Hello and welcome to the Someplace Else Blog
You may remember that last week I used the example of two very different ESRI reports and their corresponding headline summaries in the national press to illustrate the importance of using a variety of research sources before making a major decision.
So, this week I thought I’d (very) briefly write about some of the factors that really affect the prices of property, in the hope that it may help some of our research minded readers focus their efforts in the right direction.
These following factors are listed in no particular order:
FDI & Economic Growth:
It is very important to examine from the ground up how the people are living and how their lives are improving in a country. Look at overall GDP to determine how much wealth the citizens have now but pay more attention to GDP growth and whether the reasons for this growth are sustainable.
Examine Foreign Direct Investment carefully, as FDI from other countries or multi national corporations can have a profoundly positive effect on a countries economy.
Employment
As more workers mean more potential buyers, investors have always been attracted to countries or regions where there is strong sustainable growth in employment and wages. An investment that has the potential to be resold to a local person is generally more secure than one that is depending on a future foreign buyer.
Availability of Finance
Whether or not financing is available in a country can have a huge impact on the property market. Without financing locals can rarely buy new property, and so the number of buyers (and the demand) will therefore be limited. When mortgages become available however, the property market and prices can accelerate very quickly in a relatively short space of time, as has been previously witnessed in the Baltic States. Also, if you have financed a property purchase, even if it is only a 50% mortgage, the effects of capital growth are doubled.
Interest rates
These rates (set by the ECB in Frankfurt for EU citizens) typically have an inverse relationship with property prices. When interest rates fall, property prices tend to rise as it is cheaper to borrow, when interest rates rise, property prices tend to fall as it is more expensive to borrow and cheaper to save.
Inflation
Setting aside the careless populist rhetoric we often hear on television and newspapers, it’s difficult to explain in a nutshell how inflation affects property prices, but here goes: it goes rises and falls depending on the factors affecting (a) the costs of producers (land prices, taxation, labour, cost of raw materials) and (b) the demand of buyers (interest rates, employment, market sentiment, economic growth, availability of credit)
In addition to the above, there are many other factors such as availability of land, planning regulations, membership of international organisations, infrastructure and government policy which are all worthy of further consideration.
That’s it for me, if anyone has any ideas or issues they would us to address in future blogs, please let us know.
Warm Regards
Colin Murphy
http://www.someplaceelse.ie/
Wednesday, May 28, 2008
Wednesday, May 21, 2008
Confusing Headlines in the Press for would be Investors
Hello and welcome to the Someplace Else Blog.
A very pleasant surprise for me last week was a beaming headline from our friends at the Irish Times in the Wednesday edition (14 May). I could scarcely believe it – “3.75% yearly growth predicted in positive view of the economy” ran the headline based on the latest predictions from the ESRI, our highly respected Economic and Social Research Institute (who have a terrific website by the way – www.esri.ie). The article also went onto say that “the economy is heading toward a bright future” and discussed how we will outperform most of our European cousins for years to come due to our resilient economy and productive and diversified workforce.
Last Wednesday The Irish Independent also claimed that the economy was “on the way back” and our colleagues down south in the Examiner were happy to report “resilient economic growth over the next decade”
All in all, a very far cry from the headlines commented on just 8 weeks ago in Issue 7. The two main headlines that week in the Irish Times and Irish Independent were “Economy Set to grow at slowest rate for two decades” and “Growth to Plummet as Economy Slows” respectively.
Those who have been holding back on investing because of the negatively in the press recently can rightly feel a bit confused by the sudden change. However, the reason I’m writing all this has nothing to do with our national newspapers, most of which, including The Irish Times and Irish Independent, are excellent publications. It is more to stress the importance of using a variety of independent research sources before making a major investment decision.
Our own website has a small research centre that may be of use to some, which can be visited by clicking here. It is due for a comprehensive update in the next ten days, so might be worth bookmarking and returning to it from time to time.
Best Regards
Colin Murphy
Director
www.someplaceelse.ie
A very pleasant surprise for me last week was a beaming headline from our friends at the Irish Times in the Wednesday edition (14 May). I could scarcely believe it – “3.75% yearly growth predicted in positive view of the economy” ran the headline based on the latest predictions from the ESRI, our highly respected Economic and Social Research Institute (who have a terrific website by the way – www.esri.ie). The article also went onto say that “the economy is heading toward a bright future” and discussed how we will outperform most of our European cousins for years to come due to our resilient economy and productive and diversified workforce.
