South France Property – The Safe Home For Your Money?

Money Market and Property Market Parallels

As the world markets adjust to the new reality it’s interesting to watch the property markets changing in relationship with the money markets. What often happens, “initially”, is there is a direct parallel relationship between the stock market and the property market albeit the property market moves much slower to change.

The Safer Alternative

Why I say initially is that normally what happens next in the market cycle is that the property markets improve because it is often thought that bricks and mortar or gold are safer in troubled times. There is definitely some truth in this belied if you buy property in the right place.

The old adage about Location, Location, Location being the three rules is never truer than when the markets shift.

The fact is that, whilst stock market volatility and uncertainty makes for nervous investors, it can be a whole lot more fun to enjoy a property investment for the short, medium or even longer term whilst markets find their level again.

So where could the right Location be?

The USA has massive trade deficit problems that will take years to fix and consequently the “local” market does not hold for a short term rosy future so what about Europe?

Spain has it’s problems and not just the property market and credit crunch issues. For some time now Spain has allowed the loophole to exist that permits developers to grab land and then charge the owners of that land for infrastructure costs for their new developments.

Nobody in the Spanish hierarchy seems to want to close the loophole that allows this so there is probably a lot of money changing hands over this. Obviously though while this is allowed Spain is certainly not the safe home for any foreign buyer.

Interestingly the French market, much loved by the Brits for many years, turned up an interesting statistic recently that showed that while prices had fallen between 2 and 12 per cent in many places there was one place that had remained firm.

Where is that safe place?

Yes it’s the South of France.

There are many factors that protect the South of France which includes Provence, the Languedoc and more specifically the Cote d’Azur. The fact that prices have remained firm (and even increased in some cases!) is not difficult to understand when you consider that on many peoples tick list this area is always at the top.

Add to this the pressure on the market from different parts of the world for different reasons:

  1. Brits have a never ending love affair with the South of France and many would prefer to sit out the recession their than in cold gloomy England.
  2. The Dutch have it as number one on their list also
  3. The Belgians… Ditto.
  4. Germans, Swiss and Italians? The same…
  5. Now add in the Arabian Countries who have always had a soft spot for the area and now where, despite the credit problems elsewhere, they are experiencing a doubling and even trebling of profits due to the price of oil. They are swimming in cash at the moment and looking for somewhere interesting to spend it!
  6. Norwegians and other Scandinavians? Ditto!
  7. Russians? Enough said!
  8. Americans? Many believe that they should get their money out of the country before things get much worse due to the growing trade deficit crisis and since Cary Grant made it fashionable the South of France has a charm beyond belief that many Americans love.

What’s interesting is that historically the last correction in property prices for the area was as low as 10% while other areas and parts of the world lost up to 35%.

This time round though despite the “crisis” elsewhere demand for the quality properties in the South of France is currently higher than it was the same time last year.

So as you can appreciate, while other markets falter a little and correct themselves there is another old phenomenon in play in the South of France… That of the law of supply and demand…

With all that pressure at the moment of potential buyers jostling for the nicest properties it’s no wonder that prices are holding up especially when people realize that they can use the world market issues to get the occasional bargain deal in the South of France by talking the price down by 10 to 20 per cent.

Real estate agents, such as Riviera Home Finders International (RHF International) specializing in luxury property sales to International buyers report that they currently are experiencing an upsurge rather than a downturn in activity.

It seems the low end is buoyant and the high end is very strong with no sign of relaxing so it’s no wonder that the French government statistics department INSEE are finding no sign of prices really falling in the South of France.

Not to be forgotten either is the proximity to Monaco which also is considered an interesting home for your money of course…

So there you have it and just think your Safe Home could actually be a very nice French Home in the sun!

Remember that during the correction elsewhere the most expensive property every sold just happened to be in the heart of the South of France, it should tell you something…

There are gems available still if you know how to find them and bargains are being made every day.

David Beckham, The Pride Of Brazil

One of the most famous soccer stars on the planet David Beckham has announced plans of a football academy in Natal Brazil. He describes the new facility as one of the best in the world. During his visit he explains that Natal is a place of tremendous excitement owing to new hotels and property in the area. The husband of posh spice also feels that Natal Brazil is an area that will attract celebrities and other football stars.

David Beckham has announced a scholarship program available to local Brazilian children in order to actively reach-out to schools within the region. He hopes that the children will benefit from on-site coaching and access to the top class facilities, much in the same way as his Academies in London and Los Angeles.

Rubens Barrichello, Brazilian F1 champion, is also involved in the development, as well as Norwegian multi-millionaire businessman Torben Frantzen, brother of Findus founder Geir Frantzen.

