Monday, December 17, 2007

Hurghada Property & Egypt's Red Sea Real Estate - The Book!

It was just over three weeks ago that I was writing to tell you that the ebook version of the Complete Guide to Hurghada was available. The reaction to the Guide was overwhelmingly positive and there was a huge surge in the number of registered members that we received in order to download it.

Such was the reaction to the book that we were immediately contacted by a publisher who wanted to rush-release it in book form, providing that we made a few changes to it. It’s been a crazy three weeks, but we managed it and so did the publisher, with the result that Propertastic’s Complete Guide to Hurghada Property and Egypt’s Red Sea Riviera Real Estate is now available in printed book form, available for an RRP of £9.99 from and all other online UK bookstores including Waterstones, Tesco, WHSmith and

Readers outside the UK can also obtain the book from their local Amazon, as the book is also stocked by Amazon in the US, Canada, Germany, France and Japan (but not in China for some reason).

Even if you already downloaded the free ebook version of the Guide, it’s still worth considering getting a copy of the brand new printed version because, not only does it come in a handy, pocket-sized "words printed on dead-tree pulp format", but it also includes 6,000 words of brand new content, including chapters on:

Flying to Hurghada
Buying Process
Living in Hurghada

Fancy a copy? So why not head over to Amazon now and grab yourself one? Here are the links that you need to get it today:

Amazon UK

Amazon Japan

If you do have an account with Amazon and you’ve read the Guide – even if it was the ebook version - could I ask a favour of you? Please could you click on your local link above and write a nice review of it for me plus give it five stars? It would make me very happy if you could.

Thank you!

If you don’t have an account with Amazon or any of the other online stores mentioned above and still want to order it, then you can also order it directly from the publisher.

For full details of how to order it from the publisher receiving a £1 discount and free postage and packing into the bargain, click here.

# # #

If you’re a bit sick and tired of my bleating on about Egypt, then you will be pleased to know that so am I, and so I am planning on giving more attention to the other 15 countries that we cover on Propertastic! over the coming weeks.

Saturday, December 8, 2007

Can I interest you in some Egyptian Property, Sir?

In my last-but-one blog entry, I apologized for the fact that I haven't been as active either here or on the main Propertastic! site as I usually am because I have been very hard at work on two big projects.
One of these was Propertastic's Complete Guide to Hurghada Property and Red Sea Riviera Real Estate, and the other one I said I would tell you about a week later. That week became two weeks because I then got involved in yet another huge project that was even more urgent. Again I will tell you about that next week once it is released.
But anyway, let me tell you what I've been hard at work on.
As much as I enjoy nothing more than spending all my time sitting around in front of a PC researching international property and telling the whole world my thoughts, my bank manager, girlfriend, parents and everyone else who knows me aren't quite as impressed with my dedication and have suggested that it's time that I started to earn a proper living.
Several people have told me that I could put all of the research that I have made into the Egypt real estate market to good use by introducing potential buyers to developers who would then cross my palm with silver for every person I send to them.
Well, it sounded pretty good to me - better than getting a real job at least - and so this is what I have done. Ladies and gentlemen, may I introduce you to ...
Yes, my new baby is born - a new website that concentrates purely on Egyptian property, because that's what I know most about and that's what I believe in.
So, if all my (endless, recently) talk of buying property on the Red Sea Riviera has got you thinking that it might be the right investment for you, then maybe you would like to come and visit my lovely new site and perhaps think about making your inquiry via me rather than someone else. Whichever agent you deal with, you will end up at the developer in the end, so you might just as well deal with me as anyone else.
Don't expect the hard sell from me, because I'm pretty rubbish at selling. I'm good at talking and analyzing and so I can help you to get exactly the right property for you.
As well as offering property to UK buyers, my girlfriend will also be operating under the Egypt Real banner in Latvia. Ideally, I would like to set up a network of partners all over Europe to work with so that other nationalities will also be catered for. I know that Propertastic! gets visitors from all over the world and so it would be nice if they also have some local representative to deal with.
If you are reading this and you are based outside the UK and interested in offering the best of Egyptian property in your country, then I would very much like to hear from you to see if there's something that we can do together. Check out this page of the Egypt Real site if you are interested in finding out more information.
For the rest of you, take a look at my lovely new site now at:

Wednesday, November 28, 2007

Google Earth - An Essential Tool

I have to admit to having a strange addiction - and that is maps. I find them absolutely fascinating. For any female reading this, it's a guy thing. I have noticed that women in the main have no interest in, or in many instances, not even any comprehension of, maps. To all of the women I have known well, it's just a bunch of lines on a piece of paper.

