Where is the safest place to invest?

Greetings,

I was in sunny Berlin recently meeting with our local partners and discussing various plans for the future. Their offices have amazing panoramic views of the city, and judging by the number of cranes everywhere, I was struck by Berlin's suitability as the ideal place for a safe and secure property investment in uncertain times.

As discussed in Issue 23, I'm a big believer in hunting for exciting high growth opportunities abroad no matter what the conditions are at home.

Balancing a Portfolio
However, I'd also like to emphasise that it's just as important to create a balanced portfolio, where your money is spread between properties in a diverse range of economies and regions, some of which is spent on short-medium term opportunities (3-7 years) and others on long term opportunities (more than 7 years).

There are also a huge number of people out there whose overseas portfolio solely consists of properties in holiday investment destinations such as Portugal, Spain, Turkey, Morocco, Egypt etc.

In my opinion, (and please feel free to argue if you disagree) this type of portfolio is very unbalanced as it will always have an unreliable rental income and is quite vulnerable to changes in fickle tourist markets.

Capital growth could be strong if you bought in a special location (i.e. without thousands of similar properties next door) and sold at the right time, but to be on the safe side, it should ideally be balanced by something in an urban area, where the legal process is rock solid, where rental income is year round, where locals dominate the rental markets and where the economy (and wages) are strong enough to provide you with a local buyer when you choose to sell.

Where is the safest place to invest?
There is an economy in Europe which dwarfs all others, where 85% of locals rent property providing guaranteed income, and best of all, where high quality property can be bought for even less than the equivalent standard in Romania or Panama and at a mere fraction of the current prices in Ireland, UK, Spain or Portugal.

Of course, I'm talking about Germany, where one bed properties in the capital city with guaranteed income can be purchased for less than €75,000 (financing also available).

Someplace Else are in the process of completely revamping the German Section of our website, and we will soon be making new product announcements. I'm convinced that this is a market all of our clients should very seriously consider investing in over the next couple of months, particularly those who wish to put their earnings into a steady and secure long term investment.

Regards

Colin

Refocusing after 12 weeks of media mayhem

Hello and welcome to the Someplace Else blog.

It’s certainly been quite a turbulent few weeks since the last post. All was quiet when I went to Greece on holidays in early June - it certainly wasn’t when I returned.

Uncertain Times
The Irish have voted No to Lisbon, and depending on which articles you read, this will either have dire consequences for Europe or it will make very little difference.

It doesn’t stop there though, oh no - Mervin King (Britain’s top banker) thinks the UK faces its most difficult challenges for two decades and the brightest minds in the ESRI (Irelands main economic think tank) have warned us to prepare for recession, job losses and renewed emigration. We probably could have survived any one of the above in isolation, but taken as a whole, well, perhaps we should all just give up investing altogether and spend our evenings in the pub reliving the good old days.

Authorities aren’t helping
The latest quarterly ESRI report was probably the most pessimistic I’ve read in years, and I’ve read most of them. These reports and the headlines they generate can be very misleading - not because they aren’t authoritative and useful sources of economic data (they are), but because the conclusions drawn from this data, which are widely reported in our media and debated in our Dail, seem to change from one extreme to the other within weeks, and nobody in the public sphere seems to notice, care or question why.

Flip flopping
It was a mere six weeks ago that the ESRI looked forward to 3.75% yearly growth predicted in positive view of the economy which was heading toward a bright future due to resilient economic growth over the next decade which will outperform most of our European cousins for years to come due to our “productive and diversified workforce”. Surely, this was some sort of short-term informal report, not to be taken too seriously? Apparently not. It was their Median Term Review for 2008-2015.

If anybody can cast their minds way way back into the misty Ireland of old … in March 2008, they may remember reading ESRI quoted newspaper headlines gravely predicting either an Economy Set to grow at slowest rate for two decades or Growth to Plummet as Economy Slows. That was their Quarterly Economic Commentary, Spring 2008 report. It could have been more accurately called their “Mid March to be dramatically revised in a few weeks and then again in June to cause maximum panic and confusion report”, but it was possibly considered a bit unwieldy by the editing department.

So what is a prospective property investor to do in these new and unpredictable domestic markets?
Our English cousins have had a tough time of it recently, but in the space of 12 short weeks, Irish residents have been told that there will either be (a) two decades of pain to look forward to, (b) a decade of resilient growth with a strong labour market or (c) inflation, unemployment and recession. Take your pick.

Sandwiched in between all that Ireland (and Ireland alone) had to vote Yes or No to the Lisbon treaty which will keep us in the heart of Europe or the edge of Europe, which might involve conscription to the EU Army or cement our neutrality, which will lose or gain our politicians power, and will involve increased or decreased taxation and will persuade more or less foreign workers to come to our shores. Hmm.

It is natural that people will react in their own ways to the above. What we certainly shouldn’t do however is throw our hands in the air and admit that our focus and decision making power has been robbed by this barrage of conflicting information. I doubt anybody can make sense out of it all, but that's not really important from this newsletters point of view as most of the above has absolutely nothing to do with whether or not some of your savings, earnings and borrowings should be set aside to create or extend a property portfolio.

Focusing on what is important
Building a property portfolio, or indeed achieving any difficult but worthy goal, involves focusing on what’s important and shutting out everything else. Have some money that you would have thought about investing? Write down what you would like to achieve with it on a piece of paper. Then look at what options your budget, income stream, attitude to risk and timescales will safely permit you to do. When you’ve narrowed that down to a few options, examine some of the factors that will determine those markets long term success: economic growth, education, infrastructure, employment, availability of finance, interest rates etc. This information is all freely available and with patience and advice it’s really not that difficult to make a sensible decision.

We have a website that may help – it’s called www.someplaceelse.ie .

For those who would like to focus on the above - make sure there aren’t any newspapers or televisions nearby to distract you, and give us a call if you need any help. Maybe you should go to Greece altogether, it’s a bit quieter there.

Kind Regards
Colin Murphy

Lending conditions are tight in Ireland, but what about emerging markets?

If any readers of the Someplace Else Ireland Newsletter are fans of Little Britain, they might remember a very funny sketch where a bank manager refuses to give a loan to a customer because “the computer says no”. That seems to be very close to reality these days, with lending conditions both here and in the UK the tightest they’ve been for almost a decade.

It feels like only yesterday that banks were falling over themselves to offer us financing. Young couples in their early twenties with relatively low salaries had no problems getting 90-100% mortgages on properties that should have been way out of their league.

Nowadays, it’s the exact opposite – I recently had a client on the phone with a mutimillion euro portfolio who told me he was refused a €40,000 topup on his mortgage – “not right now” was what they told him, but it may as well have been “the computer says no”.

It seems like the Irish banks are telling us to come back another time when we’re considered less risky - but why on earth should we do that?

Another option is to forget about Irish and UK banks and approach their global competitors that offer financing for property in countries that are undersupplied, underpriced, with very low mortgage debt and who are more than happy to lend to foreigners that meet their (very reasonable) lending criteria.

Romania falls very firmly into this category (75% LTV 30 years, 6-7%), as does Bulgaria (75% LTV 25 years, 6-8%), Germany (60-70% LTV 25 years, 5-7%) and many more.

There’s a lot of negativity out there at the moment, and it’s tempting to shrug our shoulders and wait until things get better in Ireland, but in my opinion that won’t be for a long time. In the meantime however, myself and my colleagues will continue sourcing exciting property opportunities and building relationships with banks in countries that have much better investment potential.

If anyone is interested in learning more, please give us a call, we’d be delighted to hear from you.

Kind Regards
Colin Murphy