Channel 4 phenomenon or good old greed?
Property programmes have been popular with British TV viewers for a good number of years. With this in mind, TV stations never fail to come up with yet another property series. The more spectacular the better. Giving the audience what it wants... no harm in that. Or is there?
See, I have nothing against TV (of any sort). I do, however, have a problem with media creating unrealistic expectations, or building up a false picture of the reality - in particular when it comes to the viewer's money or investments. Tens of thousands have seen Channel 4's recent programme "A Place in the Sun - 20 Best Places to Make Money". I honestly hope none of them have taken it too seriously. It's entertainment, and should be viewed as such.
Anyone who might have concluded that buying property in the new EU (or anywhere else) is a sure way to massive returns should think again. There are many points the Channel 4 show's missed (more about that later), but my main objection is this:
Do you really believe an average property in Hungary, Slovakia, Poland, Romania etc will cost GBP 400-500,000 in 10 years?! Even in the 'old EU' very few places - with the exception of, perhaps, London - reach such property values. Local wages in Budapest, Bratislava, Warsaw, Bucharest and anywhere else in the CEE region will likely take 50-80 years to reach today's wages in central London, even with their current fast economic growth. Is it therefore reasonable to expect an apartment in these cities to reach central London prices in 10 years?
Then of course there is the gross generalization. No property market is homogeneous... there are always regions and cities performing better than others, within any country. You can hardly expect the same appreciation on a rural home in a remote area as on a prime city centre property. The same, by the way, is true about current property prices. While you can buy a remote country home in Romania for GBP 5,000, you will struggle to find a good period apartment in the centre of Bucharest for less than 80,000.
And, although few would doubt that the 'new EU' has years of property growth still ahead, investors need to be careful to analyze associated risk factors - particularly in the less developed markets and economies. Legal issues, title problems, lack of a domestic resale market, financing, and other issues associated with the immaturity of certain markets.... if Channel 4 had assessed any of these, the ranks may well have looked very differently.
Now, as you may know, Slovakia has ranked very well.... at number 7 to be precise. So, what am I complaining about, after all?
Although I fully believe in Slovakia's excellent investment potential, and as such am pleased with the increasing awareness of the British public (and yes, in part thanks to media coverage over the last two years) , unrealistic expectations do - over the long term - more harm than good.
Sadly, we at Slovakia Investment Property have, over the last few months, seen a strong rise in a particular type of enquiry - investors with a mind set on huge returns, clearly believing buying in Central Eastern Europe is a licence to print money.
Now, don't get me wrong. We wouldn't be selling Slovak property if we didn't believe in its outstanding potential. However, I also think doubling your money in, say, 10 years (without taking gearing into account) means you've made a good investment. (And no, we can't guarantee you will, in fact, make a 100% return; nobody can predict growth rates for a decade ahead!)
I do have an issue, however, with speculators expecting to see their property rise in value three- or four-fold in 10 (or less!) years. The justification is always the same - they've read, heard, or been 'offered' such returns elsewhere. No surprise here... there will always be unscrupulous estate agents ready to promise the world. But are they the only ones to blame? Or are they simply creating (an illusion of) what greedy investors want to see?
By late 2003 Slovakia Investment Property was the only company selling Slovak real estate to the UK market. Two years later, in time with the country's increased popularity with UK and Irish investors, several companies - all claiming to have long experience and be an authority on Slovakia - have started offering (mostly off-plan) property to trusting British buyers, often with the promise of massive and fast returns.
Unfortunately, some agents will always have an interest in creating a false picture of the market, be it with regard to rental returns or likely capital growth. At Slovakia Investment Property we will not jeopardize our reputation and trade it for short term commission profits. And, personally, I much prefer serving buyers and investors looking for viable long term financial returns than those hoping to make a killing in a year or two (and hands-off, of course).
So, by all means, invest and profit from new Europe's property markets, but don't forget to do your own due dilligence and research first. Don't go out and spend your hard earned money on the basis of a TV show's advice or, worse still, false promises of greedy agents selling anything they can get a commission for.
