moving in: EasyJet recently acquired GB Airways and it is likely they will expand the reach from the Dalaman base GB Airways has had until now. Added to this, the Turkish themselves are busy erecting new airports, presumably in anticipation of more traffic. They have gotten to grips with the economy and financial sector and growth rates of 6%+ this year are likely to feed into higher property prices too.
Spoilt for choice
These three markets are just a few of those that could see returns exceeding those in the UK buy-to-let market. Some developments offer guaranteed rental schemes, attractive financing deals or other incentives that make them even more irresistable but tread cautiously, as always - not every property market will turn out to be as safe as houses, maybe as safe as Northern Rock!
