Investing in Overseas Property

The above explains why values increase during the various stages of development and so it would not be unreasonable in a normal market to expect a property to increase in value by a modest 30% during the construction period. In that case if you purchased for 200,000 Eurosoff plan you would sell for 260,000 Euroson completion giving a profit of 60,000 Euros. But as your stage payments have been only 30% i.e. 60,000 Euros you have in simple terms doubled your money over the 2 years and don't forget that the 60,000 Euros which you invested in stage payments was paid gradually during the two year construction period so the whole was not invested for the whole time. Even after legal fees and taxes you should still have a very healthy profit.

The key factor which makes this possible is the low deposit of 30% required by the promoter which in effect enables you to buy a 200,000 Euros property for only 60,000 Euros and hold it for 2 years before taking the deeds and arranging a mortgage. During this time you are receiving the benefit of price increases on the 200,000 Euros not on your 60,000 Euros.

Some developers may even offer properties requiring only 20% in stage payments in this of course is an even more attractive proposition. In countries such as France or Cyprus for example the deposit required can often be as low as 15%.

Y ou do not need to be rich to invest in off-plan properties or buy your own holiday home overseas. You need from as little as around £20,000 which is paid in small instalments over the 2 year construction period. These payments can be protected by a bank guarantee.

At the end of the two-year period you will own a beautiful brand new apartment in a private development with tropical gardens and pools. This will obviously be worth more than when it was on the drawing board and may have increased in value by as much as 50% of the original promoters price.

You have the choice of selling and taking your profit, or keeping the apartment to enjoy.
There will be a pre-arranged mortgage, but if you keep the apartment, the monthly repayments can be normally covered from letting income.

Typically the 54,000 Euros investment is paid in stage payments over the two year construction period starting with a deposit of 3,000 Euros.

If you sell on completion, it would be reasonable to expect the original investment of 54.000 Euros to increase by 50% - 100%.

After completion, mortgage repayments on 98,000 Euros could normally be covered by letting income.

The information and figures above are for explanatory purposes only. Obviously no guarantee can be given of income or profit achievable and you should always consult your financial advisor before entering into any contract.

The New Spain

Remember Spain of the eighties when the cost of living was so low that you could drink Sangria on the beach and dine like a king for a few pesetas. If you owned a villa you could afford in-house staff to attend to your every need. Or you could afford the luxury of the very best hotels and sip champagne by the pool and dream of never returning to the UK again.

Well those heady days can still be found in the newly developed beach resorts of Bulgaria, which bear striking similarities to Spain of 25 years ago. It is situated in Eastern Europe with the stunning white sand beaches of the Black Sea enjoying over 150 days of sunshine a year and an average summer temperature of 26ºC.

This, plus a backdrop of breathtaking scenery and rolling mountains provide the arena for world class ski resorts. And yet Bulgaria remains relatively unspoiled with a simplistic lifestyle and very low cost of living.

The Boom Has Started

Property prices in Spain have spiralled over the last five years. So if you can no longer afford that dream home in the Spanish sun Bulgaria could certainly be a serious alternative. Prices are about one quarter of those for similar properties on the Spanish Costas but the boom in Bulgaria has already started and prices have increased over the last four years by an average of around 25% per year. What is more as Bulgaria will gain full membership of the EU in 2007 this trend should continue.

Bulgaria in recent years has become a major tourist destination and tourist arrivals last year saw 22% growth. Cut price air fares are now becoming available with BA offering flights from £29.

Investors are already moving in as all indicators point to a property price explosion as experienced in Spain in recent years.

2 Bedroom Apartments
ONLY £35 000

A new development has been released recently at Kavarna Beach resort only 45 minutes from Bulgaria’s International airport of Varna. It is situated 70m from the beach in an unspoiled area with three new golf courses and two stunning new marinas to be built.

You can obtain 2 bedroom apartments in this development for only £35000 and some prime beachfront units are still available.

The apartments all boast fantastic views over the Black Sea and enjoy beautifully manicured communal gardens with eight swimming pools.
They are built to meet the highest standards including double glazing, security locks and fully fitted kitchens. In the first phase a free furniture package is included in the price. Owners have use of all amenities including fully equipped fitness centre and refreshing hot saunas. There is also a children’s playground, good parking facilities, restaurant and bar.

The development is being constructed by a leading Spanish promoter, established in 1968, who has already completed a similar successful project nearby.

INVESTING IN SPANISH

PROPERTY

OFF-PLAN IS STILL AN OPTION

Overseas Property Investment Tracker I

BULGARIA PROVES IT HAS STAYING POWER FOR INVESTORS

Although the level of house price growth is expected to tail off slightly during the remainder of 2006, overall market growth will remain high, alongside excellent yields of 12% in quality areas such as the ski resorts of Bansko and Bovorets.

