Opportunity in Crisis for Property Investors

Average real estate prices in Greece fell by 7.7 per cent during the first quarter of 2010 in comparison to the same period last year, new research has suggested...

Average real estate prices in Greece fell by 7.7 per cent during the first quarter of 2010 in comparison to the same period last year, new research has suggested.

Figures released by the Propindex and the Foundation for Economic and Industrial Research, have shown that the country's economic woes have contributed to a downturn in both the residential and commercial property market.

The news that house values in the destination have fallen may be of interest to potential investors, who regard the current low prices as an opportunity to pick up bargain real estate.

In particular, Buy to Let investors who are looking to capitalise on the country's popularity as a tourist destination during the summer months, may find that there is a good return on investment to be realised.

But, these low prices may not be around for long, as the Greek government is currently considering making changes to its real estate tax system, which is likely to contribute towards higher costs for both buyers and sellers.

However, the situation is not one which is unique to the Greek market - the economic downturn and subsequent recession is something which has greatly affected a number of property markets around the world.

And canny real estate investors are beginning to realise this, with many looking to gain significant long-term capital returns on properties in recovering destinations.


The global crisis has become an opportunity for buyers to purchase property at cheap prices around the world, in particular, overseas investment in countries hit hard has soared.

In the UK market, for example, the number of foreign buyers in London has risen by a phenomenal amount.

Overseas buyers now account for more than 50 percent of purchases, according to a report released by Knight Frank. While, when looking at prime property priced over 5 million GBP the percentage of foreign buyers shoots up to 68 per cent, compared to 39 per cent back in December 2008.

Currency values are certainly a key factor in this, with the drop in the pound making the UK capital more affordable for buyers using foreign currency.

"The weakness of the pound ensures that effective discounts available to foreign buyers are still very significant," said Knight Frank head of residential research Liam Bailey.

Elsewhere, Russians accounted for the most international purchases, with 13.9 per cent, followed by buyers from the United States at 11.2 and Italy at 8.8 per cent.

As knowledge of a number of other markets tells us, recovery in many destinations is likely to occur at some stage and the opportunities available to investors currently around the world may help to speed up this process.

Economic Growth Slowing

Indeed, overseas buyers are certainly looking to capitalise on what would appear to be a number of recovering markets, particularly in Europe.

But, not everyone is painting such a positive picture about the speed with which economies are expected to recover.

Aberdeen Asset Management has predicted that the global real estate recovery will falter in 2011, leading to a rise in yields, before resuming a stronger trajectory in 2012.

According to the fund manager's latest Global Property Market Outlook there will be a two-stage recovery in total returns for international real estate investors.

The report said: "We expect global economic growth to slow below trend in 2011. Along with deteriorating capital market sentiment over sovereign debt risks and concerns regarding continued de-leveraging of bank balance sheets, this will generate a second though modest leg down in property returns next year in Europe and North America."

Aberdeen claimed that 2012 would be the earliest time for a sustainable upturn for global total returns, as by then "occupier demand will have strengthened" and the rental sector will be bolstered.

Globally, the highest returns for investors after taking into account factors such as the volatility, transparency and economic risks are to be found in Asian countries.

"Prime capital values, on a long-term perspective, are low, while the growth outlook is by far the strongest globally," the report said.

"However, within the region, there is considerable dispersion of pricing, with, for example, Hong Kong a relatively expensive market because of substantial yield compression in 2009."

Meanwhile, real estate investors looking to Europe will see the strongest returns in the UK, the Nordic economies and France.

"Although continental Europe offers some of the weakest returns on a global basis, it is substantially less volatile," the report added.

Thomas Beyerle, head of global property research at the company, said: "There are some recent indications investors are now considering value-added and better-quality secondary opportunities as an alternative to prime, especially in the UK, Hong Kong and France."ADNFCR-3415-ID-19899111-ADNFCR

- Thursday 22 July 2010

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