Searching for good returns on property across the globe
The landscape of buy-to-let investment overseas has shifted greatly during the global financial crisis and landlords are being forced to alter their outlook. Whereas previously many investors were achieving 100 per cent annual returns on cash invested through capital growth and rental profits at the height of the market, there are now only a handful of destinations worldwide that even offer a positive outlook for returns, based on current investment criteria.
While rock bottom prices and emerging signs of improvement in some of the global housing market are enticing investors back, it is still essential that investors look to prioritise strong and realistic rental income as the security underpinning potential capital gains.
Overseas buy-to-let investors now need to search out the few excellent pockets of investment potential available, and a major part of this is making the most of opportunities that have arisen as a direct result of the credit crunch. The distressed property market has provided the basis for the majority of UK investment purchases over the past year, and this also currently offers the best returns for property investors overseas.
In the USA, investors are being offered major tax benefits to buy into properties and boost regeneration in hurricane-hit areas such as Mississippi. In Detroit, there is currently huge rental demand with 9,000 waiting tenants and no vacant completed property up to housing department standards. These schemes provide a valuable source of much-needed local housing, but also excellent prospects for investors, with mortgages of 90 per cent loan to value or greater and extraordinarily low entry costs offering investors high gross yields of up to 20 per cent, as well as longer term prospects for strong capital growth.
The downturn in Spain has opened up the distressed property market to overseas investors there as well. Prices have gone back ten years in some cases, and it is now possible to achieve incredible bargains on fantastic properties in top resort locations. It is getting close to being an excellent time to buy in Spain, albeit in extremely carefully chosen locations and developments.
Distressed residential property SIPP compliant funds are another way into the property market right now. These funds allow investors to take advantage of hugely discounted properties as part of a specific investment plan, targeting solid income-backed property with strong potential capital gains during the recovery period expected over the next few years. Investing in this way can offer medium risk, with modest gearing used to balance income with potential equity growth.
Those looking to start out in overseas buy-to-let investment can still find excellent opportunities if they are willing to take the plunge in less established investment locations. Turkey for example, benefited from the strength of the euro against the pound as investors looked outside the euro zone and is amongst the best placed locations to turn a profit for investors over the next twelve months. As a holiday destination, Turkey has everything offered by more established European locations and its general popularity with holidaymakers and burgeoning second home market have grown substantially recently.
For rental returns there are few locations worldwide to rival Cape Verde. Visitor numbers have skyrocketed despite the global downturn, and investors can currently achieve gross yields of 10 per cent. There is also a mismatch of growing tourist numbers against the number of completed developments. Many developments in Cape Verde have paused due to a lack of development funding, so in the short to mid term investors buying into schemes that are progressing should benefit from both rental and capital appreciation.
By Stuart Law, chief executive of property investment company, Assetz