Property Investment International - Newsletters

PII Newsletter April 2010 - Athens, Brno, Cambodia

Dear Investor,

This month we take an alphabetical look at some topical property markets and finish with a tale of debt.

Athens

Over the last few years I have been occasionally asked for my thoughts on investing in Greece and my answer was always quite negative (some of the reasons are splashed all over the news currently), unless of course you wished to buy a holiday home there for pleasure which is a different decision making process. Recently many more people have been asking the question:

Given the current troubles in Greece could the market become attractive for the foreign property investor?

My answer would be that there is a chance if you know what you’re doing but personally I would avoid the market for a long while.

The chances of Greece taking sufficiently tough measures to sort its economy out are slim and the chances of defaulting on its debts are high. The risks for an investor are large. Even if Greece does sort itself out at some stage in the future and pay off its debt I would very much question the long term prospects for the country. I can’t really see Greece turning into an investment haven. It does have a strong shipping and tourism industry but otherwise not much to speak of. In a world where the costs of basic resources are soaring Greece is not well situated. It has a large trade deficit importing many essential items and doesn’t have any significant reserves of oil, gas, coal, water or food stuffs.

My view is that whatever happens to Greece it will be in a sorry state for a long time to come and most property investors will do best to avoid it.


Brno

After we released property market supply data for Prague last month we had many requests asking about the same for Brno – the Czech Republic’s second largest city.



In the last 9 months in Brno sales supply has dropped by approximately 10% and rental supply has increased around 10%.

We manage a number of properties in and around Brno and this data matches our own experience on the ground. The market in general is not as oversupplied as in Prague and prices have been hit in the last 2 years but to a slightly lesser extent than in Prague. The main issues of oversupply tend to be concentrated in pockets where a lot of new buildings have been erected.

The Brno market is neither in a very healthy nor poor state. Our forecast for Brno is that there will be no real pickup in sales or rental prices for the rest of this year. Beyond that Brno should perform well if the Czech economy rebounds and over building is kept in check.


Cambodia

When I was last in Cambodia a couple of years I reported that I thought the local property market was relatively undervalued compared to neighbouring countries in the region (and for good reason too). The country was finally pursuing its path of development and slowly upgrading infrastructure. The potential for economic and property market advancement was clear.

At the time I interviewed a number of people from the largest real estate agency in Cambodia and it was clear that they were not used to dealing with foreign investors and didn’t really have much of a clue what was happening in the market and why.

This may well change as the Cambodian government has announced that foreigners are now able to personally buy property in Cambodia. Previously one had to set up a company and deal with fairly opaque rules and business practices.

Such changes in the law are exactly the kind of stimuli that can turn a quiet market in to a booming market, especially if it is accompanied by other reforms (such as tax and mortgage availability).

So could there be a lot of money made in the Cambodian property market over the next few years? Well, possibly, yes.

In such an immature market it would require a lot more of a hands-on approach than I have time for and all the uncertainties and problems that come with it. If I was living in the region then it could well be a different matter. If I was to enter the market I would probably buy land and develop as this where the largest profits are likely to be. I would certainly avoid buying off-plan in coastal developments (while the Cambodian coast is quite pretty it’s never going to rival Thailand, Malaysia and the like).

If I was to invest into an emerging market outside of Europe I would strongly prefer such parts of Asia rather than say Africa or the Middle East (for reasons I’ve detailed in previous newsletters). Perhaps Cambodia could be a place worth further investigation?


Debt

With many governments around the world up to their eye balls in debt I leave you this month with a short poem by the American poet Paul Dunbar:

Slight was the thing I bought,
Small was the debt I thought,
Poor was the loan at best—
God! but the interest!


Regards,
Simon Tweddle.
www.propertyinvestmentinternational.com