Natal, the capital of the Brazilian state Rio Grande do Norte, is about 2600 km north of Sao Paulo along the northeast coast of the country. This city of 710,000 residents is an increasingly popular target for international investors and real estate developers. The spectacular location along the ocean and miles of undeveloped beaches north and south of the city make it ideal for those who are looking to get into an area that is up and coming.

Natal and the areas surrounding it are currently the target for over a billion dollars (US) in development. There are at least 10 golf courses planned or under construction and dozens of new housing, apartment and resort developments are also under construction. The city and surrounding communities are a major tourist destination for domestic travellers in Brazil. The area is being marketed as an international tourist destination as well, and the city is becoming increasingly popular among foreigners.

The economy of Rio Grande do Norte was centered on agriculture and cattle up until the early 1980s, when the government began to invest heavily in the natural beauty and climate of the coast and the potential for tourism. Tourism is becoming the major economic driver with the miles of undeveloped coastline drawing visitors, investors, retirees and workers. On the northwest coast, centered around the city of Macau, there is also a fair amount of petrochemical development, leading to a diversified economy.

The climate along the coast is one of the main attractions for visitors and investors. The yearly average temperature in Natal is about 27 degrees and sun seems to shine almost every day. Much of the state is fairly dry, although the southern area from Natal down to the border does have a rainy season, from April to June. It rains for a few hours, but the sun still comes out almost every day.

The greatest development and real estate opportunities for investors, both domestic and international ones, are around the city of Natal. The coastline to the north and south of the city is where all the major developments are under construction. With its tropical setting and pristine weather, this is the place to buy property in Brazil

David Beckhams seal of approval for Natal will make him the pride of Brazil.

Top 10 Overseas Property Investments in 2010

1. Brazil

The Brazilian property market has got a lot going for it. The country is attracting a lot of inward investment, has one of the world’s fastest growing economies, a rapidly emerging mortgage market, a general shortage of quality homes, and has been selected to host the 2014 football World Cup and 2016 Olympic Games. This will lead to the construction of new and improved infrastructures and homes across Brazil.

Property investors from around the world are flocking to Brazilian shores with a view to snapping up real estate, in anticipation of future capital growth.

One local expect projects Brazilian property prices could appreciate by up to 200% over the next decade, driven by the country’s burgeoning economy, and the pending introduction of mortgages to overseas nationals.

Investment banking firm Goldman Sachs believes that Brazil’s economic growth could outstrip that of the other BRIC (Brazil, Russia, India and China) member nations over the next few years.

Brazil’s economy is widely expected to become the fifth largest in the world by the time the Olympic Games kicks off in 2016, and yet Brazil property and land prices still remain a fraction of those found in more developed nations.

The Brazilian president Luiz Inacio Lula da Silva has already pledged to spend up to £11.5bn on building a million new homes in Brazil between now and 2011.

However, potential high property investment rewards are not with out their risks, as crime and corruption still remains widespread in Brazil.

2. France

In stark contrast to the relatively high risk, high return nature of investing in Brazil, the risks associated with investing in French property are far lower.

France has traditionally always been a rather safe haven for property investors. The nation was the first European country to come out of recession in 2009, reflecting the fact that the global credit crunch had much less of an impact, compared to other European counterparts.

France’s strong economy is having a positive impact on its property market, which now appears to be on the road to recovery.

Increasing property and mortgage transactions are boosting residential values, with the latest FNAIM data revealing that the average price of a French property appreciated by 2.8% between April and September 2009.

Although average prices remain down 7.8% year-on-year, the market is generally expected to improve further, due to France’s prudent attitude to mortgage lending.

Anyone taking out a mortgage in France is generally only permitted to borrow one third of their total gross monthly income. This has ensured that mortgages remain readily available, with 100% loan-to-value home loans available at competitive borrowing rates.

Consequently, mortgage lending in France is soaring. French mortgage broker Athena Mortgages reports that there was a 21% rise in mortgage enquiries in Q3 2009 compared with the previous quarter.

The buy-to-let and leaseback sectors are reportedly attracting particular interest from investors, due to improved yields across the country.

The capital city of Paris has long been identified as one of the most attractive European cities for investment, and is typically the most popular place to buy a home in France, along with Cannes, Marseille and Nice, which are all located along the southern Mediterranean coast.

3. USA

The USA property market may be showing tentative signs of improvement, following one of the worst economic and property crashes in living memory, but the downturn has come at a cost to many US homeowners.

Data from RealtyTrac shows that a record high of 938,000 US homes foreclosed in the third quarter of 2009. If this trend continues, foreclosures would reach around 3.5m by the end of 2009, up from around 2.3m properties last year.

