Has anyone made any profit from overseas property residential or commercial?

[OverseasCafe]

OverseasCafe.com

Sorry I did not realize your the expert when it comes to property

Timithypaul,

Tim,

you can be as facetious as you like but if you're going to come out with as universal a statement as 'property is dead everyware' it would be nice to see a little of the information on which you are basing this assumption.

I'm not claiming to be any more expert than anyone else who is involved in the property market. The OP posed the query - Has anyone made any profit from overseas property residential or commercial? - in response to that I outlined my own investments and how they are currently performing.

In response to your posting I then asked what is your own experience in the property market to get a handle on your knowledge of the market and the level of experience and background knowledge you bring to the debate.

To date you haven't mentioned any experience or background knowledge of property, overseas or elsewhere, that would indicate that your theory on the property market is in any way credible.

 

[OverseasCafe]

Tim,

if you're involved in the UK then you should be aware that property there is moving, if it is priced correctly, the problem is that people in both the commercial and resi markets still have unrealistic expectations in terms of the price they wish to achieve.

Admittedly, you'd have to be mad to sell in the current environment, but there are those that have no choice. Many institutions have cash calls to which they must attend and there are owners in severe distress that have no choice but to realise cash for the asset.

This is why the auctions houses are currently doing so well. If you are selling by private treaty you can name your own price. At auction you will not be allowed list unless your price is realistic, otherwise the auctioneer expends a lot of effort with little chance of actually selling the property. It is also a far quicker way of making a sale if you are under pressure.

You're always going to lose some companies in a recession, particularly one as deep as the one currently upon us, it's part of the cyclic nature of a capitalist system. It doesn't, however, mean that property everywhere is dead. On the contrary, I would be of the opinion that the current market offers opportunities that may not be seen again in our lifetime.

 

[MichaelDes]

Hi Oversea’s Cafe,

Interesting discussion - there has been an increase in activity within the UK market but is this just a dead cat bounce as a result of historical low interest rates? Can these low levels be maintained should inflation kick in to the system? Do property downturns not take three years to drop then about another two to flat line or is this a unique situation because of government fiscal intervention. With Dumferline building society going bust at the weekend and the banks still precarious on share price is it a good time to jump in. There is value in the market but IMO it is still trending lower especially if (i) the FSA's 3x's main income lending is adopted in September as a result of Lord Turners Report – affect Resi (ii) Business keep closing down will affect commercial yields.

Some land company shares in the British sector might be a good play especially after being pulverised 76% and below NAV, with dividends of 8.2%. And considering also the currency debasement may not last much past Q3 2009, seems another possible positive.

 

[OverseasCafe]

The feedback I've had from the UK is that it is now possible to buy good quality property there with as much as a 4% spread between yield and interest rate. Admittedly interest rates could rise but fixed rates for 3 or 5 years are still very cheap.

From speaking to those in the industry in the UK there is an expectancy of a move toward a recovery by Q3 this year, but expect plenty of negative sentiment and bad fallout (such as Dunfermline) in the interim.

What is holding the market back at the moment is the inability to raise finance at more than 65% LTV for commercial assets (and virtually no chance of raising finance for BTL). When this moves upwards to 70 or 75% you can expect a lot of investors to hit the market. Those with cash who can move in the next three months or so and then re-finance when criteria are less stringent, are likely to do quite well.

Sterling isn't going to stay at the levels it currently occupies over the long term either.

I'm not personally a big fan of shares or of mixing share buying with property. This is just personal preference though.

I don't see land values in the UK increasing much in the short term to be honest, certainly not until the glut of property is removed from the system. This could take three years or more.

 

[MelF]

Sterling isn't going to stay at the levels it currently occupies over the long term either.

Very interesting and informative post, am particularly interested in the comment above. Do you feel sterling will rebound against the euro and why?

 

[OverseasCafe]

Very interesting and informative post, am particularly interested in the comment above. Do you feel sterling will rebound against the euro and why?

Yes, I feel Sterling will come back strongly against the Euro. It's current valuation is a reflection on the current status of the UK market in general. Because the UK has control of its own currency and doesn't have a spread of countries involved in the currency, I believe it will be in a better position to guide itself out of recession and will do so a lot more quickly than the rest of the EU.

Sweden is in a similar situation, it was off about 15% against the Euro, but is currently coming back in line. Similarly to Sterling, I think it will come back fully by the summer or Q3 as its economy stabilises and the Euro struggles with the disparate parties involved in its makeup.

Of course this is only a personal opinion, I could be a million miles from the reality.

 

[Martin77]

Some land company shares in the British sector might be a good play especially after being pulverised 76% and below NAV, with dividends of 8.2%.