Last Wednesday The Irish Independent also claimed that the economy was “on the way back” and our colleagues down south in the Examiner were happy to report “resilient economic growth over the next decade”
All in all, a very far cry from the headlines commented on just 8 weeks ago in Issue 7. The two main headlines that week in the Irish Times and Irish Independent were “Economy Set to grow at slowest rate for two decades” and “Growth to Plummet as Economy Slows” respectively.
Those who have been holding back on investing because of the negatively in the press recently can rightly feel a bit confused by the sudden change. However, the reason I’m writing all this has nothing to do with our national newspapers, most of which, including The Irish Times and Irish Independent, are excellent publications. It is more to stress the importance of using a variety of independent research sources before making a major investment decision.
Our own website has a small research centre that may be of use to some, which can be visited by clicking here. It is due for a comprehensive update in the next ten days, so might be worth bookmarking and returning to it from time to time.
Best Regards
Colin Murphy
Director
www.someplaceelse.ie
Monday, May 12, 2008
Is the Credit Crunch doing the industry a favour?
Hello and welcome to the Someplace Else Blog
Last week saw the demise of Inside Track, a large UK based company many readers will be familiar with that specialized in (very) expensive investment seminars. The market has certainly gotten much more discerning in the last two years and most investors are now able to either do their own research or find companies that will point them in the right direction without charging high fees.
Is the credit crunch doing us a favour?
Perhaps the credit crunch is actually doing many of us a favour by narrowing the range of people who want to invest in property and the number of companies who can provide for them. From 2003-2006, when the Irish & UK economies were performing well and the overseas property boom was in full swing with property expos heaving, property supplements bursting with breathless adverts and people signing on the dotted line without a care in the world, it was very easy for property companies to rack up large volumes of sales without doing all that much selling, research or due dilligence.
With many previously gung-ho buyers now nervously scanning newspaper headlines for the latest doom and gloom stories (very easy to find these days), the only property companies that will be able to thrive (and some are definately thriving) will be those who can continuously offer a range of products and services to savvy buyers who are seeking out high performing markets, regardless, or maybe even because of, the prevailing conditions at home. These people also have the experience to know the value of the information being provided to them. Surely this is a good thing for the industry.
Someplace Else Projects During Summer Months
Getting back to emerging markets - Romania seems to be showing no signs of losing its popularity with our investors and with our Bujor development in Northern Bucharest practically sold out, we have been very fortunate to secure some units in another very similar one nearby from the same developer called Lilac Residences, details of which can be found below. The many people who replied to our teaser campaign for our new Ploiesti development (35km north of Bucharest) will hopefully be glad to know that the investment guide is almost ready and should be available to clients next week. It is called Prahova Residences and we feel that it is a great investment with superb payment terms (10/10/5/75)
I've also been quite busy this week in Panama (and am writing this note on my way back across the atlantic). It is simply an amazing country, and we will soon be announcing an exciting new venture with a local company who will be sourcing world class Panamanian developments for Someplace Else investors that will be available nowhere else in Europe. Full details won't be released for a few weeks, but if anyone would like to express an interest in being put on a preferential list, or indeed if anybody would just talk to me about the kinds of projects we will be releasing, then by all means give me a call on 1890 425 425 or me email on colin.murphy@someplaceelse.ie.
New Someplace Else Magazine Coming Soon
Finally, the next issue of the print edition of "Invest Someplace Else" will soon be ready and an email will be sent out shortly giving investors further details. In a nutshell though, it will be a 24 page magazine dedicated to emerging markets and will contain articles on Panama, Romania, Taxes on Overseas Property, Affect of Global Credit Crunch on Emerging Markets, Overseas Mortgages, updates on our own developments in Belize & Argentina ... and much more besides. We will post it out free of charge to anybody that would like to receive it. Simply email orla.doyle@someplaceelse.ie and put "subscribe to magazine" on the subject line and your postal address in the email if you'd like a copy.
That's it from me.
