Overseas property investment to drop

Thursday, 22 May 2008 10:18 AM

Investment in developing overseas property markets from UK buyers is likely to fall significantly as the credit crunch takes hold.

According to Yukiko Omura, executive vice president with the World Bank's Multilateral Investment Guarantee Agency (MIGA) investment into emerging market economies will drop to some $600 billion (£300 billion) in 2009.

This is down from a peak of $1 trillion last year, as the global credit crisis discourages bank and fund investors from taking on risk.

The Association of International Property Professionals (AIPP) International Property Market Report 2007 also found 30-35 per cent of the money spent on overseas property is in emerging markets.

The same report also finds Bulgaria was almost the sole significant trailblazer as far as the concept of new markets becoming established was concerned.

"Such significantly reduced levels of investment will obviously have an effect on global prices, not least because liquidity, after all, will always affect the fundamentals of what makes a good property market in terms of investment," commented Emma Holifield, marketing executive of analysts Property Frontiers.

"It is likely that infrastructure, new business start ups and direct investment in property may suffer especially as a result."

Yet, for savvy investors with funds available, deals remain in the market.

"There is no denying that investors need to look more closely at which areas of emerging markets they are targeting but should be aware that strong opportunities are still rife, and significantly more appealing than those in established markets, which are more prone to the squeeze because of rising lending costs and a lack of new mortgage options," explained Ms Holifield.

However, such markets are likely to grow despite a reduced level of foreign direct investment (FDI).

"It should be remembered that emerging markets are not totally dependent on FDI and are quite capable of creating their own wealth either from manufacturing or natural recourses," added Ms Holifield.

Chris O'Toole

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