I invested in property outside Gothenburg in Sweden at the end of 2006 and again at the beginning of 2007. The first property was 50% resi, 50% commercial, the second entirely commercial. Gearing was 83% on the first and 80% on the second, variable for the first three years then reverting to fixed, which is fine as Swedish rates have dropped significantly in the interim. Returns to date have been 8% net after Swedish tax so the investments are paying for themselves and throwing off a significant cash surplus.
Capital values on the buildings haven't increased any, which is hardly surprising in the current environment, but they haven't decreased any either. Of course you can really only ascertain capital values when a sale has been made but I've no intention of selling these for a very long time so the 'snapshot' capital value isn't of any great interest unless I go to re-finance the investment to pull out some capital. This isn't likely to happen for a few years.
I've just returned from a reccie in the UK and would see this as a market with significant potential if a recovery is initiated later this year. December's retail figures were released today which were worse than expected but Spring rentals are coming through since yesterday and, based on that, it should be easier to gauge where the market there actually stands. It is expected that the bailiffs will be very busy over the coming weeks though.
The current rate of Sterling against the Euro is a major attraction for European buyers who have been very active over the past few months, particularly at auctions. Alsopps said they have had their best two auctions for three years in December and February selling 95% of the stock on offer. Prices have dropped off enough to offer 6-8% net yields which haven't been seen in the UK for nearly a decade.
Had an interesting conversation with an Irish guy who sourced UK product for Irish funds and major Irish developers over the past few years. He claims that every Irish developer with whom he's dealt in that period (and there were a few pretty high profile ones on the list) are insolvent, the banks just don't want to call in the loans as it will crystallise their losses and confirm just how bad the situation is. No surprise I guess, but a bit of a jolt to hear just the same.