Anyway, such is my love of maps that I have been bugging our tech people for the past two months to upgrade the maps on Propertastic! Up until yesterday, we were just using the boring old maps that we stole from the CIA World Factbook - the same as most overseas property sites.

But yesterday was like Christmas come early for me as they finally replaced all those boring old static maps with super new, state-of-the-art interactive Google Maps. I'm so happy - they're just so darned cool! Even our tech chief who was moaning about the amount of time the programmers needed to set them up had to admit that they do look incredibly smart. I'm really surprised that none of our competitors are using them (yet) as they really make researching a market a whole lot easier.

As cool as they are though, they still can't compare with a cartographic-crazed junkie like me is already hooked on the hard stuff, and that's Google Earth - a downloadable application that puts the whole world on your desktop (well as long as you have a good and fast internet connection anyway).

Anyone who is serious about international property really needs to get Google Earth on their PC as it is an essential tool for anyone researching potential purchases overseas.

The level of detail that you get with Google Earth is quite staggering and it is the perfect way to investigate an area when you are looking to see what the location is like. When asking for details on a property that you are thinking of buying, you should always ask your agent either for a Google Earth screenshot or the map reference so you can check it out yourself.

The standard overhead view can give you a lot of information, but what is even more revealing is if you have the Panoramio photo feature switched on. This gives real photos uploaded onto the site by Average Joes and shows the views from ground level, so you can really get an excellent feel for a place. OK, so tourists will tend to focus on the more photogenic aspects of a place rather than a trash-filled alleyway behind your dream property, but it's a start at least.

Of course, in some of the fast-growing property hotspots, you could very well find that Google Earth is quite out of date. The date of the satellite sweeps seems to vary a lot. I was very surprised as to how recent the images of Hurghada were when I was compiling Propertastic's Complete Guide to Hurghada Property and Egypt's Red Sea Real Estate. What I saw on Google Earth seemed identical to what I had just seen myself just a few weeks earlier.

Conversely, however, the Google Earth images of my native Stratford-upon-Avon look to be the best part of a decade old already. It's a shame that they don't have date stamps on each of the satellite segments, but you can't have everything in life, I suppose.

Anyway, to sum up, checking out a property's location on Google Earth should be one of the starting points for anyone who is seriously considering making a purchase. It certainly should not be a replacement for getting out there and seeing it with your own eyes - anyone who buys a property without seeing it is just asking for trouble - but seeing something on Google Earth could provide you with enough information alone to discount a potential purchase - potentially saving you a great deal of wasted time and money in heading off to far distant shores to see somewhere that is completely and utter unsuitable for your purposes.

Saturday, November 24, 2007

The Complete Guide to Hurghada Property Released

Apologies for the fact that it has been over a month now since my last posting. The past month has been very hectic for me working on two very large projects One of them I will tell you about next week, but the first one that I can tell you about now is the one that I mentioned a month ago, the creation of Propertastic's Complete Guide to Hurghada Property and Egypt's Red Sea Riviera Real Estate.

If I knew how much work it would involve, then I probably wouldn't have started on the project in the first place. It's my own fault though as it is much more detailed than I originally anticipated.

I am very pleased with the results though and the feedback from those that read pre-release versions have also been very positive. If you are at all interested in purchasing property in Hurghada or the surrounding area, then it has to be an essential read because it allows anyone to compare the vast majority of the new developments that are current in progress in the area, together with giving a general overview of the area.

I kept adding and adding to it until it ended up covering 35 different developments and came in at just over 25,000 words over 87 pages. That was a lot of writing!