That's exactly what I'm seeing in the European sector too, which makes me positive. REIT company shares that have been pummeled way below net asset value (NNNAV per share ~ double the share price) i.e. anticipating a crash in commercial property values and rental cash streams. And yet these companies have strong cash balance sheets with no need to refinance before end 2010, are not over-leveraged (>50% own capital), and still have displayed very consistent dividends of around 8% up until now which are backed up by long term (>5 year) rental contracts that have actually increased direct results by 0.5% in the last year. Advantage for me in the European sector is elimination/reduction of any currency risk. IMHO they're priced for a melt down and the major risk is of a surprise to the up side, not the down side.

When this moves upwards to 70 or 75% you can expect a lot of investors to hit the market.

See the links in my last post to moneysupermarket. Don't know how real these mortgage offers are and whether there are other tricks/ conditions to stop people actually qualifying for them, but all of the buy to let mortgage entries quoted were offering 75% LTV. I think the main thing is that you've got to have proven experience and the rental flows to easily cover the payments. Exactly as you say, possibly go in with cash for now and refinance later once proven.

 

[MichaelDes]

The feedback I've had from the UK is that it is now possible to buy good quality property there with as much as a 4% spread between yield and interest rate. Admittedly interest rates could rise but fixed rates for 3 or 5 years are still very cheap.

Going forward should the Lord Turner report be adopted by the FSA in September could be a death send for the housing market. That is (i) 100% mortgages are banned (ii) No mortgages above 3.5 times main income, or 3 times main income + 2 times second income. Presently according to Natiowide data houses are still 6.7 times average income. If this recommendation within the report is ignored, then thats alright - BUT it's a big "IF" in my opinion.

Article link - Proposed cap on mortgage lending by FSA is 'suicidal', say property experts - click here

IMO the 3x's income rule will probably be relaxed to 4.5 times to stop people obtaining balancing credit through cards or other means, but it is still precarious until the FSA reports.

 

[OverseasCafe]

See the links in my last post to moneysupermarket. Don't know how real these mortgage offers are and whether there are other tricks/ conditions to stop people actually qualifying for them, but all of the buy to let mortgage entries quoted were offering 75% LTV and low fixed rate interest rates (under 5% APR for 5 years) e.g the Post Office (no recommendation, just FYI). I think the main thing is that you've got to have proven experience and the rental flows to easily cover the payments. Exactly as you say, go in with cash for now and refinance later once proven.

Martin,

I've spoken to a good few people in the UK over the past few weeks and they have all stated that a new BTL buyer looking for finance will be very lucky to get in excess of 65% LTV, if they can raise it at all. If you've a track record you may do better than this. It seems to be a lot more difficult for Irish to raise finance as it is the general perception in the UK that everyone in Ireland will lose their jobs in the next 5 years.

One company with which I had discussions said they had no problem raising finance (at 65% LTV) for a client with a steady job with a big multinational based in Ireland but a client with a better job and earning more money with an Irish company couldn't get finance anywhere.

I haven't tried personally as I've no great interest in resi and am not that far advanced with my investigations yet on the commercial side, so I'm just passing it on as anecdotal evidence of what is currently in train.

The Swedish bank, Handelsbanken, has just moved into the UK market in the past couple of weeks. It is the bank I deal with in Sweden, very conservative and no bad loans from the current property downturn (unlike Hansebank [Swedebank] which got very badly burned in the Baltics - no pun intended).

In any case, I would take this as a very strong statement of Handlesbanken's confidence in the UK market from a bank with a very strong track record - and lets be honest, there aren't many of those around at the moment.

 

[Martin77]

Martin,
I've spoken to a good few people in the UK over the past few weeks and they have all stated that a new BTL buyer looking for finance will be very lucky to get in excess of 65% LTV, if they can raise it at all. If you've a track record you may do better than this. It seems to be a lot more difficult for Irish to raise finance as it is the general perception in the UK that everyone in Ireland will lose their jobs in the next 5 years.

After following up and reading the conditions on a few of those sites I have to agree with you. Most condition sheets seemed to include clauses for experienced investors only, employed, and with UK residence (not UK national). But IMVVHO that's probably only them acting as a prudent lender given some of the excesses of the recent past. I'm sticking with my REITs, as I think their prices have been beaten down relatively quicker to what I consider as being below the long term real value. Good luck.

 

[OverseasCafe]

Going forward should the Lord Turner report be adopted by the FSA in September could be a death send for the housing market. That is (i) 100% mortgages are banned (ii) No mortgages above 3.5 times main income, or 3 times main income + 2 times second income. Presently according to Natiowide data houses are still 6.7 times average income. If this recommendation within the report is ignored, then thats alright - BUT it's a big "IF" in my opinion.

Article link - Proposed cap on mortgage lending by FSA is 'suicidal', say property experts - click here

IMO the 3x's income rule will probably be relaxed to 4.5 times to stop people obtaining balancing credit through cards or other means, but it is still precarious until the FSA reports.

Michael Des,

I should have outlined at the start that my interest in the UK is predominantly in commercial rather than resi. I haven't really looked into resi in any great detail so any information I would have gathered would be as an aside.

