Although there is no exact ‘one size fits all’ solution, here are some of our top tips about the type of property which we think is the safest type to buy in an emerging property market:
As property continues to boom, there will be more and more developments on the outskirts of property hotspots. But with building land very limited in city centres and right on the seafront, you can be sure that your property is never going to lose its premium position if you follow these rules.
|1. Location |
Yes, the old joke that there are only three important factors when it comes to property is as true in emerging markets as it is back home – perhaps even more so.
If you’re planning on buying property in a resort, then it’s obvious that you want to get as close to the best beaches/golf courses/ski lifts as you can. It’s worth paying a premium to get a good view – when it comes to marketing your property to tourists, a picture of a great view is probably going to be the one that sells it best.
Make sure that it’s close to local amenities and not too far from the main tourist airports. While there are some tourists that will pay to go far from the madding crowds, most tourists aren’t going to be that adventurous and will prefer to stay some place where there are good transport links.
4. Apartments vs. Houses/Villas
Although most people in the UK or Ireland with a bit of cash live in houses rather than apartments, the vast majority of people in the emerging markets live in apartments.
Developers make more money by ‘piling them high and selling them cheap’ and so are more likely to build apartments in the most prime locations rather than houses – houses and villas tend to be built away from city centres. So to appeal to the widest market, it is better to buy apartments rather than houses.
Another reason why apartments make a better investment is that, in several emerging markets, there are restrictions with regards to foreigners’ owning land. While there are usually ways around this, you avoid all of the hassle by buying apartments instead of houses or villas.
For reasons of privacy and security, in many of the emerging markets, locals don’t like living on the ground floor (by the way, in most of these markets, the ground floor is called the 1st floor, so what the British call the 1st floor, they call the 2nd floor, etc.) Also the views are better the higher up the apartment is.
So you’re probably better off taking one of the upper floors even though higher floors tend to be a little more expensive.
5. High Quality
A perfect location is not enough if the exterior and interior of the property is not up to scratch. Ask yourself the question, “would I be happy to live here?” If the answer is not a resounding “yes!” move on and look at something else.
While there are bargains to be found in ‘fixer-uppers’, don’t even think of buying one unless you’re prepared to do it all yourself. You think that you struggle to find good workmen back at home? Trying to arrange construction in the emerging markets where you can’t even speak the language is a recipe for complete and utter disaster.
Investing in top quality property has all of the following advantages:
(a) You attract the widest range of potential tenants – tourists, expats and rich locals.
(b) You can charge the highest prices and so get higher yields.
(c) Every rental agency is going to want to represent your property.
(d) Less chance of things breaking. If your 19th Century plumbing or electricity gives up the ghost, you’re going to have a big problem if you live on the opposite side of the continent.
(e) Tenants take better care of the property. If everything is lovely and fresh and new, tenants usually try to keep it that way. If it’s falling to bits already, most tenants won’t care if it gets a bit more broken.
6. Optimum Size
In order to appeal to the widest possible range of tenants (and buyers when you are ready to cash in your chips), we recommend looking for two-bedroom properties in the region of 50-80m2 in size.
Although studios are a lot cheaper and you will often pay less on a EUR/m2 basis for larger properties, a reasonably sized two bedroom apartment appeals to the widest possible market. With new developments, take a look at what sizes of apartments have sold out first – chances are that the medium sized apartments are the first ones to be reserved.
7. Off-Plan/Already Built
Finally, and perhaps most importantly, there is the decision to make regarding whether it is better to buy an apartment that is built and ready for someone to move into tomorrow, or ‘off-plan’.
‘Off-plan’ refers to an apartment complex that is about to be built or in the process of being built that won’t be finished for several months or several years.
The idea of buying a property that is currently nothing more than a muddy field and a pretty picture of what the architect thinks it should look like when it’s finished might fill some people with complete terror. But, in fact, it usually provides you with a lot more security than buying an existing property, because …
(a) You can be reasonably sure that there will be no ownership problems. In some of the emerging markets, it can be difficult to determine who actually owns an existing property. With an off-plan property, you can be confident that, once you own it, someone’s granny isn’t going to turn up with a tattered piece of paper saying that 10% of it still actually belongs to her.
(b) In most emerging markets, new builds will have to comply with EU building standards. In the past they didn’t have to. Some of them were actually built by convicts and so you can imagine that they weren’t too worried about cutting corners from time to time.
(c) In most cases, it is going to be a lot simpler for you as a foreigner to buy an off-plan property. The savvy developers will have English speakers on staff to help you through the buying process. In the most popular resorts where foreign buyers are the majority, they probably have mortgage deals, etc. set up ready for you to make the whole buying process as simple as possible. However, make sure that you use your own lawyer to represent you during the buying process for your own protection.
(d) Once the off-plan property is finished, you can be sure that it is brand, spanking new. See section 5 on this page for the reasons why this is a better bet than an existing property that is getting a little tatty round the edges.
However, the best reason for investing in an off-plan property is that you don’t have to come up with all of the money on day one. Sometimes 10% of the purchase price is all you need to come up with in order to secure the property for yourself which, if you are short of cash, is very useful. You won’t have to pay the full amount for the property until it is complete, which could take two years. By this time, the property could have appreciated by 30% if you’ve done your homework. So you could sell your ‘right to buy’ the property to someone else and pocket the entire difference.
Which is a lot.
Let’s assume you buy an off-plan property worth EUR100,000 today and just paid the initial 10% deposit. In two years’ time, the property is worth EUR130,000. There is EUR90,000 left for the eventual buyer to pay, so you can ask for EUR40,000.
Congratulations! You have just quadrupled your money in two years – a lot better than getting 3% interest per annum from your Building Society, I’m sure you’ll agree!
Before you get too excited though, beware. If you can’t find someone to buy your property and don’t have the finance available to pay for the 90%, you could find yourself in serious trouble.
Despite the fact that investing in off-plan is a great strategy for the beginner, you can often find some real bargains on properties that are already built (what developers call the ‘secondary market’) If you’re interested in seeing them, become a Premium Member and we’ll send you our secret tips each week.
Confused? If so, check out our Book Store to get more detailed information about buying property – this was a pretty basic guide to the rules of buying property – either in emerging or developed markets.
But if you understand everything, let’s move ahead quickly to the key data that should help you to decide upon which countries you should be looking at for buying your first or next property …
Show Me The Stats! >>>