Here is the final listing of the developments that I cover in the report:

Al-Ahyaa Villas
Al Dora Residence
Al-Rivera City
Azzurra at Sahl Hasheesh
British Resort
Coral Pearl
Delano Beach at Sahl Hasheesh
Desert Pearl
Egyptian Pearl
El Andalous at Sahl Hasheesh
El Gouna
El Khayam Resort
European Village
Hurghada Dreams
Hurghada Marina
Jewel in the Crown
Lotus Breeze
Manta Resort
Oasis Resort
Ocean Breeze at Sahl Hasheesh
Palm Beach Piazza at Sahl Hasheesh
Palma Resort
Paradise Hills
Pyramids 2
Red Sea Pearl at Sahl Hasheesh
Red Sea Pharaoh
Red Sea Residencia
Regency Beach
Regency Towers
Royal Manta
Royal Mirage
Sara’s Residence
Sea Land
Suleder Resort
The View

The Guide is available totally free to all registered members of Propertastic!

So what are you waiting for? Head over and grab a copy now and see what I've spent most of the last month of my life working on.

Click on the ad below to head to Propertastic! and see it for yourself.

Sunday, October 21, 2007

Hurghada Property & Red Sea Real Estate

I have been a bit quiet over the past two weeks on this blog and wanted to give you a sneak peak as to why this has been the case.

Propertastic! has been very bullish about the opportunities presented by investing in Hurghada property and Red Sea Riviera real estate and so decided to take a trip out to the area to see what is actually happening on the ground as there is only so much one can learn from online research. We visited Hurghada from 9 – 18 October, during which time we spoke to a wide variety of people involved in the property business – developers, real estate agents, lawyers, builders, etc. to get opinions of the current state and the future of the market there.

I am still working on the full report where I will go through each of the districts in the Greater Hurghada area and describe the developments and opportunities in each in detail but, as a taster of what is to come, here is the introduction to the report showing my initial impressions of the place:

Initial Impressions

The first surprise that we discovered is actually how incredibly close to the centre of Hurghada the airport is. OK, so I had seen a map and knew that it was not that far away, but it still came as a surprise to me when we were in our mid-town hotel in under 10 minutes after leaving the airport. This came as a nice surprise compared to our last trip overseas, to Alanya in Turkey, where we had to endure a two hour coach journey each way from the airport to the city and back.

No sooner had we left the airport when we saw the state of the construction boom. I expected there to be a fair amount of construction going on, but not that much. In a previous blog entry, I predicted that Hurghada would, sooner or later, turn into another Dubai with construction everywhere you look. Little did I know when I wrote that a month ago, but my prediction had already come true before I even said it. The differences between Dubai and Hurghada though are:

(a) There are no high-rise buildings in Hurghada. The maximum height of any building is five-stories.
(b) As much as property prices have increased since the start of 2007, they are still a lot cheaper than in Dubai.

Still, on the short journey from the airport to the hotel, every 100 metres we seemed to pass the concrete carcass of another new development, or a large hole in the ground awaiting the laying of foundations.

I expected Hurghada to be a lot bigger than it really is. The current population is around 40-50,000 making it half the size of Alanya in Turkey. One of the sales agents joked that Hurghada is a city that is 30km wide by 500m deep. Although this is a little of an exaggeration beacuse it is deeper in the older parts of the town, it’s actually not far from the truth – the newer parts of the city are probably only 200m deep.

I actually found it quite amusing seeing some of the marketing hype for some developments proudly claiming that the development is ‘only’ 700m from the sea. This basically means that it is on the complete opposite edge of the town in most instances – the airport isn’t much further than 1500m from the sea after all.

Another big surprise was that, even though you are only ever a few hundred metres from the sea in most instances, no matter where in Hurghada you are, it’s very difficult to access it. In Hurghada, it seems as if the sea is a very jealously guarded resource, even though there’s 30km of it available.

Pretty much everywhere I have been in Europe, beaches are seen as something that are public property, free for the use of everyone, or available for a token fee if you want to hire a sun-lounger. Then behind the beach is a promenade and/or a road, with the hotels or apartment buildings on the other side of the road.

This is not the case with Hurghada though – the beaches are actually owned by the hotels or the apartment developments and there is no way that you can take a long stroll down the beach as you have to stop when you get to the next hotel or development’s piece of territory. An example of how jealously some places guard their piece of beach can be found at the Seagull Hotel – one of the earliest and most famous hotels which is right in the heart of the main tourist drag in Sekalla. We went in to ask if we could have a drink at the bar. We were told that, if we wanted a drink, then we could sit in reception and they would bring us some. Come on! I fully expected us to pay way over the odds for a drink on the beach, but what did they expect us to do with their seaview? Steal it from them?!