Cyprus is not far behind and offers a lower-risk opportunity for investors. Low deposit levels of just 15% are possible now and Swiss Franc mortgages are available with rates of just 3.25%, making borrowing more affordable. Capital growth is likely to remain stable at around 15% which, combined with rental yields of 8%, results in a total of 84% return on cash invested.

Turkey, a new addition to the Tracker, will present a new overseas opportunity for investors who are awaiting a change in legislation to allow mortgages for foreign investors, expected later this year. Although gains are still strong, with 27% capital growth and 8% yield, the change of rules concerning borrowing will have a dramatic effect on the housing market, potentially pushing up prices in key areas as much as 50% in one year.

Growth in South Africa has slowed from 24.6% to 15.8% and is likely to continue falling. Mortgage rates, already 8.5% are rising, prompting serious concern over the stability of the market. Yields have fallen from 10% to as low as 5% in 2005, so rental income will fail to make a profit for many investors.

Stuart Law, Managing Director of Assetz comments:

"Overseas markets are still offering excellent opportunities for investors, with Bulgaria and Cyprus now overtaking some of the more established destinations in terms of total return on cash invested.

"However, investors should remember that high return is often associated with higher risk. Established locations such as France are still holding up extremely well against the competition, offering a total 68% return on cash invested with an excellent holiday rentals market. With the low deposits requirement of just 15% in France, the total return on cash is still exceptional at 68%.

"Cheap Bulgarian ski destinations are certainly in as much demand as quality resorts in the France Alps. However, for sunny destinations combined with quality investment returns I prefer the South of France and Southern Cyprus to the coastal resorts in Bulgaria.

Overseas Property Investment Tracker II

BULGARIA LENGTHENS ITS LEAD AS RETURN ON CASH INVESTED SOARS TO 137%

Detailed research from Assetz, the UK's leading property investment specialist, brings together all the key investment criteria for UK buy to let and overseas property hotspots to form a quarterly comprehensive and authoritative investment Tracker.

The Tracker reveals that in the second quarter of 2006 Bulgaria has lengthened its lead over the other hotspots even further, rising from a 116% return on cash invested in March to 137% currently. Borrowing is now also cheaper than it was in the spring, with mortgage rates having fallen from 7% to 5.95%. Deposits required have also dropped from 30% to 25%, meaning greater gearing and bigger returns for investors. Bulgaria has now established a stable resale market and is proving it has staying power as an investment destination, especially with the strong tourist market in ski resorts such as Bansko, the introduction of no frills airline routes and the approaching EU membership expected in 2007. Any destination hoping to oust Bulgaria from the top spot where it has been since February 2006 still has a long way to go.

Interestingly Greece is now showing positive price growth, with house prices having risen by 7.9% over the last 12 months. This brings the total return on cash invested from 2% previously to a much more respectable 25%.

In addition, Poland's property market has had an excellent first half of the year. Word from the professionals on the ground indicates that prices have risen between 20% and 30% in 2006 so far, which would give tremendous return on capital for investors there who can buy with typically 20 or 30% deposit. Warsaw's property prices remain amongst the lowest in Europe and the introduction of major industry to the city is attracting an increasingly young and wealthy population.

Graph 1: Total returns on cash invested

Investors in the United States have seen the value of the US dollar fall from $1.75 in April to $1.88 currently to £1 Sterling, which equates to about a 7% loss of capital for British investors who bought there for cash or remortgaged their UK home in order to buy. However, those who took out an American mortgage will be less concerned, as the Sterling value of their debt will have fallen by the same amount. U.S. house prices rose about 12% over the last 12 months, but much of this gain would have been wiped out by the recent currency shift (see Graph 2 below).

With capital gains of 12.8% Spain is also still in growth mode, albeit at a slower rate than in 2004 and 2005. Official house prices have continued to rise, but Assetz suspects this is mainly the result of rises in declared house prices, with less cash being involved in transactions. This is because of increased transparency in the Spanish house-buying process. However, the market continues to be underpinned by strong demand from Spanish locals as well as overseas investors, resulting in gross rental yields of 8% and a total of 43% return on cash invested.

Stuart Law, Managing Director of Assetz comments:

"The choice of overseas destinations available to investors is growing increasingly wide, driven by EU expansion, new low cost flight routes and the prospect of hefty returns particularly in emerging markets such as Bulgaria and Poland. More traditional destinations such as France and Cyprus are still stacking up very well against the competition and hold huge appeal for investors who are attracted by a stable growth pattern, uncomplicated buying process and guaranteed resale market.

"However investors keeping an eye on home turf will be interested to know that the six major UK house price indices are now averaging 6.8% growth, resulting in a healthy 44% return on cash invested."