On first impressions though, the report in it's current guise would appear to be unworkable. It would, however, result in an awful lot of people having no option but to rent.

 

[OverseasCafe]

I know it's the Mail, but still.

Mortgage approvals leap 19% as buyers return to the market.

I'm a property agnostic to be honest, I'm prepared to look anywhere that the fundamentals look to be in the right alignment. For me I don't see any reason to look beyond the UK at the minute because things are currently in our favour there (if you can get around the borrowing problem, which will be a large one for BTL buyers admittedly).

I do think the window of opportunity will be fairly short though, the UK market has a tendency to be a bit manic depressive in its price swings and I don't think Sterling is going to stay where it is for very long.

 

[mainasia]

I'd forget about property as an investment for a few years. Why? The credit bubble has exploded, interest rates can only go up, currencies can only implode, unemployment will be a serious problem for years, property is still overvalued historically compared to earnings/commercial rents and with no new property bubble to even provide the 'fantasy' of extra value it's back to good old earnings to value an asset. A lot of people can't see that because they haven't had this experience before, the other lot work in property so there is always something to push!

Good stocks with dividends backed by profitable earning companies are your best investment.

 

[OverseasCafe]

OverseasCafe,

What is your view on the property Market in Eastern Europe, Bulgaria, Romania etc?.

You'd have to be a bit more specific Tim. Bulgaria, Romania and Eastern Europe in general are very big markets, all containing many different micro-markets. A general statement isn't going to cover all of them (and my knowledge of some of them, including Romania, is very limited in any case. I have visited a number of Eastern European locations in the context of property investment, including Bulgaria).

In the main though, I always felt the main problem with Eastern Europe as it was presented to 'investors', was the dependence on capital gain and a move away from the fundamentals (that property should generate sufficient rental income to justify its existence), because rents were scarce or non-existent. This isn't property investment, it is gambling.

I haven't changed my mind on this and, in the main, I think it is going to be a long time before many investors in much of Eastern Europe make anything resembling a profit.

 

[mercman]

OverseasCafe,

With Bulgaria for example being now a member of the EU and having cheap labour costs. I think this will attract large companies to move their manufacturing outlets to countries like Bulgaria and future E.U Funding will also boast this economy I think it may have a better future than Ireland for example long term. This smart Economy which everybody is talking about will take a hell of a long time to develope and will need alot of government and financial support which we do not have at present.

This is a very negative post. Let me ask you. Does Bulgaria have the educational background or its people have the qualifications as the Irish ? Also there is a major language barrier, where English is the most spoken language worldwide.

 

[mercman]

Firstly, I am in full disagreement with you. The modern world uses the English language as its mother tongue, not Russian or any other European mix. The minimum wage is this country has caused us endless problems and now we are having to go into reverse to retrench the past greed.

Secondly, is this a thread concerning profit on overseas residential or commercial property ?? Not the misgivings of this country and the negativity that as swelled the populous.

 

[mercman]

In case you didn't realise it the people voted him back. That's democracy. The media have well publicised the state of the country-- mainly because it sells papers. The entire Western, Eastern, Northern and Southern parts of the World are in the same boat, if not worse. Even the Oil Rich middle eastern states are in serious bother. So people would want to consider blaming Bankers before Politicians. If any Government had of tried to reduce the property demand, there would have been uproar. And BTW, please try and get my name correct.

 

[Mrs.B]

As I've written elsewhere

"IMHO Ahern will start to attract public derision later this year. Public and political ostracism will hopefully follow.

This ar$ehole has economically butchered a generation and made us the laughing stock of the international financial world.

After telling us the boom was to get boomier; that doomsayers should kill themselves and that bad advice given by so many resulted in some people making mistakes when they should have bought property in 2006 he turns around on November 1 last in the Irish Times with "Granted, [property] was over-priced. We all knew it was over-priced and the correction had to happen in the market".

http://www.irishtimes.com/newspaper/ireland/2008/1101/1225321622165.html

WTF???

I hope he rots in Hell".

Now back on topic. UK resi margins have indeed improved.
Recent Vat rate reduction also reduces cost burden.
Making money on UK appts for first time which is novel. Long may interest rates stay low.

​

 

[mercman]

If you watch the news Ireland is in a pretty bad shape the problem is the Government just did not try to stop, it they encouraged it

And if they tried to stop it there would be another heap of moaning and groaning. When the Government tried to impose restrictions after one of the Bacon reports there was uproar.

 

[mercman]

Thanks for your thoughts. This country's problems are not going to be solved by Political Football and a blame game. If you are trying to gain support for the Blue Shirts or Labour this is not the place, not there is a place for these wasters either.

As already mentioned here there and everywhere, most economies are in the same circumstance as Ireland, so get real. And try keeping to the topic of this thread. Otherwise start a new one.