Property Investment International - Newsletters
PII Newsletter August 09 - upgraded investments
Dear Investor,
It’s been an interesting first half of the year and wealth has been transferring hands at an even more rapid pace than normal. Stock markets have boomed on the back of rising confidence the world wasn’t descending into Armageddon and by the middle of this summer many of the world’s property markets seem to have at least stabilized, if not already commencing a turn around. Whilst the future is, of course, eternally bright I would still caution rampant exuberance as there are still many factors (eg government debt, rising unemployment, inflation and rising commodity prices) that could knock the stuffing out of the recent surge of optimism, but at the same time don’t stand around too long with your hands in your pockets as you don’t want to miss the next boat.
Build Quality
There is a trend in the property industry to market every property development as “luxury” and thus be able to charge a higher price. The truth is that very few of these projects are actually luxurious and can vary in quality widely.
When you’re buying off-plan its relatively easy to find out the price you’re paying, the location, the layout of the apartment etc but it’s much more difficult to determine just what quality of build and internal finish the property will have once its completed. Hence, an investor takes on some risk when they calculate whether they are buying a good deal or not as the final finish can differ substantially.
Because this we’ve started a fledging “Build Quality Ratings” page which lists a number of developments and how their build quality ranks against one another. Currently the ratings mainly cover Prague with the intention of expanding this more widely over time. If a development you would like to see rated is not on the list just drop me a line.
Bottoming
Over the last couple of months we’ve noticed a hardening of prices in many of our major markets such as Warsaw, Prague and Bratislava (but not in Bucharest or Sofia where prices continue to soften). This could be partly due to the normal summer inactivity levels but I think it’s something more than that – the markets could actually be finding a bottom after over a year of prices falls. I think we’re not completely out of the woods just yet but equally I don’t want to be caught on the sidelines as the market rebounds so (as so many have been in the stock market this year), for the first time in a year, I’d recommend investors to start some cautious buying.
Investments 1 2 3
Over the last few months we’ve been searching for good deals that meet our investment criteria. Frustratingly we struggled to find any. Developers weren’t quite ready to give the necessary discounts and the market continued to slide downwards.
However, after over a year we’ve just launched our first deal in Prague and we think it’s a good one.
Not only is the market in Prague now starting to bottom out but we’ve secured a great deal on a high quality development right next a metro station very close to the Prague’s city centre with discounts up to 21% (note as of 31st August we’ve managed to increase this discount by a further 2.5% to up to 23% discount). These kind of good quality, well priced and well located properties will always do well on the rental and resale markets, you really can’t go too far wrong with them.
For more details contact me or click on the following link:
www.propertyinvestmentinternational.com/Property_Investments_CzechRepublic_Prague_MetroResidence.php.
Summer upgrades
Over the last few weeks we’ve implemented a newly designed website which is hopefully a little easier to read and navigate than before. In September we’ll also be launching lots of new features on our Czech real estate agency website. All comments are gratefully appreciated.
Probability of a false dawn
As I mentioned in newsletters earlier in the year I thought early 2009 was a good time to be getting back into the stock market as there was strong possibilities of price growth and little prospect of price growth coming from many world property markets. Since then we’ve seen large rises in world stock markets as fears of a depression recede away.
Despite all the doom and gloom it never really felt like a deep recession, yes there were a lot of financial problems but unemployment didn’t really rise that high (yet), interest rates and inflation have stayed low and all in all the world has continued to function relatively ‘normally’.
Even recent laggards such as Germany and Japan are even supposedly coming out of recession (whether you believe the numbers is a debate for another time). If this is true, and sustainable, then a strong Germany is great news for exporting CEE countries such as the Czech and Slovak Republics.
So the future seems much brighter now and with property prices and interest rates at a low could this be a perfect time to buy?
The answer would be seemingly yes.
However, I would add a small dose of caution.
Much of the recent stimulus has come from massive government spending, which is probably not very sustainable. Furthermore, these same governments are in huge debt which means at some stage very soon spending will have to be cut, taxes will have to rise and/or governments will just inflate their way out of the problem. A good dose of inflation would be great for property investors if you’re able to lock in low interest rates today.
With the huge growing populations and consumption demand from countries such as China and India, which has ebbed a little, will come back with a vengeance. This means prices of food, metals, energy are all likely to rise and could put a massive dampener on growth in the west.
Already oil is back above $70 a barrel and if this continues it will act like a massive tax on oil importing nations (as well as a massive revenue stream for oil exporting nations).
With this in mind, as mentioned in previous newsletters, I’d recommend getting a slice of property in countries that will benefit from an increasingly resource hungry world (eg USA, UK, Australia, Canada, Brazil, Norway, Russia) and run a mile from those countries that don’t (eg Spain, Greece, Italy).
In the coming months I’ll do a more complete review of which regions are best and worst situated for property price growth over the next decade.
I hope you’ve had an enjoyable summer.
Regards,
Simon Tweddle.
www.propertyinvestmentinternational.com