Development Locations
Selection Criteria
The plethora of overseas property “investment” opportunities is a relatively recent phenomenon and would suggest that an increasing number of countries and emerging markets can offer stellar returns on capital growth, “low” acquisition costs and spectacular income returns.
Years of research and continuous assessment and analysis undertaken by the I.P.S. advisors paints a very different picture and many of the critical factors affecting all property markets are at best ignored, grossly exaggerated and based on assumptions plucked from the ether (or simply a wish list created by the marketeers).
Overseas investment opportunities require even greater scrutiny if they are to meet the specific criteria; achieving realistic medium to long term capital values and generating consistent levels of income.
Residential property letting is a well established market, particularly in Europe and represents an opportunity for the property investor providing there is clear headline return beyond the acquisition costs, initial capital required, level of interest on loan capital and sufficient income to support the loan obligations, maintenance and running costs.
However, rising acquisition costs fuelled by historically low interest rates, an increasing number of lending institutions with “relaxed” lending criteria and relatively small or static increases in rental income returns has driven yields to an all time low.
The current UK market is clear evidence of this trend and is equally reflected in commercial property as increasing numbers of investors and investment funds chase diminishing stock opportunities.
Yields on short term holiday and lifestyle lettings have created an alternative opportunity as the global demand for international travel partnered with the lowest (in real terms) cost of air travel fuels the demand for high quality destinations offering bespoke flexible options on accommodation and visitor experience.
Statistical evidence suggests that global travel demand will accelerate as developing countries economies and incomes begin to match the developed world at a much faster rate than experienced historically.
There is a similar correlation with property values rising in direct proportion to the internal economic development of a country as an increasing proportion of the indigenous population are demanding improved living accommodation or wish to “trade up” repeating the pattern of existing developed countries and markets.
Political stability, visionary Governments and Regional authorities, controlled inflation and money supply and a well planned long term view of infrastructure, services and communication network requirements, are key drivers for the long term prospects of rising capital values and secondary market future resales.
The criteria analysis undertaken in property selection to match the S.I.P.P. fund requirements are summarised:-
- Locations attracting national and international travellers
- Year round climate appeal
- Rich diversity of culture and heritage
- Existing or clear evidence of growing economic infrastructure
- Existing and future economic and commercial agreements with key world market partners
- Development sensitive to long term cultural and ecological issues
- Potential to exploit fiscal opportunities
- Indigenous population welcoming and benefiting from economic growth
- Long term prospect for capital values