Property Investments Abroad - Why?

Re: Lending for Property Abroad

Hi johnotoole - Are you saying that you are investing your house deposit (which you intend to use to buy a home here in Ireland) in a Budapest property?

If so, please be aware that this is a very HIGH RISK transaction. In general, property is a long term investment. The cost of each transaction (legal, survey, travel in your case) militates against short-term transactions. Also, the risk of devaluation and/or economic problems leading to poor rental market and poor resale value is substantial.

If it is your Irish house deposit, stick it under the mattress.

Re: Lending for Property Abroad

If it is your Irish house deposit, stick it under the mattress.

Click to expand...

I get the impression that as these days people are not getting married and having kids in alot of cases until their late twenties or thirtes or forties even, and that they have no real need for a house or the restrictions it brings until later in life. However they realise that they need to invest for the future just like the previous generation had been doing since their early twenties. This makes it more plausible to invest where you think you can get decent returns and live in the location you desire, rather than move 50 miles out of the city and commute your life away. Compounded with high prices and the high risk of buying in Ireland, and the picture becomes even more logical. One things for sure leaving it under the mattress aint going to do a whole lot for you.

..

It strikes me that:

a) Irish house prices appaer expensive relative to comparable markets (e.g othe EU capitals/major cities)

b) to try and anticipate the market in new EU member states is very risky, particulalrly if you're new to property investment.

I know I've raised this before, but would it strike a good balance to consider established markets that have risen steadily, if unspectacularly (e.g Rome, Paris, etc)?

Re: ..

High prices in Ireland are NOT a good reason for buying abroad. Keeping it under the mattress may not grow it, but it will make damn sure that it doesn't get cut in half. Investing it in Budapest/Prague/Elbonia/Mars risks losing a good part of your capital.

Yes - you might make good money out of it, but unless you have a good knowledge of the property market in that location and the economic issues in those locations, you really are taking a big gamble. Why not just put on the 3.30 at Punchestown?

Re: Lending for Property Abroad

Hi folks,

To answer some of the questions :

Why they won't lend : per your point euroDilbert, an Irish lender would have no jurisdiction in Hungary to recover the loan amount in the event of default, hence the foreign property does not represent any security from the lenders point of view. I would have thought that some would have been willing to go for it with a reasonably low loan to value ratio all the same.

I have tried some brokers, but they are generally singing the same tune.


Rainyday,

Thanks for the advice - don't worry, it is still under the mattress!

My rent is very low at the moment - lower that the interest on a home loan (at 3.5% pa), so I don't have a real driver right now to buy a place in Ireland, or sink savings into a long-term property investment.

I reckon I'll be looking for somewhere in Ireland in the next year or so due to changes in my personal circumstances, so that is keeping me from purchasing abroad just now. I think that the Irish market is HIGH RISK myself, particularly in the case of some of the starter homes that are on offer at the moment. There are a lot of small apartments out there which are really very poor value to the tenant, and I don't think it would take too much of a drop in rental income for investors to realise their capital gains and sell up. With regard to foreign vs Irish investment, I suppose its a case of "better the devil you know than the one you don't". Another factor which has influenced me is that I would be considering a 70k risk in Budapest, versus a 380k risk in Ireland. A 50% loss in value in Budapest would be equivalent to just a 9% loss in value in Ireland.

Re: Lending for Property Abroad

I don't think you are comparing like with like. If you buy in Ireland, you'll be buying a home - a place to live. Whether the Irish market falls or rise, your monthly repayments will stay the same. Even in the worst case scenario of a big market crash, you will still have your home, once you can continue to pay your mortgage.

Whereas if you buy in Budapest, this would be a pure investment - and you really, really need this investment to pay off in order to make your money.

..

What about lenders in the country you want to buy in?

I've heard of some that will lend up to 80% of the purchase price.

On the other hand, if they're not prepared to give loans at all, it indicates a lack of confidence in the local market which it might be wise to take note of.

Re: ..

I believe the interest rate in Hungary is 10% +, which if you believe the marketing, means that the property prices are currently depressed.

I haven't checked that out independently at all ...

Re: Lending for Property Abroad

rainyday,

I've just read this thread for the first time and I thought you might need a little support.

It seems most people in this discussion are in a reasonable level of agreement that the Irish property market has already delivered its big returns in this cycle. Therefore, people increasingly feel it may not be the best investment play. Of course, if this view was shared nationally, one would expect to see the market turning - that isn't happening yet even though a softening in rents is underway. Thus, the Irish residential property market is still heavily populated with investors who expect capital appreciation. They may know something we don't.

