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Realty boom in emerging nations
Friday, May 30, 2008 By Adrian Murphy, Emirates Business 24-7

Parts of the world may be reeling from a crisis in the property market but bricks and mortar remain a solid investment on some foreign soil – provided people choose their location well.

The real estate sector in the United States is experiencing a major downturn in the wake of the sub-prime fallout.

However, some markets in Europe and emerging nations in Asia and the Americas remain buoyant and are potentially excellent places to invest in real estate.

Ahmed Jamal, Managing Director of Emerging Markets Property Advisors, which compiles reports on 40 countries around the world, said many countries offered strong returns. "People are talking about a global property crisis but the terminology is incorrect. There is a crisis in the US and parts of Europe but other places are doing well," he said. One market which not too many people are talking about is Vietnam. It has been growing slowly, but in five years time I can see it being massive.

"Dubai is still a great place to invest – you have excellent rental use and yields are going up. It's one of the top 20 places in the world, hands down. In Romania, at the moment, returns are the best and there are also excellent opportunities outside Warsaw in Poland and Berlin," said Jamal.

Romania's inclusion into the European Union in 1994 saw its economy blossom and in the past eight years there has been a property boom, according to romaniareport.com. "It started in [the capital] Bucharest, which caused prices to go through the roof, and in the past few years foreign investors have caught on as well," said one analyst.

Property returns in Romania will hit 414 per cent over the next 10 years, although prices are below other capital cities in Europe, according to PricewaterhouseCoopers.

A one-bedroom apartment in Bucharest can be bought for £40,000 (Dh300,000) to £50,000, while the same in London would fetch in the region of £300,000.

Factors such as the pre-requisites of affordability, a stable economy and a solid political system make a city or a country attractive. Natural beauty and rental potential also play a major part. "People in the UAE have always been interested in buying property in the UK and France," said Farooq Khan, international sales co-ordinator at Sherwoods. "The south of France has great deals for investors with potential for resale, return and rental potential. All three of these are high on the list for investors," he said.

But investors, whether individuals or companies, need to be aware of a few rules before rushing into the latest hotspot.

George Betz, Sales Director for the Worldwide Property Show, which recently came to Dubai, said potential investors should do their own research and make a list of things to consider. "First of all, you need to know about the people selling the property. Are they reputable," he said.

"Another thing to consider is the environment and whether the laws are favourable to the buyer. On the same line, as an investor, you have to look into tax issues – you do not want to buy a property if there are heavy taxes to deal with.

"A very important factor is the market you are buying into, whether it has a resale value and rental potential. And the bottom line is: Are you happy with the location and would you be willing to live there yourself if the investment failed?"

This advice is all the more relevant as developers focus on the 'pluses' of their particular plots of land. For instance, developers in Panama are riding off the back of the government's announcement to widen the Panama Canal. This will bring jobs and increase the need for rental property, provided the development is successful.

In Thailand, developers are also encouraging foreign investors and claim that, following the 2006 military coup and subsequent election of a new government, the political and economic climate is stable.

In Malaysia, the government is actively involved in attracting foreign investments with the My Second Home Programme, which allows foreigners to gain multiple-entry visas for up to 10 years. "We are encouraging foreigners to invest and retire in Malaysia," said Jenny Low, sales manager of the Kuala Lumpur Metro Group.

"The Gulf market is particularly strong for us as Malaysia is also a Muslim country and has the same systems."

In Turkey, the government's application to join the European Union has seen it comply with many European laws which, in turn, has boosted the property market.

Irum Ashraf, senior director of El Sueno Dream Properties, has invested in a five-star luxury apartment development in Turkey – to be completed in 2010 – and is positive about its potential.

"It's so difficult for us to find negative points about Turkey," she said. "We conducted research and found one of the best pros is that the property market has risen by 40 per cent. Its application to the European Union is another excellent reason to invest."

In cities such as New York and London, prices remain fairly sound as rentability is always assured, but with the credit squeeze investors are reluctant to part easily with their money. Andrew Godman, of UK property management firm Image Homes, is mindful of the property crisis and now offers incentives for overseas buyers. "If they buy an investment property then Image Homes will cover the mortgage payments for five years and rent the property out," said Godman.

"We have given people more confidence in the market and this is ideal for overseas buyers who do not want to live or manage their property straight away.

"The UK is still a good place to buy property. London is a place that people from the Middle East like to have in their property portfolio and, of course it will host the Olympics in 2012."

In June, immigrant investor visa programme EB5America will be in the UAE to sell properties in the United States Applicants, who will only be eligible if they earn $100,000 or more per annum, will then be put forward for a green card.

"There are a lot of people considering buying in America now the domestic market is in turmoil. But we would recommend that they buy a year down the line," said Jamal.

"The US market at the moment is going through a downturn but people are not yet feeling it. There will be a time lapse for repossession. If you buy now, a year down the line you will be able to buy the same properties for less."


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