Spanish property investors set for bumpy ride
Thursday, 5 January 2006 12:00 AM
Spain has long been a favoured destination for overseas property investors, but they could 'come down to earth with a bump in 2006', experts say.
Growth in Spanish property prices is unsustainable due to oversupply and over-valuation, according to property investment firm Assetz.
With Florida and South Africa also looking like risky investments for overseas property, countries like Bulgaria, Turkey and particularly Southern Cyprus are the likely destinations for property investors this year.
Greece and France are also expected to be a good bet for investment in overseas property in 2006.
Spain, on the other hand, saw valuations overshoot the mark in 2005 with property price growth of 17.2 per cent to the end of June 2005.
Stuart Law, managing director of Assetz, said: "An oversupply situation has developed and valuations for remortgaging purposes have been over-optimistic in many cases, contributing towards the suspiciously high growth levels.
"In addition European mortgage rates are rising and Spain is losing some potential investment to newcomers such as Bulgaria, occasionally referred to as 'the new Spain'. Valuations on Spanish property have overshot the mark and investors may come down to earth with a bump in 2005 as prices fall back into line."
Assetz expects overseas property investors to look closer to home in 2006, with the prognosis for Florida and South Africa also poor.
"Florida remains one of the riskiest investment zones, with interest rates rising fast and a widely forecast faltering in property price growth," said Mr Law.
The recent natural disasters also make property on the Gulf of Mexico "very difficult to insure".
In South Africa, an oversupply of high-density apartments and decrease in demand for rental space means "trouble is looming".
Bulgaria, on the other hand, "is now securing its position as a mainstream investment destination".
Mr Law said: "The ski resorts thrive through the summer months with activities such as hiking, fishing and mountain biking, resulting in yields of up to 12 per cent, as much as double those in coastal resorts."
In Turkey, the change in legislation allowing mortgage for foreign investors is likely to "have a dramatic effect on the housing market", but Mr Law believes Southern Cyprus will be the real star of 2006.
"Southern Cyprus is set to become the overseas investment hotspot of 2006, with deposit levels falling to just 15 per cent in many areas for higher income clients and with Swiss Franc mortgages now available with rates of just 3.25 per cent, making borrowing even more affordable.
"The complete redevelopment of Paphos airport, due for completion in 2008, will bring increased levels of tourism to the country and additional investment opportunities, prompting an increase in house prices.
"Entry to the Euro is beckoning in 2007/8 which will pre-empt further price growth. Rental yields remain at a confident eight - nine per cent with a year round rental market in some parts of island."
Neighbouring Greece endured a poor year in 2005 with zero per cent growth, but this is expected to improve in 2005.
Meanwhile, in France growth levels are expected to fall, but remain above ten per cent, and Assetz expects to see "significant growth" in the Languedoc region as a result of new cheap flight routes.
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