Investor Reactions to a Domestic Slump

Good morning and welcome to the Someplace Else Blog.

Widening Economic Gap
This week, I thought I'd briefly write about the huge and widening directions the UK & Irish economies are moving in compared to the emerging markets myself and my colleagues discuss with clients every day.

The Irish economy, as we have been constantly reminded over the last few months, is heading in a very worrying direction. Unemployment is rising fast and foreign direct investment is falling fast. Public spending is being severely curbed because government tax receipts are rapidly declining. Much of this is down to the rapid deceleration of investment in the domestic residential market, which, as the Irish Times recently pointed out, represented a completely unsustainable 13.3% of our GDP in 2006 (IMF calculates 6.5% as a sustainable rate).

The UK is also in for a rough time. According to the Bank of England, mortgage approvals for home purchases in June fell to 36,000, a mere third of what they were a year ago. The combination of a slump in the housing market, a banking trauma that refuses to end and rising inflation is starting to make life very difficult for those with high debts and low incomes.

Investor Reactions to a Downturn
Experience has taught me that there are many types of investors out there who will react to a local downturn in a variety of ways. Some will be spurred into immediate action and will hunt for opportunities that will protect and grow the assets accumulated during the boom. Others will take a more cautious route and will cancel planned investments and wait for their domestic markets to recover. Others will form a compromise strategy where they will invest a portion of their cash into areas that should perform strongly while keeping the bulk of it in a low interest (but safe) deposit account.

Whichever type you may be, myself and my colleagues are more than happy to discuss both modest (eg Berlin) and ambitious (eg Panama) investment opportunities.

Looking Ahead
Before I sign off, it is perhaps worth noting that domestic consumption in emerging markets is now rising three times faster than developed markets and investment in capital expenditure is rising an incredible 14 times faster.

As the surest residential property investments are usually those with a strong local market where banks have plenty of scope to expand their mortgage books, the people currently investing in our projects in eastern europe and central & south america have every right to be optimistic in the face of tough conditions at home.


Kind Regards

Colin Murphy
www.someplaceelse.ie

What are the best property research sources?

Good morning and welcome to the Someplace Else Blog.

We had a great response to the launch of our first Panama project last week - many thanks to all who got in touch. Panama is just a fantastic investment prospect at the moment, and there is plenty of information at http://www.someplaceelse.ie/ for those who would like to learn more.

We are also in the process of finalising details for a commercial project, a 30 storey office building in the heart of Panama's banking district. Rental yields for these types of properties are about as high as anything I've ever come across, and we've been very lucky to secure a few floors at prelaunch prices for our regular investors. Please feel free to call the office if you would like to discuss further with myself or David Shaw, our Sales Manager.

Research
Focused research, as our regular readers will have heard me say before, is essential for those who want to maximise their savings and borrowings to build and maintain a balanced and profitable property portfolio. With August looming, I thought I'd briefly list my favourite research sources for those who'd like to spend a few hours during the holidays learning about emerging markets.

Starting with the Irish Media - The Sunday Times and The Examiner are the only two national titles publishing dedicated property supplements during the summer months.

The BBC Website is a fantastic source of free information, one of my favourite sections is their Country Profile page. The Economist website is also quite amazing. Particularly useful are their country briefings, city guides & special reports.

I also find the Global Property Guide a useful source of information on the average rental yields, tax regulation and legal fees for dozens of countries. For currency exchange rates, I find www.xe.com/ucc very user friendly. www.ft.com is the homepage of the Financial Times, and is much easier to read than the rather stuffy print version.

Staying closer to home, www.overseascafe.com has an abundance of property information tailored to an Irish audience and I'd highly recommend signing up to it.

www.myoverseasproperty.ie is also quite good.

The Someplace Else Website is a work in progress. Our research centre currently contains five of our previous print newsletters, four buyers guides and several articles in the industry. The Newsletter Archives contains the previous 21 newsletters (this is Issue 22). Our FAQ section is worth a visit, as is the Someplace Else Blog. Each of the country headings on our homepage also contains information on laws & taxes, general overviews, and of course, property listings.

Speaking of property listings, this week we're promoting Bellevue Residences in Romania, Tropical Hill in Panama, and Castle Loft Apartments in Berlin. Details all at http://www.someplaceelse.ie/

Kind Regards

Colin Murphy
Director
Someplace Else Ireland

How to Profit from a Domestic Downturn

Hello and welcome to the Someplace Else Blog.

