New Euro nations set for property boom

Monday, 17 December 2007 12:00 AM

Nations on the verge of joining the European Union become property hotspots, with the economic benefits of membership bolstering local markets.

That is according to financial planning group Blevins Franks, which finds countries being considered for membership tend to see a boost in overseas property investment.

"Once a country has been accepted into the EU it forms part of a single market system which guarantees its members the freedom of people, goods, services and capital," said Matthew Weston, manager of overseas mortgages at Blevins Franks.

"It is no wonder people invest in a new-born member countries, as they feel that it is likely that membership brings with it prosperity and protection."

Recent examples of such a trend include Bulgaria and Slovakia, both of which have seen property prices increase dramatically following acceptance to the European Union.

Similarly joining the single European currency, the euro, can also provide a financial boon to investors looking for overseas property.

"Joining the euro should bring macroeconomic stability to its members," continued Mr Weston.

"The European Central Bank (ECB) has a mandate to keep inflationary pressures low and members join the bank with the intention of controlling inflation hoping to enjoy low inflation and a more stable economy."

However, conditions could be rocky during the early part of 2008 as the ECB seeks to assert control over the market.

"Analysts are forecasting a 0.25 per cent rate hike by the ECB by the end of the first quarter of 2008; and potentially a further increase of 0.5 per cent by summer 2008," said Mr Weston.

"The euro is still a very attractive market, but clients really need to do their research and look at locations and regions that have true potential for making significant capital gain. Some markets I would say are definitely saturated right now, but some hold a lot of potential."

One further factor must also be considered, according to Blevins Franks.

"Clients also need to be aware of currency fluctuation risks if they're going to borrow in another currency. If the euro increases in value the mortgagor will need more pounds to afford the next mortgage payment," explained Mr Weston.

However, difficulties in this area can be avoided through the employment of a currency specialist, who should be able to allow the mortgagor to lock a set exchange rate for up to 12 months.

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