in Portugal is increasingly popular and here are some factors to take into consideration when moving into the overseas property market.
The growth in equity of overseas property 10% or more is to be considered a reasonable return on your investment. It is important to know the yearly or forecasted yearly growth in the regions investment property market. There are many external and internal factors that contribute to the growth of equity, however good equity growth does not happen everywhere at the same time, for example the Algarve region of Portugal enjoyed far higher growth than the rest of Portugal for a number of years- however now the rest of Portugal has caught up and has probably surpassed the growth in the Algarve region. So it is important to properly research your area before going ahead.
Price & current currency exchange rates Are you buying the property at its current value or is it possible to buy below its current value? Very often buying off plan means the buyer can obtain an initial discount on the expected market value at the time of completion. Exchange rates can play a large part in buying overseas property but must be offset against the increase or decrease of the property market involved; there is no point in waiting for more favorable exchange rates if the property has gone up more than the saving you have made. To take a case in point the UK pound is at the moment at an all time low against the Euro, however in Portugal the value of property is climbing all the time, therefore given that there is no guarantee of any significant recovery you must weigh up where there is most likely to be losses.
Finance and Mortgaging. Until recently borrowing the majority of the costs involved in buying a property was easy and is still prudent if available. It can give you tax breaks on income generated from the property and of course leaves your cash for other investment.
Portugal’s rental market
when reviewing rentals you should review the area’s tourism figures as well as commercial and industrial factors which may provide jobs in the area. How buoyant is the local rental market and upon what is the market based ? is it on holiday lets, long term tenants or do nearby universities provide a rental income ? Is there indeed a market or is it over crowded. You should insure that your rental income covers your mortgage and any admin and management costs, also taking into account general wear and tear.
What else should drive your decision ? infrastructure such as international airports, new major road building projects, high speed rail links, tour operators starting up, historical landmarks- especially if they are in vogue, and new retail parks springing up are all signs that the area is (at least in the minds of Government and big business) on the up. Portugal and especially Central Portugal is most certainly in that category now and in the next few years all of the above transport infrastructures will take place, you can expect more interest in the overseas property investors as the rush begins. In fact the rush has begun as serious investors move out of poorly performing regions and into developing markets.
Be aware Other countries that look like they have great investment property opportunities may have a few catches that are easily missed, especially when it comes to looking for the right time for selling; also some of the tax laws can take all of the profit you have built into your investment property- so be aware.