While this is annoying for the standard tourist, it is a very important and useful factor for prospective property buyer to bear in mind because it means that property with direct access to the beach is always going to be at a premium in Hurghada. Logic says that the town is going to grow deeper and deeper over time as developers search for new land to build on, but spare beachfront land within the current region on Hurghada is already very limited, so is always going to fetch a premium.

Some more general observations about Hurghada …

I was very impressed with the weather during the time we were there. Being a pasty-white Brit, I have a problem if the weather gets too ridiculously hot. While we were in Alanya in late July, daytime temperatures were usually around 40C and I spent the whole time sweating like the illegitimate lovechild of Elvis and Barry White and had to take great care not to stay out in it too long for fear of getting burned to a crisp. In Hurghada, however, day-time temperatures while we were there always hovered around 30C. This was fine both for me and for my sun-loving girlfriend as it was plenty hot enough for her to top up her tan.

In the evening, I feared that it would get a bit too chilly as this is often a problem in the desert (as I discovered on a trip to Dubai in January where I was freezing cold soon after the sun went down). Night time temperatures were always around 20C or just under, which was perfect for wandering around dressed normally.

Some friends of mine who visited Hurghada a while back had complained that they didn’t like the place as it was dirty and downmarket and so this is what I expected to see. In parts of the town (Dahar and Sekalla) this was certainly the case. But it seems as if Hurghada has learned from their past mistakes as the newer parts of the town were very nice and clean – much more pleasant than I expected and better than anything I had seen in my other trips to the emerging Mediterranean (Alanya, Turkey and also on a previous trip to Tunisia a few years back).

Another thing I feared is that the local Egyptians would prove to be a complete pain in the neck, constantly harassing you as you pass by to buy whatever piece of tourist tat they offered in their shops. While there were plenty of salesmen who come bounding up to you with the standard ‘Hi! Where are you from?’ opener, they were a lot less persistent than their Turkish and Tunisian counterparts.

I was impressed with the range of activities that are available in Hurghada as there is a wide range of activities available for everyone. The water sports – the diving, snorkeling, kite-surfing, etc., which is what made the Red Sea famous in the first place, are obviously there in abundance. The beaches are a lot less crowded than I expected them to be, even the public beaches. This made a nice change from Alanya where it was difficult to find a spot on the beach where you weren’t always just a few inches away from the person lying next to you.

Families are catered for with a couple of waterparks, bowling and activity centres just for the kids. I was actually surprised at how few children I saw during my time in the town, but perhaps families prefer to simply stay in their resorts instead of getting out and about a lot exploring.

Late teens and twenty-somethings were also well catered for with a pleasantly wide variety of pubs and clubs. It was quite a surprise to find places as cool as Ministry of Sound, HedKandi, Hard Rock CafĂ© and Havana Club there already, plus the very exclusive (and expensive) Little Buddha – a sister operation to the famous Buddah Bars of Paris and New York. There were also bars and restaurants catering for all tastes, including an Irish Pub, naturally.

I was also quite amazed at the amount of extremely large (and obviously expensive) yachts that were moored in the Marina and out in the sea. I have no idea who they belonged to and where the owners go when they are on land as there seemed to be few places for millionaires and oligarchs to feel completely at home in ludicrously exclusive and expensive restaurants and clubs. Even the most luxurious of the resorts were very affordable compared to even mid-market hotels that you would find in Dubai, for example, so I can’t really imagine that the owners of these yachts would particularly want to mingle with us middle-lass hoi-polloi.

In general though, whatever the age group of the visitor, there is going to be something in Hurghada to entertain them, although maybe less so for the older generation of retirees.

In general, prices were lower than I expected them to be. These days my benchmark prices are Eastern European prices rather than those in the UK. I didn’t find Turkey to be particularly cheap, but I was pleasantly surprised how affordable Hurghada was in general (although it is possible to spend some serious dough at the more upmarket places). Being a Muslim state, alcohol was a notable exception to the generally low prices. Beer is readily available in most places (although quite a few restaurants are completely dry) prices at around EUR2.00 a pint. Spirits were harder to find and more expensive though – around EUR6 a pop. They also seem to be impossible to get hold of in regular shops and supermarkets and only available in the hotels and better-stocked bars.

