Cara Aer Lingus 03.07

Home for all Seasons
CARA Aer Lingus Magazine
April 2007

Why settle for a country house when you can settle in a foreign country? Kate McMorrow investigates the ever-evolving foreign property industry and reports on making yourself at home in seven top destinations.

Considering investing in a property hotspot?  If you're Irish, equity at home could go a long way toward financing the right buy. There are pitfalls, but no more than buying in Ireland and following a few guidelines will reduce the financial risk. And the right purchase could produce a tidy profit when it comes to selling on.

Everyone is looking for the next emerging country to invest their spare cash. Like predicting winning lottery numbers, an informed guess is as close as anyone gets to choosing the right location. Access, climate and political stability are the main criteria. But that indefinable factor, gut instinct, can't be ignored. With a holiday home, buying where you know and love is sound advice.

Using a solicitor with expert knowledge of property law in the country you are buying in is essential. Each country's laws are different when it comes to taxes, inheritance rights and ownership rights. While it is customary in many countries for buyer and seller to use the same legal advisor, splashing out on independent advice is money well spent. People signing a power of attorney and having their apartment sold under their noses, others swindled of their savings by unscrupulous agents - Dublin-based solicitor Tom McGrath has heard plenty of hard luck stories over the years.

"France is well-regulated and the Spanish government is now regulating property transactions in Spain. In Turkey and Bulgaria in particular, you come across cases of contracts not being honoured and developers looking for two and three times as much. You can't be too careful," he adds. Transport is another major consideration - that barn to restore in the Cevennes or Umbria might tick all the boxes but if it takes a couple of flights and long car journey to get there, you're hardly going to use it at weekends. Location applies, just as at home.

Irish overseas buyers tend to demand an income from their overseas investment, whether it's a holiday home or year-round rental property. Buying early and getting out before a development is completed or when prices begin to rise is one way to turn a quick profit - Dubai, Hungary, Poland and Germany are a few locations where astute investors have made serious money. Cities with direct flights from Ireland and rental potential are one of the best options from an investment point of view and double as a trouble-free weekend getaway. Barcelona, Paris, Rome and New York are current jet-set favourites. Value still can be found in Prague, Riga, Tallinn, Warsaw and Budapest. Nice and the Cote d'Azur command premium prices, but across the border in Liguria, properties on the beautiful Italian Riviera are considerably cheaper. Less fashionable Western Provence. Gard and the Languedoc benefit from a Mediterranean climate, good beaches and property is reasonable.

Croatia
Croatia is a top holiday destination and a good property bet, although a house in downtown Dubrovnik will be expensive. A short ferry ride away, idyllic islands are worth checking out for a bargain - if you can find something. An hour's drive from Dubrovnik and one of this year's tipped hotspots, Montenegro is beautiful, cheap and as yet unspoiled. Croatian property prices have doubled since 2000, notably in Dubrovnik. "With its picturesque walled Old Town, coastline and sea dotted with islands, Dubrovnik has the 'wow' factor", says Liliane Scully of Adriatic Riviera. Trouble is, anything special is snapped up as soon as it appears on the market. "The town is now coming back to its former glory after the war and property in the old town is scarce. A good two-bedroom apartment with sea views will cost from €400,000 minimum, if you can find one. The nearby village of Cavtat is right on the sea and you can buy a studio there for around €100,000. It's difficult to find properties on the Elplatite Islands of Lopud and Sipan, but we occasionally carry out searches for clients," says Scully. Another seaside village worth a look is Slano, half an hour's drive from Dubrovnik, where a new hotel and marina are under construction. Problems are few, but locating title deeds can be problematic when buying property in Croatia, because of the Balkan war and the subsequent emigration of many Serbs. Employing a good English-speaking solicitor with knowledge of the market is crucial.


Morocco
Morocco is undergoing an extensive Government-backed tourism drive, with holiday resorts springing up in coastal locations. Apartments and townhouses for sale off-plans are keenly sought-after by northern Europeans, with UK buyers well in the running. A strong economy and good investment climate augers well for the future.


