Flat earth

    30 November 2014

    There has never been a better time to buy a foreign property, or so the developers tell us. In fact, for as long as I can remember there has never been a better time to buy a foreign property. Come boom or bust, for the past decade my inbox has been stuffed with press releases imploring me to buy abroad before prices soar. It did get a little too much when Greek villas kept flooding in while the riot-bound country was on the cusp of dropping out of the euro, which would have led to an instant devaluation of all assets in Greece.

    There is always somewhere in the world where property prices seem to be rising, even if it’s Ghana. People now buy not because they want somewhere to live but purely because they want to make some money. Yet in contrast to stock markets, which to a fair extent follow each other, property markets are far from synchronised. The list of the top ten performing countries over the past 12 months, according to the Knight Frank Global Index, is a mix drawn from every continent. Bizarrely, it even includes a country which has been at war: Israel, where prices have risen by 8.2 per cent.

    The top three are all countries where bubbles of the mid-2000s have suddenly reinflated: Dubai (24 per cent), Turkey (14 per cent) and Ireland (12.5 per cent). Fourth is Colombia (12.3 per cent), followed by Britain (11.6 per cent). Then come Brazil (10.8 per cent), Australia (10.1 per cent), Estonia (9.9 per cent) and Iceland (8.4 per cent) — which just shows a banking collapse doesn’t necessarily destroy your property market for ever.

    Most of the ten countries with the biggest falls in property prices over the past year are in the EU, starting with Cyprus (-9.2 per cent), Greece (-7.9 per cent) and Slovenia (-7.4 per cent). The only non-European country on the list is Singapore (-2.4 per cent).

    Capital cities are doing much better than provincial ones, and London is now in a class of its own, with property averaging $34,500 per square metre. Nowhere, save Monaco, even comes close. Hong Kong is next at $22,814 per square metre and then New York at $18,500 per square metre. Tokyo, where in the late 1980s boom the Emperor’s palace was calculated to be worth more than the entire state of California, has slipped way down the list of most expensive world cities, at tenth place, behind Moscow and Mumbai.

    As for the playground property markets — the villas and apartments on golf resorts and palm-fringed beaches — they have generally taken a bigger hammering since the crisis than have city markets. In the Bahamas prices slid by 40 per cent in the three years to 2010 and have since to recover. When money is tight, people tend to buy property where money is made rather than where it is spent.

    Evidence of property booms in foreign markets is not necessarily an indication of opportunities for foreign buyers to make profits. One of the reasons for the sharply differing performances of property markets is that taxes and property law vary so sharply from country to country. Some countries place high taxes or severe restrictions on foreign buyers. Australia, for example, bans foreign investors from buying established housing. South Africa is mulling a ban on foreigners buying freehold land; in future they may be restricted to buying leases of up to 30 years.

    If you are buying to let, tenant law is a bewildering web of complexity. In New York, you might want to be careful of the age of the property you are buying: rent controls apply to buildings that went up before 1947. In some countries taxes will almost certainly wipe out any profits you make within the first few years. In Russia, for example, the costs associated with buying and then selling a property amount to a whacking 22.75 per cent of its capital value. Italy is not far behind on 22.6 per cent. The comparable figure for London is 8 per cent.

    If you still fancy a foreign property, here are a few tips. Avoid Hong Kong, and the Far East in general: those markets never really suffered a crash in 2008/09 and are now teetering. Don’t bother with Canada. The Bank of Canada, Mark Carney’s previous parish, recently put out a warning of the risks of falling property prices: the market there, too, did not have much of a correction in 2008/09. You could look instead to Warsaw, where yields are 7.3 per cent and the government recently announced measures to stimulate the property market. Elsewhere in Europe the Netherlands is not a bad bet: prices have started to inflate again after several years of stagnation, rising by 2.6 per cent over the past 12 months in Amsterdam.

    Outside Europe, the Cayman Islands is attracting tax exiles again, with prices rising by 13.5 per cent over the past 12 months. The US, the collapse of whose property market sparked the sub-prime crisis in 2007, is in the early stages of a foreign-led investment boom — the number of foreign investors has risen by 35 per cent in a year. Prices were up 10.5 per cent in Miami and 10.1 per cent in Las Vegas. New York is a modest 3.1 per cent up in the past year.

    And for the more adventurous there is always Ghana. The capital Accra has one of the most lively property markets in Africa as foreign investment pours in. You don’t have explore the dusty backroads: the airport has a residential area favoured by many foreign residents. Prices of the spacious villas there have recently surged to an average of £160,000. It is a fortune for Ghana citizens but it will buy you one of the finest residences in the whole country — for the price of studio flat in Croydon.