profitable overseas property markets in 2011

One of the great paradoxes of the industry we work in is that the most lucrative markets for an agent are not always the best investment opportunities for the client.

The most money is always made in the final stages of a property bubble when fear of loss is driving a mania to purchase and the even the most incompetent salesman can close a deal.

You don’t have to look too hard to find an agent who sold Spain or Bulgaria who is nostalgic for the heady days of 2007.  You would be hard pressed however to find an overseas property owner who bought in Spain or Bulgaria in that year who believes they are sitting on a great deal (although they may be in the long term if they bought in a prime location).

If I have learnt anything in my time as an entrepreneur it is that it is does not matter how good your products are, it is incrediably difficult change market perceptions or fight against a tide of opinion.

It is often better to sell a poor investment into a receptive market than sell a great one into an unreceptive one.

Last year, two friends of mine working for different companies wasted significant resources on two separate ventures that ended in failure.  One “sold” a stunning up-market resort in Albania to the British market.  Great product, zero sales.  Without huge advertising budgets to shift public perceptions, the British market found it hard to imagine buying into what they wrongly perceived a run down eastern European former communist state.

The other spent months packaging up a great tenanted property portfolio in the North east of England.  The problem was their audience of international buyers had never been to the North East and were not familiar enough with the area to commit to purchase.  Again, zero sales.
 

Spotting the best seller markets in 2011

If you are looking to diversify your property portfolio in 2011, there are a number of conditions that should significantly increase your chances of commercial success.

•    A compelling and credible sales story
•    Positive momentum
•    Reasonable mortgage market (easier sales, commission on leveraged money)
•    Accessible price point
•    Familiarity
•    Convenience
•    Cache

All the conditions, except the second one, are relative to the buyer market segments you serve.  If you sell to sophisticated investors, a familiar and convenient location is obviously less important, although locations unfamiliar to your prospects, add both to risk and the cost of sale.

In my opinion, by far the most important is a compelling and credible sales story.  In the boom years, almost every overseas property location had one.  Prices were rising and everyone was making money.  There was also positive momentum.  If you didn’t buy immediately you would lose out and there were plenty of stories in the press to prove it.
 

Decent bets for 2011

Today, it is very difficult to find any destination which hits all the buttons.  The British press have done their best in the past few years to talk down most overseas property markets which has dampened consumer demand.

One way to judge the best bets for 2011 is to try and predict which destinations are likely to produce the most positive news coverage.  If you have the media behind you, it adds credibility to your sales story and gives you momentum.

It is the time of year when I feel obliged to produce just enough rope to hang myself with, so here are my predictions on the overseas markets most likely to produce sales from UK buyers.
 

France - Paris and South

Although French property prices have more than doubled since 2000 and are still overvalued, the short term outlook appears positive.  Property prices rose for the first time in eight quarters in Q4 of 2010 according to FNIAM  and the economy is also recovering.

France has not been affected by the kind of title and planning problems of Spain or Cyprus and most of the media coverage has been benign.  The profile of buyer is also more affluent and is less vulnerable to the vagaries of the economic cycle.

Importantly, French lending institutions are in better shape than most of their European counterparts which means mortgages are more readily available then elsewhere.  Fixed term deals of 25 years are common and interest rates are on the rise which creates an incentive to buy quickly, which should benefit transaction volumes.

Finally, good new build property in hard to find.  This makes sourcing more difficult but also reflects a scarcity of supply which makes the market more robust.

The biggest risk is another euro crisis.  Spain has to refinance large swathes of debt in the spring which could lead to another Greek style crisis but on a larger scale.  However, this risk exists with all member countries.  If it happens, short term business will be hit but it would be a positive development medium term.
 

US- Florida

The news coming out of the US currently is of falling real estate prices.  However, price indicators like Case-Shiller are time-lagged and reflect activity in August.

The Bush tax cuts have been extended and there is a further payroll tax cut in the pipeline which will put money in consumers’ pockets.

The US is the world’s most flexible and innovative economy.  It always comes out of recessions more quickly than anyone else.

As we move through 2011, I believe the economic news will get better providing an environment of low real estate prices and media predictions of increases.  An ideal environment for closing business.

The mortgage market is still tricky but get the finance right and it could prove extremely profitable.

Turkey and Egypt

Of all non-established markets, my favourites are Egypt and Turkey as far as the British buyer is concerned.  Compared to many of their rivals, they are both familiar and convenient for the UK market.
Tourism is growing and land prices are relatively cheap.  Population growth is bolstering demand and provides a strong sales story.

Finance is difficult in Egypt but the long season and cheap property prices are a big plus.

Both markets have the potential to ride a boom for quite some time before they bust (all property markets do).  There are political risks, but there is plenty of upside to compensate. 

Better to be lucky than good

A lot of business success comes down to being in the right place at the right time.  Catch a wave of a growing market and it’s not too difficult to build enough momentum and leverage to succeed and raise the barriers for later entrants.

If are looking to diversify in 2011, sourcing great deals in Egypt, Turkey, France and Florida could be the places to start.

 

Source: Global edge