Overseas Property: How To Find A Hotspot

Until about 18 months ago, you would be hard-pressed to fail to make money from investing in overseas property. Everywhere was emerging and on the up.
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But, in these credit-crunch times, it is a different story. The US and Spanish markets are floundering. Recent successes, such as Estonia and Latvia, are slipping. So where do you turn to now?

Follow the locals

"An interesting indicator of future growth areas are places where wealthy locals go on holiday," says Lance Nelson of Jet2Let Property. ]#

"Seek out undeveloped enclaves with a couple of high-end hotels, such as the Bulgarian resort of Byala or Sapareva Banya, which has the hottest natural springs in Europe. Water spas are popular among Eastern Europeans, Russians and Japanese tourists and offer year-round rental potential."

Dubai has also developed as a major business hub, so it is not entirely dependent on tourism, says Nelson. "Dubai is a case of following the locals if they are getting richer. After doubts about its sustainability with such rapid growth, there is now a clear reason to invest there."

Egypt's investment market is also sparking interest. Its population of 80 million is growing in wealth and there is a major tourism drive. El Gouna ont he Red Sea coast is a luxury golf, beach and marina resort where 50 per cent of buyers are Egyptian.

"A holiday home in El Gouna is a must-have for wealthy Cairo families wanting to escape the city, so that is your exit strategy," says Jeremy Sturgess of the Raven Group, which is selling properties next to a new marina from Ј75,000.

Follow the Russians

The Russians are snapping up everything in sight - not just billionaires buying in London, but a new "business class" - estimated at about 55?million people.

"They are looking for luxury investments and holiday homes outside Russia because luxury is so expensive at home," says Alex Evans of Overseas Property Professional magazine. "Russian demand is having a big impact on build quality in parts of Bulgaria."

Turkey and Egypt are also tempting the Russians, says Lance Nelson. "They are buying in prime locations in Croatia, Montenegro and Dubai. The flashiest Bulgarian beach resort or ski property will cost a fifth of similar luxury in Moscow."

Look for the exit

While foreign investors in many Eastern European countries are pushing up prices and rents beyond the domestic market's grasp -particularly Bulgaria - local wages in Budapest are high enough for Hungarians to afford property in the Ј150,000-Ј230,000 price range, comments Alistair Powell of Seven Continent Investment (7Ci).

"Look for properties that the locals want and can afford, to open up your selling options," he says.

Also look for strategic locations to multiple markets: Georgia, for example, says Powell. The former Soviet republic has major links with Russia and - because of its oil pipeline - the US. "With its return to economic and political stability, Georgia is set to boom over the next few years as a business and tourism destination," he adds.

Don't think cheap

The British philosophy when investing abroad is that the cheaper the property, the better value the investment, but often this is not the case.

"There is far wider rental demand for large, high-end apartments than for cheap one-beds, and the price difference between an average property and one with a sea view is minimal - perhaps 20 per cent more," says Nelson. "In mature markets, such as Spain, you will pay double for a seafront property compared with one a block behind."

Cheap properties abroad owned by people who need a loan will be worst hit by the credit crunch, says Russell Bragg of Premier Resorts.

"Spain, and possibly the Algarve and Turkey, will be badly affected in the current economic climate, but the 'boutique' end of the market will remain insulated from the effects of the credit crunch," says Bragg.

"There is still a hunger for top-quality resort property, particularly in France and Italy, which attract a more affluent clientele, Portugal's Silver Coast, and the emerging market of Greece."telegraph.co.uk