Properties in Nevada had the highest foreclosures rates in Q3, followed by homes in Arizona, California, Florida, Idaho, Utah, Georgia, Michigan, Colorado and Illinois.
Rising unemployment levels – currently at a 26-year high of 9.8% – was cited as the main reason for the increase in foreclosure levels. Yet, there may be worst to come, as the unemployment rate is not expected to peak until mid-2010.

Unfortunately, one person’s misfortune is another’s gain. With around 7m properties currently in the foreclosure process, compared with 1.3m for the same period in 2005, predatory investors are buying up distressed, abandoned and repossessed homes at bargain-basement prices, as now appears to be the ideal time to fill your boots.

Although the sub-prime mortgage crisis started in the USA, there are growing signs that the property market may now be at or near the bottom of the cyclical downturn. Various indices reveal that average residential prices started to rise, albeit marginally, during the second quarter of 2009.

4. Norway

Sales in Norway have nosedived over the past year or so, as residential values have cooled.

However, the Norwegian property market downturn, which has not been anywhere near as severe as in other neighbouring countries, appears to have already bottomed out, and looks ready to lead the Scandinavian property market recovery.

The key to the Norwegian property market is the strength of the country’s economy, which has made it one of the wealthiest in the world, while new housing output has dropped below average, which could fall short of demand next year.

Norway is rich in both gas and oil and this helps to support the country’s economy and ensure that its currency also stays strong – both alluring to property investors.

The country’s population is estimated to increase by 23% – approximately one million people – over the next 40 years, which should make sure that long-term residential demand is robust.

Another positive is the fact that unemployment is extremely low – approximately 3% – compared to its European counterparts.

Almost half of the Norwegian population resides in the counties of Oslo, Rogaland, Akershus and Hordaland, and so this is where property investors should focus their attentions. Property prices in these places remain relatively cheap compared to wages in Norway.

5. Switzerland

Many of the high earners currently living in Britain look set to quit the UK in droves ahead of the introduction of a 50% top tax rate in April 2010, and escape to more tax-friendly shores, such as Switzerland.

The Swiss authorities are actively lobbying to attract many of these disillusioned high-net worth individuals, who are being tempted by assurances that they will be allowed to steer clear of European Union regulation and Britain’s Financial Services Authority.

It is estimated that hedge funds managing in the region of £10 billion in assets have already moved to Switzerland in the past year alone. This has increased demand for homes to rent and buy.

Due to canton restrictions, it has previously been difficult for foreigners to buy property in Switzerland. However, the country has now eased its strict property buying regulations, and opened its doors to more international buyers, partly through the introduction of ‘residence de tourisme’ style investments, which is similar to the ever-popular ‘leaseback’ formula in France.

Switzerland, one of the richest nations in the world, is of course a tax haven.
Anyone who sets up permanent residency in Switzerland would be entitled to take advantage of the country’s favourable tax law, including the lump sum taxation, which charges a levy based on people’s lifestyle and spending habits.

Given that one’s taxable income is charged at just five times their annual rent or rental value of their property, and the fact that assets outside Switzerland remain tax-free, should ensure demand for Swiss properties – to rent and buy – remains strong for years to come.

Historically, Swiss property values have typically appreciated in line with inflation. Properties located at the top end of the market, in cantons like Valais and Vaud, have reportedly increased by up to 20% in the past year.

6. Australia

The Australian economic and property market recovery has been swifter than the other leading nations around the world.

It has been claimed that the revival in the country’s property market and economy is as much as 12 months ahead of the other developed countries in the economic cycle.

Unemployment peaked in September 2009, in stark contrast to Britain and the USA, while increasing commodity demand from China has forced the Australian Central Bank to raise benchmark interest rates. Yet this has failed to cool strong residential demand, which coupled with a general housing shortage, is forcing property values higher.

The latest Australian Bureau of Statistics house price index shows that the average price of a residential property in Australia appreciated by 4.2% in the third quarter of 2009, which means that in the year to September, residential prices increased 6.2%.

Australia could be set for a residential property price boom over the next few years, as the country’s economy continues to show genuine signs of recovery.

A recent Australia property report projected that average residential prices in nearly all capital cities would increase by between 11% and 19% by 2012, with the greatest property price rises expected to be recorded in Sydney, Adelaide and Melbourne.

7. Malaysia

I tipped Malaysia to be the number one place to invest in property in 2009, due to the country’s robust property ownership laws, lack of capital gains tax and attractive mortgage rates.

However, residential sales were sluggish during the early half of the year, as the market struggled as a direct consequence of the global credit crunch, while there are some political uncertainties emerging.

But with consumer sentiment improving, the recent positive market recovery, supported by the construction of new residential schemes across the country, should continue in 2010.

