March 21, 2008
Lunatic Real Estate
Now and again one can question even the basic sanity of some decisions. Or the pure idiot cupidity. Real Estate and UK investors come to mind. In particular, from The Times (London) and this particularly inane note Fly-to-let: the best places to buy an investment property overseas:
The essential of this, promoting investment in real estate for income ... on a retail basis.
Now, I have already disliked real estate. Stones. blah. But can be a good income stream one must admit, from time to time. However, I don't think small time investors are sane to try to invest in rental properties in emerging markets (well ones they don't personally know well, if one has connexions, its another story). The boosterism in the following note borders on insanity (above all in the current climate:
But why confine your search to Europe? Egypt and Morocco both offer low entry prices: you can pick up a studio in the Lotus Breeze development in Hurghada on Egypt’s Red Sea coast for as little as £14,500 and a one-bedder for £22,500 through Egypt Venture (www.egyptventure.co.uk) — although the sheer amount of construction underway in both countries could hit rental income and constrain capital growth.
Such oversupply has already cast a shadow over parts of the market in Dubai — prices increased rapidly earlier this decade, providing huge profits for speculators who bought and sold on their properties even before they were finished. Things are a lot calmer these days and the prices of flats in some developments are expected to fall back as more projects are completed. Rents, though, are strong and even rising in some cases. The smart money, meanwhile, is moving to neighbouring emirates such as Abu Dhabi or Ras al Khaimah trying to emulate Dubai’s success or slightly further afield to Oman and Qatar.
Emphasis added. The pricing there is mad
India, too, is finally coming onto the radar of British buyers keen to benefit from the country’s huge economic potential that looks set to transform it into a global superpower. Prices are still extremely low by international standards — David Stanley Redfern, for example, is selling two-bed, two-balcony 1,060sq ft flats in a newly established special economic zone at Rudrapur, in Uttarakhand in northeast India, starting at just £29,000 (0800 634 2377, www.davidstanleyredfern.com). Although people of Indian origin can buy freely, those without a connection to the country may need to set up a company and buy through that.
Not exotic enough? Then what about Mongolia, a country rich in copper, gold and oil, which is benefiting from the global commodity price boom? “The capital, Ulan Bator, has a unique property market, and one that should appeal to any sophisticated property investor,” says Emma Holifield, a marketing executive with Property Frontiers, which is selling flats in The Temple development there, with prices starting at about £85,000 for a 1,410sq ft two-bedder.
“With half the population of the city living in the traditional mountain tents known as gers and the other half in old buildings with bad insulation, demand for good quality accommodation for locals is vast,” she says, going on to claim that rental yields are still as high as 13%, thanks to a supply squeeze in the middle market.
Investment in rental properties in Ulan Bator...
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I've always thought that as a rule of thumb metric, something like P/E ratios, is to compare market purchase values to market rental values historically. Haven't actually tested it, but it would measure the purchase price situation alongside a metric of people actually buying for the purpose of living there. (Alot of reasons of course that that figure may not be a complete metric but it is something to look at.)
Posted by: matthew hogan at March 22, 2008 03:59 PM
Sure, if you have real data.
I have no confidence there is any proper and reliable data about actual rental rates and yields in Dubai or the Emirates. None.
The French expression "They lie as they breathe" was properly invented for realtors, and the Emirates with its fly-in & Out UKers et al is a veritable confirmation of the same.
A place like Morocco or Tunisia you can have some modest degree of confidence as there is a baseline market that is not sheer speculation. Egypt less so because the laws are so fucked up, but normally would be the same. Emirates... Bah. I'd sooner go to a casino.
Posted by: The Lounsbury at March 22, 2008 05:44 PM
Ulan Bator . . . hilarious. Maybe they should do timeshares.
Posted by: Anonymous at March 26, 2008 03:02 AM