Despite the uncertain times we currently face in the Irish & UK economies, there are a whole range of emerging markets out there offering exciting investment opportunities to those looking in the right areas.

Our domestic house prices are falling, that is very true, but those of us who were lucky enough to have lived through an economic boom have a very large disposable income compared to the average hard working citizen of an emerging economy.

The Irish are also particularly well placed to spot trends and opportunities in poor but very fast growing economies, and as one of the wealthiest nations in the world in terms of GDP per capita, we still have the ability to build a diverse portfolio in markets at a much earlier phase of the property growth cycle than our own.

No matter what happens to the Irish & UK economies over the next five years, we are in a unique position to capitalize on the huge growth in emerging economies that are, by and large, unaffected by the credit crisis. For example - about 2% of Romania's GDP is mortgage debt. Ireland & the UK? Over 40%.

I firmly believe that focused research aimed at achieving well defined goals and targets will be how savvy investors use current market conditions to their advantage.

Someplace Else has specialized in these high growth markets for the last four years and our doors are always open to those who would like an informal chat with one of our sales consultants. Speaking of which, I'd like to extend a very warm welcome to Genevieve Judson, the newest member of our sales team.

To view a selection of our latest investment opportunities please visit www.someplaceelse.ie.

Kind Regards

Colin Murphy

Launching Panama & Current Economic Woes in Ireland and the UK

Hello and welcome to the Someplace Else Blog. Panama is the big theme of today’s post and the Someplace Else team are all very excited by the release of our first investment project in this wonderful city. It is called Tropical Hills and the details are all below...

Before I begin though, I must offer an apology to our regular readers for the irregular frequency of these emails lately – these posts & newsletters are very much a team effort and are therefore disrupted during the holiday period. I’d also like to officially welcome Nick Beard to the Dublin office, who joins us from Trinity College and will be concentrating her many talents on the marketing and administration side of our business.

Panama – What’s so special?
While it’s no secret that current domestic economic woes have diminished the famous gung ho investment attitude of the Irish & UK buyer, it is worth noting out that there are still many cities in this world moving to a very different rhythm to our local markets. Some of them offer excellent investment returns to those willing to do their homework and buy the right type of property. Panama is one such city, and we’ve sourced some excellent property starting at just €100,000 ($157,000).

It is officially one of the best places to live in Latin America, and is hugely popular with foreign retirees because of the quality of life, dollar economy and status as a tax haven. Additionally, inflation is low, taxation is low, unemployment is low, economic growth is high and the government is stable, democratic and very open to outside investment. What’s not to like about all that!

Side Effects of a Property Boom
Before moving onto the further information on our Panama project (which you’ll in the new Panama section of our website); I’d like to acknowledge the huge change in our national optimism levels these last six months, which seems to have dramatically changed attitudes towards property and the people who sell it.

One of the drawbacks of our prolonged boom was that it gave unscrupulous agents and developers the opportunity to make a lot of what I would call easy money. Life isn’t so easy for these companies nowadays, which I’m quite happy about.

In my view (and it seems to be borne out by innovative colleagues in the industry who are thriving in the current environment), the only companies that will continue to be successful are those that have always protected their clients and advised them to buy only what suits their budget, timescales, risk profiles and income levels.

It’s all about trust
It’s not an easy thing for a property company to gain the trust of its clients, as it involves taking a long term point of view that doesn’t suit (or even occur to) everybody. You need to continuously source very good properties and research them to death, you need to take a modest commission, and you need to work very hard to ensure your clients get rock solid mortgage, tax, legal and aftersales advice.

In a boom you also often have to ignore requests to promote developments in areas which would be easy to sell but which you know won’t work out in the long term. Instead you must sometimes work extremely hard to convince clients that a city they’ve never even heard of will turn out to be a great property investment for them.

Thankfully, most people have heard of Panama, due to the incredible canal that cuts right through it. And in case anybody is interested, about eight of the apartments we’re selling have unobstructed views of it…

As always, all opinions and points of view are welcome in the Someplace Else Blog.

Kind Regards

Colin Murphy

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

What really affects the prices of overseas property?

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/

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