What troubles me is, I think, what troubles you - investors smart enough to be nervous about Ireland but whose obsession with property as an asset class drives them abroad to invest, not on the basis of knowledge of these foreign markets, simply because these markets aren't in Ireland i.e. Irish market undesirable implies foreign market desirable.

I have made the same point many times before on AAM - "investing" big in a residential property has a lovely cushion....even if the market doesn't deliver you a return, you get to live in a nice house. When I hear of "first time buyers" deciding to buy in Romania (what does the expression ftb mean in such a context anyway? That they're simply investment novices?) I simply laugh - if you know that much about property you would already have invested, years ago, in Ireland.

All these people running abroad with their money deserve everything they get - devaluation of the soft currency in their country of choice; U.S. overseas investment retrenchment in an unstable global climate; a renewed international terrorism campaign.

Can I point out to all these children and neophytes that the best investment returns over the past 12 months haven't come from their beloved property (either in Ireland or elsewhere) but rather from equities (bought with a little of the investment smarts that they think they have)?

Keep the faith, and the equities portfolio, rainyday.

Personally, I also think that extreme caution is advised in relation to any property purchase abroad - especially if it is a purely investment property.

To address the original question "Property Investments Abroad - Why?" I think that a lot of people, like myself, have some savings and maybe some spare income which we would like to invest for the future. For many people, the range of possibilities boils down to 2 major areas :

(a) Equities and (b) Property (but not necessarily in that order !).

I have some money in equity funds, have an SSIA and so property seems the next best bet. I have a home and mortgage here so would be looking at an investment property. I am discouraged from 'trading-up' because of inflated costs and stamp duty. I also think Irish property is overvalued and so have looked at property abroad like many others.

However, unlike some other people, I have decided that, for me, the risks are too high at present. I may change my mind, but I think that is the straightforward answer to why people are taking such risks. Nothing else available appears to have the same investment possibilities as buying abroad.

Northern Ireland

Buying up North does; although this is technically "abroad".

In the north you will probably get similar returns as buying in some far flung country without the associated risks and travel expenses.

I don't know why more haven't thought of investing in NI instead of venturing to the other end of the continent.

Re: Northern Ireland

Maybe its got something to do with the many southern specultaors who recently bought into new apartment developments in Belfast to find the value dropping by 20-30% and rents not covering mortgages.

But its not got to do with the seasoned investors there who quietly seek and buy low key investment properties that generate decent yields.

Re: Northern Ireland

People have money, money is cheap to borrow, people have seen the huge price increases in Irish property in recent times and expect this to happen abroad. Also Irish property is a lot more expensive than property in other European countries, but there are reasons for this - not least government policy(whether it be by choice or lack of action).

People thinking of buying abroad would do well to remember a few points:
1. It took Ireland 30 years to get to this standard of living. Other European countries will probably take longer to reach this point.
2. Other countries have their own laws dealing with taxes on property, investment property, tenants rights etc. These laws are subject to change and must be factored into any risk assessment.
3. Building standards vary from country to country.

There are other points that can be added to this list, but my main point is to illustrate that like any investment buying property abroad must be backed up with adequate and thorough research. This is the only way to minimise risk and to feel comfortable about investing.

Northern Ireland

That's the key.

People in Northern Ireland, in my opinion, just haven't taken to what are now called "apartments". Until recently were simply called "flats". Flats have had too many associations with 1960's/1970's blocks of flats.

Most people here still prefer a small terraced house over a flat/apartment. So it does not surprise me that apartment prices here fell. House prices certainly did not fall - they have soared ahead.

Though it's probably different if the apartment is in a really great location i.e. within walking distance of a town centre.

investing abroad

Disappointed to read the post by Oysterman but realise everyones entitled to their opinion. I often hear about people investing money in something that I think isn’t great value but I hope I never wish bad luck on them by saying they deserve everything they get as a result of foreign currency fluctuations , economic downturn or global terrorism.
Not trying to be smart but when referring to people running abroad to invest in property and the risks, does the same apply to foreign equities or are you talking about investing in Irish companies only .I have no business qualification so maybe theres a formula saying that global equities are more stable/profitable than global property ? To be honest that’s why I enjoy this website , getting advice/tips from more experienced investors or people with bad experiences. Investing in anything is risky but I hope I’m learning as I go along but I’m not put off by the thought of failure or people who want to see me fail.

investing abroad

I think there will be a boom in the Polish property market.

Sometime around the year 2029.

The property boom took about 25 years to begin in Ireland after we joined Europe.