The mix of nationalities to be found in Hurghada also came as a bit of a surprise to me. A very large proportion of the tourists were Russian, with many Eastern Europeans – Poles, Czechs, Slovaks, Ukrainians, etc. – also in attendance. This is perhaps not too surprising when looking at Egypt’s position on the map. Eastern Europeans really have no other closer alternative for winter sunshine, whereas Western Europeans have guaranteed winter sun closer at hand in Morocco or the Canary Islands. Italians were one of the first nationalities to start visiting Hurghada in their numbers, but there seem to be less of them there now. The remainder of the tourists were spread from throughout Western Europe – Germans, Dutch, Scandinavians, etc. The British seem to be in a minority currently, but it looks as if they are becoming a more and more important part of the tourist mix, especially now that the word is out that there are good possibilities for property investments in the region.

Despite this jumble of nationalities, I was quite surprised at how empty Hurghada seemed while we were there as I expected the place to feel a lot more bustling and crowded than it was. We didn’t see a traffic jam in the whole time we were there and, apart from in Sekalla at times, the pavements were easy to walk down without having to barge through a throng. Maybe it was especially quiet while we were there as our visit coincided with the end of Ramadan when few of the local Egyptians were working and were away with their families. The numbers of tourists milling around seemed a lot lower than I expected as well. We did a tour of the clubs on a Saturday night and they were mostly very empty. OK, so it was right at the start of the tourist season (we took the earliest charter flight that we could get out there), but still we found it hard to get accommodation as everywhere was booked already. Certainly the airport coming back was completely packed with tourists flying in and out of the place. So where the hell were they all hiding? Perhaps a lot of them are less adventurous than us though and rarely ventured outside the all inclusive sanctuary of their luxury resorts for fear of discovering what the ‘real’ Egypt looks like.

The lack of more tourists did start me worrying that yields are going to be going way down as more and more property is finished, but we’ll talk about that in more detail later.

To conclude my general observations on Hurghada, I have to say that I was very pleasantly surprised about it. I wouldn’t, by choice, go back to either Alanya or Tunisia again as I found them both to be rather dirty and boring as well as a little downmarket for my semi-snobby tastes, but I could easily see myself going back on holiday to Hurghada again, purely for holiday purposes.

That’s enough of the Rough Guide/Lonely Planet information to Hurghada in general. If you want more tourist information on the region, there are plenty of more detailed guides around. You’re reading this, I presume, because you want to know what the current situation with the property market is. Is it still a good deal? Where should you buy, where should you avoid and what kind of prices are you likely to be paying.

Hopefully I should have the main bulk of the report finished in the next two or three days where it will appear on the main Propertastic! site.
I will post a link to it from this blog as well so that you know as soon as it is up and ready to read.

Monday, October 8, 2007

Albania Revisited

Once of the most popular blog entries I have made to date is Property and the Tipping Point, in which I discussed the possibilities of investing in real estate in Albania.

In the article, I argued that I thought that it was too early for their to be large gains in property prices for a number of reasons, the main one being that there is very little tourism to Albania at the moment and I didn't see that there is the likelihood of their being much in the short-term.

Since I wrote that article, I have received some new information that I thought was worth sharing with you.

Firstly I was referred to some statistics from the Albanian Statistics Office to show that tourism is increasing to Albania. In 2004 there were 645,000 tourists visiting Albania, with the figure rising by 100,000 per year. These numbers are higher than I would have anticipated, but are still not that large by the standards of any of the existing markets.

Secondly, my girlfriend recently met with a developer from South Africa who had been touring Eastern Europe looking for development opportunities. He said that he visited Albania earlier in the year, but didn't think that the infrastructure was ready to start investing in the territory. He mentioned the fact that it was quite normal for the electricity to be out for a couple of hours each day. Not something that the majority of mass-market tourists are going to find acceptable (I certainly couldn't put up with it).

Instead he is planning on investing in Romania instead, a decision that we at Propertastic! would agree with as the climate for investment in Romanian property is currently looking very bright.

