Will stock market confusion affect Irish overseas property investments?

Hello and welcome to the Someplace Else Ireland blog.

This week I’m going to write about the stock market turbulence and how it may affect Irish overseas property investments.

It’s been a helter skelter week in the global stock markets and readers of the Someplace Else newsletter could be forgiven for wondering how all of this confusion might affect property purchases they have made or are thinking of making.

To get a clear picture of what’s going on, let’s try and steer clear of the colourful headlines. Recent ones that have caught my eye have been “Brokers bet on basket cases” (The Independent), “Recession fears spark selling bout” (The Independent), “Why Fed hit panic button” (The Sun).

So what has actually happened?
Well, the last year has been awful for the ISEQ, it's down about 30%. Last week and most of this week have also been terrible for global stock markets - billions were wiped off the ISEQ alone as confidence was low and traders were panicking. Then on Tuesday 22nd Jan the Fed Reserve dropped interest rates by 0.75% to 3.5% at an unscheduled policy meeting.

Yesterday, (Thurs 24th January) the European markets had a massive surge with the ISEQ up 5%, the UK FTSE up 4.3%, Germanys DAX up 5.4% and Frances CAC up 4.5% (despite a €5 billion fraud in their second largest bank). Certainly isn’t an industry for the faint hearted and despite yesterdays surge, these markets are all much lower than they were a year ago.

What about Emerging Market stock exchanges?
In case you were wondering, the Emerging market stock markets all enjoyed massive growth in 2007 – China up 100%, Turkey 40%, Indonesia 50%, Brazil 42% and India 45%.

To quote an expert: "The value in emerging markets is significantly greater than in developed markets and the risk of a downside is much, much greater in the U.S. and Europe than in emerging markets," said Jerome Booth, head of research at Ashmore Investment Management, an emerging market specialist firm.

Getting back to Property
Refocusing on the property market, there’s no doubt in my mind that Ireland, Spain and the US are going to have a very rough 2008, and probably an even worse 2009.

The way I see it, we can all sit tight for a couple of years and hope that things will be rosy again in the property markets where we have already made lots of money or we can seek out alternative markets now that aren’t overvalued, oversupplied and in too much debt.

There are an abundance of great investment opportunities outside the traditional developed markets. I’m talking about countries in the opposite situation to the Irish property market – i.e. undervalued, undersupplied and with negligible mortgage debts and fast growing economies.

We sell apartments in emerging markets with double digit capital appreciation and rental yields, we have others with up to 85% local financing, we have exclusive agreements with developers to sell apartments to Irish investors in areas where locals are crying out for modern accommodation.

In Conclusion
I believe we are in a very good position to steer Irish investors away from the mess at home and in the direction of property markets that are going to make them a lot of money, and we cater for all investment budgets and risk profiles.

All comments and feedback welcome.

Kind Regards

Colin Murphy
Director

Someplace Else Ireland Ltd

Short note on the Berlin Property Market

Hello and welcome to the Someplace Else Ireland blog.

As most of our readers will know, property prices are extremely low in Germany when compared to those of other European countries. Apartments in major cities can be bought from as little as €1,200-€1,700 per square metre. Why is this the case? If we cast our investment minds back to the Germany of 1980-1990, we might remember that it was one the best performing economies in the world with a very mature property market with comparatively high prices. In the aftermath of reunification however, Germany suffered years of economic decline and property price deflation. Today’s property prices are more or less the same as they were in 1997 and most experts will freely admit that they can’t predict exactly when prices will start to rise again.

Property can still be bought in the capital city of Berlin at emerging market prices, but Germany is no emerging market. It’s the third biggest economy in the world and the world’s biggest exporter. Most of those involved in the German property market, including Someplace Else Ireland, will predict that if the economy continues it’s long awaited revival under Angela Merkel, then long and sustainable property price increases won’t be far behind.

Those looking to make money and get out quickly won’t want to look at Germany, as it is a long term investment – we recommend 10 years. However, if any of our readers are happy to wait this long before selling, and are happy to take advantage of the local financing and exceptionally strong rental market available they may find this market to be one of the most hassle free and solid property investments in the world.

Over the long term, it is the capital cities that are most likely to provide the safest and most reliable return on investment, and it is for this reason that Someplace Else Ireland have put a number of guaranteed rent, maintenance and management schemes together to assist our clients in getting on the Berlin property ladder.

