Lessons Learned from Overseas Property Investment
When the banking crisis hit the overseas property market it revealed some fundamental flaws that were created by speculation and greed. Now that the dust has settled and recovery is underway, investors can learn from the errors of others and make sure that they don’t repeat the same mistakes.
The biggest mistake was that investors lost their common sense. An overseas property destination has to be a place that people will want to come on holiday, not just once for the novelty, but again and again. And if your investment is to grow, then it will also want to be a popular place with wide appeal.
The weather is the most important single factor that makes or breaks a holiday destination. This was an important reason why Dubai’s market crashed to the extent that it did. Though the egg frying pavements of Dubai may have guaranteed sun, the novelty of chilled towels after a swim in the pool soon wears off.
But even a destination with reliable weather needs more. For example it needs infrastructure, and this is why many of the investors in emerging beach destinations such as Cabo Verde were left with unsellable homes on their hands. Significant commercial investment and the upgrading and improvement of accommodation and infrastructure are crucial in attracting the tourists that become property investors.
Location and proximity is also important. Sufficient flights to buying destinations throughout the year are a necessity and the recession had the effect of almost cutting off the ability of second homeowners to visit their properties, let alone rent them out. A flurry of charter flights in the summer with the occasional premium scheduled flight for the rest of the year will not do.
Established destinations clearly weathered the recession better than the newer holiday getaways where tourism proved more fickle. But investors also learned that over-exploited areas became less desirable, and in extreme cases on the Costas, investors were left with properties that have proved almost unsellable.
An essential ingredient of the most successful areas for overseas property investors is the environment both manmade and natural. A beautiful destination will attract more visitors, and one with many recreational opportunities will keep them coming back. A destination that has both is truly blessed!
And then there is the future to consider. A destination that is proving popular with the emerging affluent markets is one whose future is assured from a real estate perspective. A balance of regular tourism from established markets and increasing popularity of new markets is the ideal. There’s lots of room for growth, and that means increased and sustained demand for property.
So how many destinations can tick all the common sense boxes that make a good overseas property investment? You probably wouldn’t even need all your fingers to count them. But for an investor from the UK, who will want to visit their property regularly, Tenerife is the most accessible. Though a small island, its perfect year round weather and the huge variety that the destination has to offer makes it probably the most sensible place to make an overseas property investment.