Most damning of all though was a recent article by Athena Kalaitzoglou which I discovered on the SMAnalysis blog written by Stavros Markos.

The article is entitled "Investment in Albania - High Risk" and mentions the fact that there is widespread corruption in the country and a severe lack of a legal framework.

It mentions that the government coffers are currently empty and so the country's finances are being supplemented by imposing fines on foreign investors for the most arbitary of reasons.

The article goes on to mention that there are often ownsership issues with regards to land and property. It is easily possible to buy some real estate, only to find that other payments are due down the line in order to clear up ownership issues, meaning that the overall cost can end up as being three times the initially agreed purchase price.

The article also mentions the same facts about power blackouts that we heard from the South African developer.

Another blog entry by a British expat who has been living in Albania's capital, Tirana, on July 4 also gives a similarly pessimistic view of the current potential for investing in the country. He has been living there for many years and so knows the market firsthand.

In summary, I am even more sure now that it is just too early for Albania to be a serious investment target, even though beachfront property is still very cheap compared to neighbouring Montenegro or Greece. Sure, if you have a large property portfolio it might be worthwhile making an investment as part of a longterm strategy, but it's going to be on a high-risk basis for a long time to come.

Saturday, October 6, 2007

Why Are Old Media Property Tipsters Rubbish?

This is related to my last posting about journalistic integrity and which news is worthwhile circulating and which is not.

Just three weeks ago, my search for news came across an article from the UK's Sunday Mirror entitled, "Is Turkey The New Spain?" While the information contained within the article is not wrong, it is written in the style that the journalist seems to believe that she is the first to think of the possibility of investing in 'a brand new, developing market'. Although she goes on to contradict herself by saying that there is already an oversupply in some parts of the country.

While Turkey is still a good market to invest in and there is definitely money left to be made there, people have been buying there for man years already and I consider it as one of the more established markets - certainly the most established of the 16 that we cover on Propertastic!

It's not the first time that I have seen the UK's old media (newspapers and TV) get all excited about some market that is already way, way past its initial growth period and is starting to mature, so that all of the fast money has already been earned.

It seems to be the same for all newspapers - even the 'quality press' such as The Times and The Daily Telegraph always seem to be way behind the curve when it comes to their property tips. It's very rare that I find anything in any of their property supplements that is real 'news' to me and is thus worth passing on to Propertastic's visitors. The most useful information always seems to come from the English language newspapers in the markets themselves such as The Sofia Echo, the Turkish Daily News and the Warsaw Voice, all of which produce some excellent and fresh information relating to their local real estate markets.

So why is this the case? This is a genuine question to which I would invite any comments upon, because I really don't have a clue as to why the newspapers are so laggardly with their overseas property market coverage. OK, the TV shows I can understand are never going to be cutting edge - they have long lead times and are there for 'infotainment' and not news. Monthly magazines are also going to be up to three months late with their news.

But for the quality press in particular, I am clueless. Their pieces are presumably written by professional journalists with access to a wide variety of resources. Most of them publish material only once a week and so they should have plenty of time available to make some detailed research on markets. So why don't they? The property pages of the newspapers are always packed full of advertising, so I would have thought that it would be very much in the newspapers' interest to provide great coverage in order to attract the maximum amount of readers to the section.

Maybe this gives a clue as to the real reasons though - to keep advertisers happy. It's better for them to write yet another article on major markets such as Bulgaria, Turkey - or one of the even older favourites such as Spain, France or Cyprus because they have plenty of existing and potential advertisers who want to see positive coverage of these markets. If they instead concentrated on real new hotspots such as Montenegro or Romania, then they have less advertisers to benefit from.

This is just a wild guess as to what their motives are. Honestly, I have no real idea as to whether it is an editorial policy, lazy journalism or what.

No, if you are really looking for tips as to where the best places are for investment, you are better off forgetting about traditional media and concentrating on the Web. Of course I rate Propertastic! very highly as one of the best sources of information, but I would say that, wouldn't I. After all, its opinions are mine!

But in the interest of fairness I would also say that there are some other good resources on the Web (not too many though) that give some excellent tips as to up and coming markets with the potential of making excellent and fast returns.