Consider our pros and cons of the German market:

Pros

- GDP Growth by 2.8% is the highest since 2000 (better than France or Italy)
- Shortage of skilled workers and low wage growth point to a sharp increase in migration to the city
- Growing housing demand in the right locations
- Hugely undervalued Capital city - and as the relatively new administrative centre of Germany matures we expect to see huge growth in housing demand
- Germany is still the 3rd largest economy in the world
- Stable inflation at 1.6%
- Declining unemployment as new labour laws make Germany more competitive on the world stage
- Government is cutting federal corporation tax from 25% to 15% from January 2008

Cons

- Tenancy laws and price regulation still favour the rental market.
- Foreign mortgages of just 60% are less favourable than other emerging markets
- Moderate (but stable) rental yields
- More economic improvements needed, and a large coalition government makes it difficult to initiate important legal, tax and employment reforms

If you'd like to learn more about Germany, please feel free to email me or visit our property listings.

Kind Regards

Colin Murphy
Director
Someplace Else Ireland

Why Belize is a solid investment bet

Hello and welcome to the Someplace Else blog.

Someplace Else has been selling in Belize since 2004 and our resorts and offplan developments have been hugely popular with clients, with the Belize Reserve easily being our most popular project to date. The purpose of this blog entry to remind Irish clients why we feel Belize still has enormous untapped investment potential.

Belize, formerly known as British Honduras, was the UK's last colony on the American mainland, gaining independence in 1981. Nestled between Mexico and Guatemala on the Caribbean coast, it is an adventurer's paradise and as far as Europeans are concerned, it is possibly Central America’s best-kept secret.

The coastline comprises many salt and freshwater lagoons, palm-fringed white sandy beaches and idyllic small islands, all surrounded and immersed in the crystal clear waters of the Caribbean. Rare and exotic species abound in Belize's fertile ecosystems; birds, mammals, fish - they all thrive in this pristine environment. And they will continue to thrive, as almost 42% of Belize's land is under protected status. Among some of these guarded treasures is the world’s only jaguar reserve (Cockscomb Basin Wildlife Sanctuary), the Hol Chan Marine Reserve, the Community Baboon Sanctuary and dozens of ancient Maya sites.

The sub-tropical climate in Belize is like a doctor's prescription: lots of sunshine and fresh air - no smog and no stress. The average annual temperature is 26° C. It is a democratic, stable, English speaking country, with a small population of 291,800, a booming tourist industry, good standard of heath care and a legal system based on British common law. Foreign tourism is booming (25% increase in just four years) and Belize is receiving huge interest from both foreign and local investors, with the real estate market rocketing over the past 12 to 18 months and annual capital appreciation upwards of 20% per year.

If you'd like to learn more about Belize, please feel free to email me or visit our website.

Kind Regards

Colin Murphy
Director
Someplace Else Ireland Ltd

Building an Investment Property Portfolio

Hello and welcome to the Someplace Else Ireland Blog.

This article discusses property portfolios.

A portfolio enables you to:
- Maximise profits
- Minimise risk & increase potential
- Generate cash-flow and income

The aim of putting together a property portfolio is to make your money work the hardest it possibly can for you, in order to maximise the return on your investment. Why buy one property for €75,000 cash when you can buy several with exactly the same amount of money by obtaining hassle free financing, where rental income covers all costs, and the effects of capital growth are multiplied?

Two of the main reasons for investing in property in the emerging markets are low prices and high capital growth potential. The fact that financing is becoming more readily available means that your money can go much further. Whether you are looking to invest €35,000 or €8 million, we usually recommend spreading your investment across a portfolio of properties in different countries. Having a portfolio of properties also means that you can be much more versatile with your money; if your cash flow situation changes it is much easier to sell one of the smaller properties in your portfolio as opposed to selling your one large investment property.

Important factors to consider

The idea behind our portfolios is that they can flexible and fully tailored to suit your investment requirements. Before looking at investing in a portfolio of properties you should first think about several aspects:

Budget – how much do you want to invest? Budget is the first factor to consider, and many people are surprised to hear that investing in the emerging markets can start from under €12,000, and with €25,000 to €30,000 it is possible to invest in several properties in a number of countries.

Timescales – how long do you want your money invested for? How long are you prepared to have your money tied up for? If you know that within a certain period of time you will need to liquidate any investments that you will make, not all countries will be suitable for you. Some areas are more long term investments, for example, if you want to realise your investment within 3 years, then areas such as Romania and Argentina will probably be better than Berlin or Montenegro.