While property prices race ahead across much of Asia – in countries like China, Vietnam and Singapore – which has led to heightened fears of budding property bubbles, the Malaysian property market has merely stabilised, making it suited to more balanced investors.

With an extremely young and well-educated population, long-term demand for property in Malaysia looks set to grow.

Domestically, an increasing number of people are moving from the countryside into the larger cities, while internationally Malaysia looks set to cross a demographic landmark of huge social and economic importance.

Malaysia’s population is growing by around 2%, or an extra 500,000 people, every year. The World Bank projects the country’s population will grow annually by 1% until 2050, which will place further pent-up demand on property values.

Malaysia’s property prices are still lower than they were in 1997, due partly to the Asian financial crisis in the late 1990’s, suggesting very real room for growth.

8. Abu Dhabi

The recent property price falls in the fast growing UAE capital of Abu Dhabi, the richest and largest of all the seven UAE states, have been nowhere near as severe as in neighbouring Dubai.

The tax-efficient emirate has the largest fossil fuel reserve in the UAE, is the fourth biggest natural gas producer in the world, has the world’s highest income per capita, is home to almost all of the Arabic Fortune 500 companies, and is currently sitting on over 88 billion barrels of proven oil reserves.

Yet Abu Dhabi is now actively trying to reduce its reliance on oil, and is diversify its economy into the financial services and tourism sectors. Billions of pounds have been allocated for infrastructure projects and the development of residential, leisure and cultural schemes across the oil-rich emirate. The plans are truly remarkable.

Nevertheless, investors seeking out bargain deals will find some of the best opportunities for distressed property investments in the Gulf region in Abu Dhabi.

The recent slowdown in the property market means that just 45,000 are anticipated to be completed in the capital in the next four years, augmenting the exiting housing shortage.

The supply of housing stock remains scant, partly because Abu Dhabi is not part of a community master-plan like those pioneered by Emaar and Nakheel in Dubai.

The housing shortfall in the capital is expected to stand at around 15,000 homes next year, which could mean that property prices and rents are forced up, while residential demand – domestic and international – is expected to increase.

Because Abu Dhabi does not have the same high level of exposure to the global financial crisis, compared with other UAE emirates, mortgages for non-residents – at up to 75% loan-to-value – are readily available again. This is likely to appeal to buy-to-let investors, as well as those people seeking equity release and to remortgage their properties in Abu Dhabi.

9. Oman

The relaxed Arabian state of Oman, voted ‘destination of the year 2008’ by Vogue magazine, has long been a popular holidaying destination for people living within the GCC.

With a population of around 2.3m, Oman is being modernised and liberalised culturally and economically by hereditary Sultan, Qaboos Bin Said Al-Said, a forward-thinking leader.

Sultan Qaboos strategy for economic growth – Vision 2020 – aims to diversify Oman’s economic dependency on oil, and focus on other industries, such as property and tourism.

Demand for property in Oman is primarily being driven by the Sultan’s decision to introduce legislation in 2004 – ratified in 2006 – permitting foreigners to buy freehold property and land in designated tourist areas, most notably Muscat. These projects are referred to as Integrated Tourism Complexes (ITC). Furthermore, foreign homeowners can now apply for residency visas.

A number of luxurious developments are being erected across Oman including, The Chedi, Azaiba, Wadi Kabi, The Wave, Barr Al Jissah Residences, Jebel Sifah, Salalah Beach, The Malkai, Muscat Hills, Al Madina A’Zarqa, Jebel Sifah, and Salalah Beach.

The fact that Oman appeals to end-users – not just investors – means that the medium to long-term prospect for Omani property market growth looks good.

10. South Africa

South African property market conditions look ripe for investment, as the country starts to come out of recession. Recent property price falls appear to be bottoming out, while FIFA’s 2010 football World Cup fast approaches.

From the moment world football’s governing body, FIFA, awarded South Africa the rights to host the World Cup in 2010, shrewd property investors from around the globe have been looking on with great interest, with one eye firmly on cashing in on the sport’s popularity.

The first ever FIFA World Cup to be hosted on African soil has the potential to be the biggest sporting event of all time.

The tournament is expected to attract around 350,000 football fans for a month of football mayhem, starting on 11 June 2010, which is tipped to contribute around £1.5bn to South Africa’s gross domestic product and generate another £500m in government taxes.

South Africa property prices haven softened over the past year or so, due to a fall in residential demand, caused by reduced housing affordability, higher inflation and interest rates.

But residential prices could soon experience growth, on the back of what should be a reinvigorated economy, spurred by the football tournament.

While the odds may be stacked up against the South African football winning the World Cup in 2010, it is not too far fetched to assume that the country’s housing market could prove to be the real winner of the tournament, generating significant returns for property investors in the process.