The ones that I rate highly are:

Property Secrets
Amber Lamb
Global Property Guide

There are also some interesting tips on the Totally Property forum if you take time to search for them.

But as for the old media, the only use for them I can see is to keep an eye on them to see what Mr. and Mrs. Average - the Johnny Come Latelies - are starting to get interested in. Because when the mass market is starting to buy in a big way, it usually means that it is time to start planning your exit strategy because this will be the last wave of buyers into a market before it starts getting totally over-exploited (such as Sunny Beach, Bulgaria). If you miss your chance to sell to them, you might not get another one without selling at a significant loss.

Please feel free to add comments if you disagree with my opinions - I am most certainly open for a debate on the issue.

Thursday, October 4, 2007

Journalistic Integrity

Every day I scour the Web looking for property news that's relevant to the real estate market in Eastern Europe and the emerging Mediterranean in order to add it to Propertastic's News Archive, and also because it's the only way I can personally keep abreast of all that is happening in each of the 16 markets that we cover.

I highly recommend that anyone who is looking seriously at investing in a particular market should skim through the last few months' worth of entries because it does give an excellent objective view as to the current status of each market.

At least it should be objective if I am doing my job properly, although sometimes it's not quite as easy as it sounds. Sometimes it's hard to differentiate between real news and PR spin. Other times it seems as if someone has an axe to grind.

Last Sunday I came across a brief article about the current state of the Moroccan property market which I found on the website of the North Africa Journal:

The bubble may not burst yet but the real estate craze that Morocco has been witnessing shows signs of stabilization, most likely on the temporary basis. There is a consensus as everyone in the real estate sector, from developers to bankers, recognizes that prices have gone through the roof, so to speak. So much so that potential buyers have decided they can no longer afford to purchase a home and prefer to adopt a wait-and-see attitude. Mortgage lenders have been among the first ones to warn that the prices of new housing units have been alarmingly exceeding the real value of those units. Driven by unscrupulous developers and their speculative investors, prices reached unprecedented levels that are such a mismatch to the current wage levels in Morocco. And while prices have not decreased yet, they have stabilized to begin to worry the main players in the industry.

Although the article was short on hard data and actual quotations from real people, I thought that it would be an interesting piece to add to our News Archive. The North Africa Journal appears as a reputable site and I thought that it would be interesting to get people thinking because virtually every other article that I have added about Morocco has been very positive indeed.

Less than 24 hours later though, I got the following email in from one of the leading agents covering Morocco:

Dear Nick,

Thanks for the email. But I must admit I am extremely annoyed by the article that appears on your website. It is completely misleading, talks about “unscrupulous developers” and contains no facts or back up for any of the statements made. It is completely irresponsible and the worst example for lazy journalism, indeed it doesn’t even look like it has been properly proof read (see last sentence). Can you explain who benefits from this? Not the client – who is being given wildly speculative, incorrect and unfounded information. Not the agent who sells in Morocco – for obvious reasons or any of the many reputable hard working developers who try to give a good service.

Can you ask one of your “crack researchers” to explain?

I look forward to hearing from you,


Far from being upset at the accusations, I was quite happy to explain our policy when it came to reporting news.
My reply was as follows:


Many thanks for your message. It’s good to hear from you.

Like other organizations covering particular markets online, we scour the Web constantly looking for articles that will be useful for our visitors – in our case individuals who are considering investing in purchasing property in Eastern Europe and the emerging Mediterranean.

We do write our own material and you can read
Propertastic’s own thoughts regarding the current state of the Moroccan market in our Overview section on the market .

As you will read, our own editorial thoughts on the state of the market are very positive. But they are the thoughts of just one organization – namely ours.

We advise our visitors to do as much research as they can
into a market before choosing which is the right one for them. We make it easy for them by republishing all of the news items that we believe are relevant to a market.

The item that you refer to was taken directly from The
North African Journal on 26 September. It appears to be a respectable online publication, as you can see for yourself [at their website].

While checking for news, I come across of a lot of sites that ignore any news from a market that is less than positive. Sure, I can imagine that it keeps their advertisers happy if that’s their business model or else it helps them to sell property if they are in the business directly. However, as a visitor to their site, I soon come to realize that the value of the information on their site is quite worthless if they only present one side of a story. Propertastic! would definitely be the poorer if we adopted a ‘good news only’ policy because it would be a significantly less useful resource for visitors.