Income – do you want income or just capital growth? Are you able to invest the money you have and forget about it, or do you need to get some form of monthly or annual income from it? You may have borrowed money from a property in Ireland to finance you overseas investments, in which case you may need to be able to generate some monthly revenue to help cover your Irish mortgage. Alternatively you may just want to supplement your current income from your investment properties, or perhaps even hope to be able to live off your property investments entirely, which is by all means possible.

Risk factor – how risk averse are you? All of the countries that we deal with are emerging markets and so come with some inherent investment risks. However, if there were no risks at all then everybody would be buying there and there would not be such huge growth potential. It can often be the case that the highest risk areas generate the highest returns, but it is important to get a balance and spread your investment, no matter how convinced you may be about a certain area or development.

Hope this gives you some food for thought. All comments are welcome.

Kind Regards

Colin Murphy
Director
Someplace Else Ireland Ltd

How did the property boom get started?

Hello and welcome to the Someplace Else Ireland blog.

I think it’s fair to say that Irish estate agents, both local and overseas, have had a very easy time of it in the last ten years. There seemed to be a never-ending supply of new customers as disposable income increased dramatically and cheap credit was very easy to come by. Anybody could sell overseas property, and it cost very little to get started. Everybody - buyers, agents, developers, (not to mention politicians!) seemed to be making a fortune. It was never going to last, but how on earth did it all get started?

Let’s remind ourselves for a moment that income in Ireland didn’t increase gradually over the years like it did for most of Western Europe during the 1990s. Hundreds of thousands of Irish people moved from surviving on a low wage to wondering what to do with large amounts of excess cash in a very short period of time. The figures are amazing. Between 1992 and 1997 disposable income for the average Irish person increased by 44%. Between 1997 and 2002 it increased a further 70%. Trade surpluses accumulated into billions, employment boomed and emigrants poured into the country.

But that was then, and this is now. The Celtic Tiger stopped roaring some time ago and the days when you could buy an Irish or foreign property with little or no independent research or legal advice and yet still make a large profit are over.

Does that mean that we can’t double our money every five years on property anymore? Does that mean that we can’t use the huge equity held in our banks and properties to continue buying investments overseas? I certainly don’t think so. There is absolutely no reason at all why you can’t continue to build valuable and diverse property portfolios with your cash and equity – we just need to ensure that a more professional and thoughtful approach is made by both buyers and sellers.

Firstly, (and I can rightly be accused of bias here considering what I do for a living), the only place where you can find the capital growth and rental yields of 5-7 years ago is in Emerging Markets. It’s not Ireland, it’s not the UK and it’s certainly not holiday resorts like coastal Spain, Florida and Turkey.

Secondly, the shrewd investors out there have gotten very choosy about which emerging market and which area within an emerging market suits them best. They are researching and having in-depth discussions with a variety of companies regarding what product best fits their budget, income level, timescale and attitude to risk. For example, an investor who released €100k in equity from his house to buy abroad and needs some sort of income to help cover the extra mortgage payments would be buying something completely different to another who has €50k cash in his current account and wants to put it somewhere for 5 years and is more interested in capital growth than rental yield.

Thirdly, I think investors seeking a strong return increasingly need to decide on a target market and exit strategy for their investment and stick to it. It is also much safer to depend on local markets than a fickle foreign one. Why rely on another Irish person to buy or rent an apartment when it is just as easy to identify an area where locals are buying 90% of all new apartments, where locals can get financing to buy property and where the economy (and wage levels) are rising every year?

Fourthly, I predict that investors, both novice and experienced, will start moving (or at least seriously looking) outside their property comfort zone. After all, there is a lot more than buy-to-let’s out there. Land plots and property funds can often yield many times what an apartment will, and a diverse portfolio is much safer and more flexible than one which is dependent one a single type of market.

Whilst I would like to think that everyone who has bought and sold in the booming property markets at home and abroad in the last 10 years have done so for sound investment reasons, I suspect that many were making decisions based on newspaper headlines (good or bad), back of the envelope calculations and barstool advice. Well, it worked for many, and well fair play to everyone that made a profit! However, I don’t think too many property millionaires would disagree when I say that investing, serious investing, means putting significant time and energy into figuring out which country, product, agent and lawyer are best suited to your circumstances.

Thankfully, the attitudes of Irish investors are rapidly changing for the better, and people are demanding much more information (and accountability) from their estate agents than they used to. Investing in property can and will continue to be an intensely rewarding experience for the Irish. Providing you do your homework and identify solid grounds for investment, or speak to people like ourselves that do it for you and have a great deal of experience on the ground in these countries, emerging markets can definitely be worth the effort.

