At MoneyWeek we are often accused of being too bearish on property. Perhaps we are. But we still can’t suggest buying in the UK. Here we offer three more promising locations abroad
Property hotspots: Argentina
Argentina may have been in crisis a mere five years ago, but today it is a property hotspot, writes Mangal Kapoor. Transaction volumes are rising fast – up 37% between September 2005 and September 2006 in Buenos Aires – and so are prices. This should continue. A stable parliamentary democracy is in place, and a strong police presence on the streets inspires a confidence not shared by Argentina’s neighbours, Brazil, Peru and Chile. Investment in tourism has also paid off – Argentina attracts many holidaymakers and retirees from Europe and the US – and a sound Western-style infrastructure and a transparent and accessible legal system all make Argentina look a promising long-term investment.
Add the fact that the peso is trading at nearly six to the pound, and now looks just the time to snap up a bargain.
Buying property in Argentina is simplicity itself. Each property has three documents attached to it: the title deeds, the survey (new for each sale), and the matricula, which lists the charges. The lawyer acts for both buyer and seller, and draws up the contract in his office, in their presence, so any discrepancies can be ironed out verbally before the final draft. A 50% deposit is normal, with the remainder paid on the day of completion (generally 45 days later).
Julie Greiner from Norfolk bought a 18 hectare vineyard last November for $500,000, with a swimming pool and two extra houses in the grounds. “The legal system is much better than ours,” says Julie, “even for foreigners. You could say it took a long time for us to get the contract drawn up – a whole morning!” Buyers and sellers both pay agents’ fees of 3%, with 1% each to the notary, and a sales tax of 3%. “If our seller had not had to find somewhere to go, we could have been in the house within a week of making the offer,” Julie says. She reckons her property is now worth more than $1,000,000.
Buying in town can be even simpler. You can buy an off-plan flat in the trendy Puerta Madera, completely furnished and have it managed for you on site. Prices for the 50 sq m units start at just over £110,000, rising to around £650,000 for penthouses of 300 sq m. Contact Aylesford International on 020-7351 2383 for details.
Property hotspots: Bahamas
One of the best property investments of the last 20 to 30 years has been land in the Bahamas, writes Mangal Kapoor. The creeping development of resorts and casinos has transformed once-barren islands into thriving holiday destinations, crowded with wealthy Americans. Prices are now underpinned – and should continue to be – by the influx of moneyed ‘snowbirds’, who fly south in the winter.
There are good reasons for British buyers to consider getting into the market: there is a direct BA flight leaving Heathrow at around 10am and getting you to Nassau at 3pm local time; the Bahamian dollar is pegged at par to the US dollar; and the Bahamas is a safe and easy place to buy. There is no income, corporate, inheritance or capital gains tax.
Buying is relatively straightforward, says Jonathan Morris of Sothebys. An initial purchase must be registered with the government, which then issues a Home Owners’ Residence Card. “Second purchases, or plots of more than five consecutive acres, require approval from the Foreign Investment Board, which takes longer. But there is an accelerated proceedure for properties costing over $500,000.” Buyers and sellers reach a verbal agreement on price, after which a 10% deposit is paid. Completion takes place some time later.
Those in receipt of large City bonuses might consider Weatherside, a ten-bedroom house with 200 ft of white sand beach frontage on Lyford Cay, one of the most exclusive gated communities in the world. With an additional two-bedroom pool house and two-bedroom gate house, and a Boston Whaler boat thrown in, the property will set you back $25,000,000. A cheaper alternative is a two-bedroom, one-bathroom apartment with balcony and sea views in Cable Beach priced at $320,000. Contact Jonathan Morris at Sotheby’s on 00 1 242 332 2820.
Property hotspots: Berlin
Imagine knowing what you know now about UK property prices and being able to pop back in time to buy up half of Notting Hill at 1995 prices, writes Merryn Somerset Webb. Well, you can’t do exactly that, but many think that opportunities on a similar scale might be on offer in Germany today.
For the last decade, property prices in Germany have barely budged: you can buy a flat in Berlin for a tenth of what it would cost you in London. There are several reasons for this – the country’s economic difficulties and a conservative mortgage lending system, for example – but the most important factor seems to be that for many years it has been cheaper to rent than to buy in much of Germany. And when it is cheaper to rent, rational people rent. I recently met a woman in Berlin who lives only a few minutes from the city’s main shopping street, in a flat of around 80 sq m. Her rent is e350 a month, of which e100 goes on heating and electricity. The flat’s market price would be about e100,000, so even a very cheap, interest-only mortgage at 5% would cost her more than her basic rent (e416 a month).
Add on the e100 for heating and electricity, and the flat would cost her an extra e166 a month. The result? She can’t see any point in buying. However, soon she might. The main reason that rents are so low in much of Germany is because a large part of the housing stock is government owned, and the government likes rents to be low. But this tenant-friendly situation will not last much longer. The government can no longer afford to subsidise housing for all, and has begun to sell off its housing assets to large private investors. And those investors approach life in a less charitable way than the state. That means rents are going to rise, and that owning is going to start looking increasingly attractive.
The other part of the equation is the mortgage market. As a single market in financial products spreads across Europe, the German banks are having to offer a bit more: you can now get competitive interest rates and even 100% mortgages. All these things bring down the cost of buying. The big buyers of Berlin’s residential blocks make their returns not just from notching up rents, but also by knocking on doors with a mortgage adviser at their side and asking their tenants if they want to buy them out. An increasing number of people are doing the sums and saying yes: when buying is cheaper than renting, rational people buy.
The bad news is that it isn’t particularly easy for individual investors to buy in Germany. The market is still very illiquid and quite opaque. However, over the last year or so, some agencies that help foreign investors have been established. One is Berlin Capital Investments, which has flats for sale from e50,000 on its website and can guide you through the entire process.