Warm Regards
Colin Murphy
Director
Someplace Else Ireland Ltd
Last week saw the demise of Inside Track, a large UK based company many readers will be familiar with that specialized in (very) expensive investment seminars. The market has certainly gotten much more discerning in the last two years and most investors are now able to either do their own research or find companies that will point them in the right direction without charging high fees.
Is the credit crunch doing us a favour?
Perhaps the credit crunch is actually doing many of us a favour by narrowing the range of people who want to invest in property and the number of companies who can provide for them. From 2003-2006, when the Irish & UK economies were performing well and the overseas property boom was in full swing with property expos heaving, property supplements bursting with breathless adverts and people signing on the dotted line without a care in the world, it was very easy for property companies to rack up large volumes of sales without doing all that much selling, research or due dilligence.
With many previously gung-ho buyers now nervously scanning newspaper headlines for the latest doom and gloom stories (very easy to find these days), the only property companies that will be able to thrive (and some are definately thriving) will be those who can continuously offer a range of products and services to savvy buyers who are seeking out high performing markets, regardless, or maybe even because of, the prevailing conditions at home. These people also have the experience to know the value of the information being provided to them. Surely this is a good thing for the industry.
Someplace Else Projects During Summer Months
Getting back to emerging markets - Romania seems to be showing no signs of losing its popularity with our investors and with our Bujor development in Northern Bucharest practically sold out, we have been very fortunate to secure some units in another very similar one nearby from the same developer called Lilac Residences, details of which can be found below. The many people who replied to our teaser campaign for our new Ploiesti development (35km north of Bucharest) will hopefully be glad to know that the investment guide is almost ready and should be available to clients next week. It is called Prahova Residences and we feel that it is a great investment with superb payment terms (10/10/5/75)
I've also been quite busy this week in Panama (and am writing this note on my way back across the atlantic). It is simply an amazing country, and we will soon be announcing an exciting new venture with a local company who will be sourcing world class Panamanian developments for Someplace Else investors that will be available nowhere else in Europe. Full details won't be released for a few weeks, but if anyone would like to express an interest in being put on a preferential list, or indeed if anybody would just talk to me about the kinds of projects we will be releasing, then by all means give me a call on 1890 425 425 or me email on colin.murphy@someplaceelse.ie.
New Someplace Else Magazine Coming Soon
Finally, the next issue of the print edition of "Invest Someplace Else" will soon be ready and an email will be sent out shortly giving investors further details. In a nutshell though, it will be a 24 page magazine dedicated to emerging markets and will contain articles on Panama, Romania, Taxes on Overseas Property, Affect of Global Credit Crunch on Emerging Markets, Overseas Mortgages, updates on our own developments in Belize & Argentina ... and much more besides. We will post it out free of charge to anybody that would like to receive it. Simply email orla.doyle@someplaceelse.ie and put "subscribe to magazine" on the subject line and your postal address in the email if you'd like a copy.
That's it from me.
Warm Regards
Colin Murphy
Director
Someplace Else Ireland Ltd
Thursday, May 8, 2008
Thanking the Germans for the Irish Property Boom
Hello and welcome to the Someplace Else Blog.
Those of you who read these blogs on a regular basis (many thanks) will probably know that I am quite prone to wax lyrical about the booming property markets of Eastern Europe and South American on a regular basis.
There is one great country which I haven't been paying enough attention to lately though, and it's Germany. Most people with a passing or professional interest in Germany will know the basics by now: huge exporting economy, low property prices, low rental yields and a sophisticated banking system that is nonetheless universally reluctant to lend foreigners more than 60% for an investment mortgage.
We shouldn't complain too much though, if it wasn't for Germanys big and financally cautious population of over 80 million people, then Ireland (and to a lesser extent, the UK) would never have had such a huge property boom during the 1990s and early 2000s. It was low interest rates and the cheap availability of credit above anything else that enabled so many people to speculate and make fortunes on the property markets, which in turn granted ordinary homeowners huge equity in their own properties without really doing anything at all.