And, above all, be realistic with your expectations. They may well be exceeded, but will certainly be a lot closer to reality than any hype created by the media or unscrupulous agents. After all, no matter which country, property prices will, in the long term, only rise based on wage growth and affordability of domestic buyers. So, the next time somebody promises you 300% returns, ask them to guarantee it per contract! :)
See, I have nothing against TV (of any sort). I do, however, have a problem with media creating unrealistic expectations, or building up a false picture of the reality - in particular when it comes to the viewer's money or investments. Tens of thousands have seen Channel 4's recent programme "A Place in the Sun - 20 Best Places to Make Money". I honestly hope none of them have taken it too seriously. It's entertainment, and should be viewed as such.
Anyone who might have concluded that buying property in the new EU (or anywhere else) is a sure way to massive returns should think again. There are many points the Channel 4 show's missed (more about that later), but my main objection is this:
Do you really believe an average property in Hungary, Slovakia, Poland, Romania etc will cost GBP 400-500,000 in 10 years?! Even in the 'old EU' very few places - with the exception of, perhaps, London - reach such property values. Local wages in Budapest, Bratislava, Warsaw, Bucharest and anywhere else in the CEE region will likely take 50-80 years to reach today's wages in central London, even with their current fast economic growth. Is it therefore reasonable to expect an apartment in these cities to reach central London prices in 10 years?
Then of course there is the gross generalization. No property market is homogeneous... there are always regions and cities performing better than others, within any country. You can hardly expect the same appreciation on a rural home in a remote area as on a prime city centre property. The same, by the way, is true about current property prices. While you can buy a remote country home in Romania for GBP 5,000, you will struggle to find a good period apartment in the centre of Bucharest for less than 80,000.
And, although few would doubt that the 'new EU' has years of property growth still ahead, investors need to be careful to analyze associated risk factors - particularly in the less developed markets and economies. Legal issues, title problems, lack of a domestic resale market, financing, and other issues associated with the immaturity of certain markets.... if Channel 4 had assessed any of these, the ranks may well have looked very differently.
Now, as you may know, Slovakia has ranked very well.... at number 7 to be precise. So, what am I complaining about, after all?
Although I fully believe in Slovakia's excellent investment potential, and as such am pleased with the increasing awareness of the British public (and yes, in part thanks to media coverage over the last two years) , unrealistic expectations do - over the long term - more harm than good.
Sadly, we at Slovakia Investment Property have, over the last few months, seen a strong rise in a particular type of enquiry - investors with a mind set on huge returns, clearly believing buying in Central Eastern Europe is a licence to print money.
Now, don't get me wrong. We wouldn't be selling Slovak property if we didn't believe in its outstanding potential. However, I also think doubling your money in, say, 10 years (without taking gearing into account) means you've made a good investment. (And no, we can't guarantee you will, in fact, make a 100% return; nobody can predict growth rates for a decade ahead!)
I do have an issue, however, with speculators expecting to see their property rise in value three- or four-fold in 10 (or less!) years. The justification is always the same - they've read, heard, or been 'offered' such returns elsewhere. No surprise here... there will always be unscrupulous estate agents ready to promise the world. But are they the only ones to blame? Or are they simply creating (an illusion of) what greedy investors want to see?
By late 2003 Slovakia Investment Property was the only company selling Slovak real estate to the UK market. Two years later, in time with the country's increased popularity with UK and Irish investors, several companies - all claiming to have long experience and be an authority on Slovakia - have started offering (mostly off-plan) property to trusting British buyers, often with the promise of massive and fast returns.
Unfortunately, some agents will always have an interest in creating a false picture of the market, be it with regard to rental returns or likely capital growth. At Slovakia Investment Property we will not jeopardize our reputation and trade it for short term commission profits. And, personally, I much prefer serving buyers and investors looking for viable long term financial returns than those hoping to make a killing in a year or two (and hands-off, of course).
So, by all means, invest and profit from new Europe's property markets, but don't forget to do your own due dilligence and research first. Don't go out and spend your hard earned money on the basis of a TV show's advice or, worse still, false promises of greedy agents selling anything they can get a commission for.
And, above all, be realistic with your expectations. They may well be exceeded, but will certainly be a lot closer to reality than any hype created by the media or unscrupulous agents. After all, no matter which country, property prices will, in the long term, only rise based on wage growth and affordability of domestic buyers. So, the next time somebody promises you 300% returns, ask them to guarantee it per contract! :)
posted by sip at 12:19 AM
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