No matter what the newspapers are now saying, the Irish did take the property world by storm and previous successes have just made us more determined to become the most adventurous overseas property investors of them all.

Kind Regards

Colin Murphy

Director

Someplace Else Ireland Ltd

Global Credit Crunch & Property Markets

Hello and welcome to the Someplace Else Ireland blog.

Let’s start this post with the elephant in the corner that a lot of estate agents will try to avoid discussing with you – the global credit crunch. Started by the subprime lending mess in the USA, it’s now causing great concern among investors and financial institutions all over the world.

It will take time to untangle this complicated financial mess and discover the extent of the damage that’s been done to property markets, but we can forecast that outside the USA, it will probably have the biggest impact on the European property markets that have expanded quickest using an abundance of cheap credit – i.e. Ireland, Spain and the UK. Anybody trying to lure investors into these property markets in 2008 is going to have a very tough time doing so as I simply can't see any point investing in them. It will take years for these markets to recover, and those suffering most will be young first time buyers facing negative equity and increasingly difficult mortgage payments.

With the worlds biggest and most developed economies (USA, Japan, UK, France) all performing woefully, isn’t it ironic that we are now relying on the new emerging market consumer giants of China, Brazil, Russia, India and the Central & Eastern European countries to drive the global economy in 2008 and beyond? The concept of what is risky and what isn’t has completely been turned on its head – investment experts across all financial categories now consider emerging markets to be safe havens!

What is certain is that investors will have access to less credit in 2008 than they had in 2004-2007. This certainly won’t stop them investing, although it will probably mean that they invest a little bit less in total. Overall however, we will see large increases in the amount of capital flowing into emerging property markets and the opposite in the troubled Western European and US markets.

So, how are the markets Someplace Else promotes likely to fare next year? Argentina is on a roll at the moment, with consumer confidence reaching new highs and its robust recovery set to continue with the election of Cristina Kirchner last October. 2007 was a great year for Someplace Else’s Belize operation, with our Bella Maya resort winning Gold at the Homes Overseas Awards. Following unprecedented sales of land plots and cabanas, construction is also due to begin shortly on our 1000-acre ecological resort – The Belize Reserve.

Romania is going to be huge in 2008, and the investment activity in the last six months has been simply unbelievable. Outside of Bucharest, the secondary cities of Cluj, Brasov and Iasi will all be the lucky recipients of larges amounts of foreign capital. What about Berlin? In my opinion (with the possible exception of Buenos Aires), this is the most undervalued capital city in the world. It definitely falls into the long-term investment category, but the capital city of the world’s third biggest economy will not always contain property that is five times cheaper than London, Paris and Dublin.

Kind Regards

Colin Murphy

Director

Someplace Else Ireland Ltd

Emerging Market Multinationals

Hello and welcome to the first Someplace Else Ireland blog.

This week I’m going to write about the new breed of multinational companies in emerging markets that are storming into Europe and America.

Take Indian giant Tata Motors as a prime example - it now looks likely to purchase Jaguar & Landrover, two legendary British brands from Ford, America’s stumbling giant. How many people have heard of Embraer, a Brazilian aircraft company? It is now the third biggest in the world (after Boeing & Airbus), has 95% of it’s sales outside of Brazil and has overtaken Canadian based Bombardier as the worlds leading maker of regional jets. Consider Cemex, the Mexican cement giant with $18 billion in sales last year, who astonished industry experts by purchasing UK based RMC for $5.8 billion in 2005.

These companies are exceptional but they are merely leading as opposed to bucking the trend of emerging market corporations strutting the global stage. According to a recent article in The Economist, foreign direct investment from developing countries in 2006 reached $174 billion – 14% of the worlds total, up from just 5% in 1990. Cross border Mergers and Acquisitions from developing countries increased from $20 billion in 1998 to $120 billion in 2006! What an incredible performance.

It seems like developing economies have never had it better. Even though emerging market corporations are investing huge amounts abroad, their governments are receiving much more from wealthy countries - €200 billion more flows into developing economies than flows out (UN statistic). For a European example look no further than the capital city of Romania, which is attracting billions in FDI from corporate giants such as Nokia, Microsoft, IBM & KPMG.

While people can be forgiven for getting down on the constant negative media coverage of the Irish property market, the Irish manufacturing industry and the possibility of a recession in the US, it seems to me that the opportunities for making money have never been better.

It can all be boiled down to a simple message - study and invest in emerging markets.

Best Regards

Colin Murphy
Director
Someplace Else Ireland Ltd