Investing abroad in property; ever considered it? Should you ever?

Holiday Lets July 11th, 2016
Investing abroad in property; ever considered it? Should you ever?

This article is concerning the do’s and don’ts of investing abroad in the current economic climate. it focuses on the differing nature of markets, particularly in the popular sunny Mediterranean or Atlantic destinations for U.K. tourist markets.

Investing abroad can be a daunting proposition for anyone attempting to expand their property portfolio. The U.K. property market is almost seen as a guaranteed source of profitability over time, as prices have continued to rise extensively since the 1970s. But, other domestic property markets are very different. While we assume upward pressures driven by over demand and lack of supply, other nations have very different approaches, requiring caution when investing abroad.

Portugal recently announced that its house prices were in a state of growth. The reduction in taxes on pensions are driving this, as this allows for more disposable income. Potential investors are already circling, hoping to make quick money from Portuguese villa’s in tourist areas. But, look back further and you would notice that the Portuguese property market has not improved since 2008. Zero increase for eight years. Over the same time period, property prices in some areas of South-East England have almost doubled. It raises serious concerns about relative increases in property rates for investor choosing between the U.K. and the continent.

Spain is trying a different strategy to entice UK residents to invest abroad. It is a country in which supply outstrips demand. Huge quantities of property was built on the expectation of continuing economic development. The slowdowns caused by the 2008 recession, followed by the Euro-crisis, have left Spain with ghost towns. Filled with new apartments, but bereft of people. Thus, Spain has chosen to dramatically cut the asking prices for unsold properties, undervaluing their own market in order to entice the much needed demand by an average of 3.1% since June 2015. Their long term projections will be that, once the market is reinvigorated, profitability will return to the industry.

Should You Invest in Overseas Property?

Does this then mean that a shrewd U.K. resident investing abroad in Spain could make substantial profits? This all depends on how long it takes for the Spanish property market to recover. If it does not see that required increase in demand, then it may be 10 years or more before you would begin to see any substantial returns on your investment in an undervalued property.

Despite the concerns over the British property market brought about by Brexit, investing in other European markets is not the quick solution. yes it is indeed possible to make money in other markets, but previous years have shown that the U.K. market is far more vibrant for investors. Despite a potential slowdown, the U.K. bubble has not burst, and demand for property continues to ensure that prices remain stable, or even improving in many regions.

 

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