Poland
Poland is experiencing a property boom, thanks to the droves of foreigners buying here, including many Irish investors. Some educated emigrants are returning home, adding to the workforce. Things a buyer needs to watch out for include title defects, bank guarantees in regard to new developments and pre-emption rights - where others may have preferential right to purchase over your own.

Prices have risen by up to 100 percent in Warsaw and Krakow, the first destinations to be targeted by overseas buyers. Warsaw-based property lawyer Maria Slazak suggests looking at alternative investment locations.

"Warsaw and Krakow are now over-invested. Buyers should about other places, such as Gdansk on the Baltic coast Wroclaw or Lodz, where the computer company Dell is located," says Slazak.


Germany
Germany is enjoying massive overseas investment, particularly Berlin, which is benefiting from Government grants to refurbish run-down period buildings in the city centre. The tradition of renting rather than buying ensures a steady supply of tenants. Tenency rights in Germany are strong - an advantage for investors looking for long-term tenants. Unemployment is high and supply is plentiful, so anyone buying an unoccupied apartment could be waiting a long time for a tenant.

On the plus side, grants and government loans are available for many older listed buildings. Yields can be as high as ten or twelve percent, with up to six per cent on more expensive areas.

Irish website german property. ie lists a number of agencies handling German investment property. "Berlin is vibrant and a sound place to invest but it's a complicated market and buyers need a helping hand", says Pat Cody, Managing Director of Marlborough International.

"This is the hardest city to do business in, because you have to know which individual blocks represent good value. The city centre is best and the older parts of the west side of the Rhine in former East Berlin tend to be good value. The best buys are in Kudam, Mitte and Freidrichschein, where lovely renovated buildings often have sitting tenants and guaranteed income," adds Cody.

Since the early 1990s market crash when new homes investors lost their savings, Germans have been slow to invest in property.

This is beginning to change, but prices are still surprisingly affordable and growth potential is strong. A two-bedroom apartment in Mitte in central Berlin can be bought for around €130,000. Further out a family house in a Berlin suburb will set you back about €150,000.


New York
New York, New York...who wouldn't want a base in this most exciting of US cities? While prices are dropping across the US, New York City is bucking the trend, particularly in the Manhattan area. "The market is on fire right now and there's a bullet-proof bubble over New York City", claims Annemarie Moriarty of Corcoran Real Estate Group, who are affiliated with Savills Hamilton Osborne King. Key reasons are the scarcity of vacant rental properties, high employment and New York's position as a world financial and cultural centre. Word of the purchase power of Irish buyers has reached New York and brokers are falling over themselves to lend on prime city real estate. Returns in the right area are impressive, with a two-bed apartment in Downtown fetching a monthly rent of up to $6,000. Mind you, this is for a prime Manhattan apartment in the million dollar bracket. Borrowings of up to 80 per cent are possible using the US property as collateral. A reputable lender will ensure that the deal "washes its own face", meaning the outlay is covered by rental income.

Italy
Few bargains here but the lifestyle is second to none and access is excellent. Liguria offers elegant Italian Riviera towns and inland valleys studded with chestnut woods, where slow-food is a speciality. Puglia in Italy's deep south is cheaper and a restored stone cottage or 'trulli' can be bought for around €200,000, but getting here involves flight changes. An hour's drive from Milan, the Italian lakes is a popular choice for a second home. Lake Como has attracted a number of celebrity owners, while Lake Garda has the advantage of being within reach of Verona and Venice. Buying into a new complex with communal facilities will cost around €200.000 for a one-bedroom apartment.

France
French leasebacks are government-regulated and one of the safest property investments on the European market Returns of around six percent are customary - reduced according to owner usage. Leaseback properties are free of VAT and come fully furnished. The French market has experienced a slow but steady increase in values, rising by ten per cent per year over the past decade. Fashionable Nice and the Cote d'Azur offer year-round good weather and good access. Further along the coast and within easy reach of Marseilles airport, Provence and the Languedoc region offer great weather and property is less expensive.