As the European Central Bank has one interest rate for the whole eurozone, it is the financial saving and spending habits of the big EU countries that determine what their monetary policy will be. When the world economy was booming and you had a large and very wealthy country like Germany saving lots of money in banks, then other banks had more to lend, interest rates were very low and little countries like Ireland could more or less borrow and spend as much as they wanted without having any significant affect on Europes overall borrowings and savings at all. So let us all please raise a glass and toast the wonderful Mr and Mrs Wadenburg, whose careful savings helped Mr and Mrs O'Connor borrow enough money to purchase two buy to lets in Rathgar, a holiday home in Marbella and piece of land somewhere in Brazil.
In all seriousness though - one of the dangers about so many people making so much money so quickly, is that future property purchases might be made on the basis of a similar quick and easy return. Is this the best way to sustain a profitable portfolio over the long term though? Might it be more sensible to invest part of your money in property markets where the short term outlook is very exciting but the long term outlook is uncertain, and another part in markets where the short term outlook is uncertain and the long term very exciting?
It is easy to cross Germany off your list as property prices are flat and rental yields are an unexciting (but very reliable) 3-5%. Think about it again though, and with a long term 8-10 year view rather than a 3-5 year view and the picture will start to look very different. To but it bluntly - Germany is a rich country with emerging market property prices and over the long term, I have no doubts that prices will go back to where they should be alongside those of other major countries. Is it not amazing that we have this huge and vitally important economy in the heart of the EU and yet a one bed apartment in a posh part of its capital city costs about 25% of an equivalent property in London, Paris or Dublin?
In conclusion, those who would really like to plan their purchases based not on what is hot now or what will be hot in six months time, but rather on what mixture of properties is most likely to provide a steady income stream for your family with the right balance of short, medium and long term capital growth should definately take a closer look at prime properties in the major cities of Germany.
All the best
Colin
Those of you who read these blogs on a regular basis (many thanks) will probably know that I am quite prone to wax lyrical about the booming property markets of Eastern Europe and South American on a regular basis.
There is one great country which I haven't been paying enough attention to lately though, and it's Germany. Most people with a passing or professional interest in Germany will know the basics by now: huge exporting economy, low property prices, low rental yields and a sophisticated banking system that is nonetheless universally reluctant to lend foreigners more than 60% for an investment mortgage.
We shouldn't complain too much though, if it wasn't for Germanys big and financally cautious population of over 80 million people, then Ireland (and to a lesser extent, the UK) would never have had such a huge property boom during the 1990s and early 2000s. It was low interest rates and the cheap availability of credit above anything else that enabled so many people to speculate and make fortunes on the property markets, which in turn granted ordinary homeowners huge equity in their own properties without really doing anything at all.
As the European Central Bank has one interest rate for the whole eurozone, it is the financial saving and spending habits of the big EU countries that determine what their monetary policy will be. When the world economy was booming and you had a large and very wealthy country like Germany saving lots of money in banks, then other banks had more to lend, interest rates were very low and little countries like Ireland could more or less borrow and spend as much as they wanted without having any significant affect on Europes overall borrowings and savings at all. So let us all please raise a glass and toast the wonderful Mr and Mrs Wadenburg, whose careful savings helped Mr and Mrs O'Connor borrow enough money to purchase two buy to lets in Rathgar, a holiday home in Marbella and piece of land somewhere in Brazil.
In all seriousness though - one of the dangers about so many people making so much money so quickly, is that future property purchases might be made on the basis of a similar quick and easy return. Is this the best way to sustain a profitable portfolio over the long term though? Might it be more sensible to invest part of your money in property markets where the short term outlook is very exciting but the long term outlook is uncertain, and another part in markets where the short term outlook is uncertain and the long term very exciting?
It is easy to cross Germany off your list as property prices are flat and rental yields are an unexciting (but very reliable) 3-5%. Think about it again though, and with a long term 8-10 year view rather than a 3-5 year view and the picture will start to look very different. To but it bluntly - Germany is a rich country with emerging market property prices and over the long term, I have no doubts that prices will go back to where they should be alongside those of other major countries. Is it not amazing that we have this huge and vitally important economy in the heart of the EU and yet a one bed apartment in a posh part of its capital city costs about 25% of an equivalent property in London, Paris or Dublin?
In conclusion, those who would really like to plan their purchases based not on what is hot now or what will be hot in six months time, but rather on what mixture of properties is most likely to provide a steady income stream for your family with the right balance of short, medium and long term capital growth should definately take a closer look at prime properties in the major cities of Germany.
All the best
Colin
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