Too fashionable for my property
With property in the UK, the US and across much of Western Europe looking overpriced, British second-home seekers have started to look further afield for deals. But there are usually catches to buying in newly-fashionable locations. Here, we look at three property markets that are perhaps not the bargains they appear to be.
Dubai
Dubai has certainly got the PR machine whirring to establish their property market on the UK radar.
Some reports say that David Beckham was given a home on the famous Palm Resort, a huge man-made archipelago that can be seen from space, when he passed through Dubai. The ruling Maktoum family (who control Dubai) have spent millions of pounds on appearance fees to persuade top sportsmen to perform in the middle eastern state and raise its profile.
And the PR seems to be working as some of the off-plan units on the island are said already to have been resold many times over long before the building completion date.
But what's the reality? Supply is rising fast. Building is forging ahead with 215 big projects under way, including The Burj Dubai, the world's tallest building, and The World Resort, 250 man-made islands.
At the same time, more properties than were originally planned on the Palm Resort are being built, despite fears that the infrastructure may not be able to cope.
But oversupply may not be the worst news for foreign investors, who are still not able to have freehold property rights in Dubai. The royal family has been promising to change those rules for years with little sign that it will ever happen.
Eastern Europe
Attractive property prices in Estonia, Bulgaria, Montenegro and Croatia has made Eastern Europe very popular for the last year or two. With ski chalets going for £30,000, flats overlooking the beach for £50,000 and five-bedroom villas for £100,000, it's little wonder.
But let's take a closer look; these markets are cheap for a reason. Bulgaria may have great skiing and a superb coastline, but buying in the country as a foreign investor is not easy. Estate agents have a poor reputation, commissions are high and, while foreigners are allowed to buy buildings, they cannot buy the land they're built on unless they set up a firm which is not easy.
There are similar problems with buying in the Czech Republic, Poland, Croatia, Estonia and Montenegro. These countries lag behind Western European markets in terms of sophistication, legal propriety and straight dealing.
The fashionability of some of these countries also makes them quite expensive already. Small houses with no direct sea access go for £150,000 in Croatia, while in Montenegro, a small two-bedroom house on the edge of one of the fjords would be a similar price. Couple these drawbacks with poor infrastructure and struggling economies, and it may be too big a step for many British families looking for a low-stress second home.
Prague has its own problems - prices have been rising at 20% a year for the last five years, but where there has also been a lot of new building rental yields are falling fast.
To sum up, just because prices in Eastern Europe look cheap to British investors, there is no guarantee they will go up, or why they can't get even cheaper.
Zimbabwe
Zimbabwe has recently been mooted as a potential future star of the global property market.
Many people believe that white home owners in Zimbabwe are having their property forcibly removed but this is not generally the case. The forced land reclamation policy has targeted only farms over 50 acres, not freehold holiday-homes or city flats.
While Zimbabwe may not be the most politically stable country in which to invest, that doesn't preclude making money for the shrewd investor as happened in neighbouring Mozambique, whose government identified a few years ago that the route to sustainable wealth was through a robust tourist infrastructure. As a result, property prices there have more than doubled in the last five years. It is possible this could happen in Zimbabwe too. While the market in the capital Harare is said to be quite buoyant, this won't eradicate the fears of many built up from many years of violent news stories and crumbling infrastructure.
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Mayfair Consulting Limited is an Appointed Representative of The Mortgage Times Group Limited, 279 Tottenham Court Road, London , W1T 7RJ , which is authorised and regulated by the Financial Services Authority no. 303007.
