International property investment advice from our expert Alan Forsyth
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Posted on 29 May 2007
Knight Frank Latest Ratings
Hi All,
As reported in the Sunday Times lenders are restricting the best rates to those on higher salaries eg RBS will lend 100% rental coverage but only if you earn £75k per annum or more. It would appear they are trying to protect themselves from new investors and those on low salaries.
The other concern is over repossessed new build apartments with 25% of those properties sold at auction being repossessions – and 80% of them were new build flats.
Many lenders now have new build properties on their books which are worth less than the mortgage amount so have had to look closely at what they lend on. This is something that should not surprise as we have always said be careful about true market values of new build properties.
I feel as many of these markets are so new and values have been set by developers rather than the market, it will take up to 5 years for the true market value to be found.
Prices of new build apartments has fallen 4.4% over the last year – while the market as a whole is up 10.9% on average.
This only tells half the story. If you have tied up only 15% of the property value this can be an incredible difference in the return on investment.
It can be equivalent to a ROI of -33% and +70% - and that is just in year one. Going forward this is staggering – which just emphasises how critical it is to make correct investment decision – you can make phenomenal returns but choose your investments wisely.
Overall the BTL market is a strong one, with only a 0.59% of BTL mortgages being 3 or more months in arrears in the second half of 2006, compared with 0.89% of the total mortgage market, according to figures from Council of Mortgage Lenders.
So in conclusion, the market as a whole is strong and phenomenal returns of over 50% per annum are possible, but aim to buy affordable houses in general under £100,000 rather than new build apartments at over £100,000, and look for solid rental returns of at least 6%.
Far flung buy to let hot spots
Knight Frank again reported that the Baltic states and Bulgaria had the highest price growth in the world over the last quarter – firstquarter of 2007 - and I see no reason for this not to continue over the rest of the year.
Investors are looking further and further afield for value, with eastern Europe clearly offering some huge returns for investors. Now add Mongolia to that list!
Emerging markets around the world attract more attention all the time and with the power of the internet investors are able to look further afield and analyse different countries and deals.
Ulan Bator, the capital of Mongolia has seen interest from UK investors, looking for buy to let property to rent to Expat businessmen with capital growth forecast to be in the double digits next year.
Liam Bailey of Knight Frank states that St Petersburg and Moscow in Russia are offering excellent returns along with Delhi and Mumbai in India – I have been checking out a deal in Mumbai over the last month where there is some terrific value and a good sized middle class desperate for quality housing. If this would of interest let me know by email as the potential and affordability is very good.
Clearly there are some rapidly growing economies in the world and some fast moving property markets – as always ensure you have a good understanding of the local market before investing, but international investing is well worth considering to maximise your returns.
Free Currency Report
Currency exchange - another very important area to consider when buying overseas property. When buying property abroad, the difference in exchange rates can make a very large difference to the amount you eventually pay in your own currency.
Therefore, a common feature is to use the services of a money exchange company – and the reason is, that even with the big 5 banks, the rates offered vary considerably between each other, leaving the buyer with little choice and exposed to rate fluctuations.
Rather than you having to accept an uncompetitive fixed rate from your bank, they are able to call upon the currency trading floors directly to negotiate an excellent rate on your behalf. This alone can save you £1,000's. (On £100,000 they can save you up to £4,000)
I learnt from experience over the last few months as we have transferred some pretty large amounts to Estonia, Latvia and Czech Republic – and the difference in exchange rates offered by my bank, and the specialist exchange companies was huge.
Free Currency Exchange Report
We have a free 12-page educational report for all our subscribers outlining:
The facts about currency exchange so that you don’t get ripped-off,
How the Banks make HUGE profits from their long-standing unsuspecting customers,
Ways to safeguard yourself against adverse fluctuations in exchange rates (or in other words, helping you to keep your money in your pocket),
The entire process of moving money from the UK to any overseas location, so that you're armed with all the knowledge you need to make intelligent decisions about your money,
How you can ultimately save £100’s and £1000’s so that you have ample money to buy furniture and white goods,
Case studies of people that lost money due to foreign currency strengthening against the pound, so that you learn from other peoples mistakes rather than your own!
Send an email for this free report to
currencyexchange@property-investment-tips.com and we will have it emailed it over – but this is just for the first 5 subscribers, so email as soon as possible!
Currency exchange is an area that must be taken into consideration when are buying property overseas and switching large amounts of money from £ to euros, dollars or any other currency.
All the best
Alan
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About Alan:
Alan Forsyth is a full time property investor from the UK. He runs the website www.property-investment-tips.com
which gives free, independent investing tips to investors. This site, www.property-investment-deals.com is designed to run alongside
his original website, and will give in more detail his recommended property deals, and full details/pictures of any new deal on offer.