I don’t think that any intelligent investor would dismiss Morocco as a potential market from this one article alone, but that they would rather consider it in context with all of the other news articles coming from the market, plus Propertastic’s own overview. As can be seen from our
Moroccan News Archive, the vast majority of news items that we have featured have been highly positive.

This situation is not unique to Morocco either – of the 16 markets we cover, all of them contain both positive and negative news items. In some territories, such as the Baltic States, the articles are overwhelmingly negative, but this reflects our own thoughts on the market.

So, in answer to your question as to who benefits – the answer is that it is the visitor to the site who benefits from getting both sides to every story. Although developers and sales agents might not like it if they get asked difficult questions as a result of these articles, but they should be easy to counter with cold hard facts, and I am all too ready to agree with you that the North African Journal article was very short on facts and very long on one reporter’s personal take on the current state of the Moroccan market.

Reading this article certainly hasn’t changed my opinion that Morocco is a good market to invest in. I doubt very much that it would greatly sway the opinion of any of our visitors either (because if they check the other 15 markets which we cover, they will find similar instances of the occasional negative article mixed in with the positive). After all, there is no such thing as a sure bet in property investment.

It is definitely a very interesting subject that you bring up here about the benefits of providing a full range of opinions regarding each county’s property market and I plan to write something on the next installment of our blog about it.

If you have any additional questions or comments, then I would be very interested in hearing from you.

Many thanks for taking the time and trouble to contact us and I look forward to hearing from you soon.

Kind regards,


The agent got back to me later that day with the following response:

Dear Nick,

Thanks for your very comprehensive and well argued reply.

I quite agree that there should be no censorship with regard to positive / negative articles. I ensure that we always tell clients that this is an emerging market sothere is an element of risk involved and that this risk is frequently enunciated by “negative” news stories.

My gripe was more that the article was so poorly referenced and sourced without even a name to back up any of the statements. If it had been properly accredited I would have no problem with it. It’s one of my biggest annoyances in the overseas property industry that there are too many lazy agents (bred in Spain during the boom years) who are all too happy to offer soundbites with no real factual basis. This undermines that whole idea of overseas property as a serious investment option.

Since this exchange, I have started to give the source of all of our news so that, if anyone disagrees with an article, they can take it up directly with the original authors of the piece. If anyone else disagrees with any of the news items that are featured on Propertastic! though, please feel free to take a few potshots at the messenger!

I am always interested in hearing your thoughts, and will also give anyone a 'right to reply' here on the blog.

Debate is always good.

Friday, September 28, 2007

Property Prizefight - Hurghada vs. Bratislava

I used to be indecisive.

But now I’m not so sure.

Which is why I am having a devil of a time trying to decide where to invest my own hard-earned cash.

There are a lot of opportunities for investing in real estate which I am sure are going to lead to very good returns over the next two years or so. But I don’t just want ‘very good’. I’m greedy. I want ‘the very best’!

I’ve narrowed the contenders down to just two after much deliberation. I quite fancy Sofia still – that would probably have been my third choice, and I would also love to invest in Podgorica, Montenegro if anyone was developing some offplan properties there, but I haven’t seen any yet.

So my final two contenders are Hurghada on Egypt’s Red Sea coast and Bratislava, the capital of Slovakia. Initially I was more keen on Sharm el-Sheikh than Hughada with regards to opportunities on the Red Sea, but I later discovered that foreigners can only buy property in Sharm el-Sheikh on a 99-year leasehold basis – not freehold. While it’s probably not a big deal, there’s just something psychological knowing that, at some point in time, the value is going to go down as someone looks at the amount of years remaining on the lease and decides that it’s not a very good investment for them. I also heard some information recently that interest in Sharm is starting to wane a little compared to the Hurghada region.

So Hurghada and Bratislava are my favourite two opportunities at the moment.

But how to decide between the two of them? Although I think that they both have great potential for short-term gains, you really couldn’t find much more different investment locations within a few hours' flight of the UK if you tried. So I have decided that the only way to decide where to invest is to put them both to the test in terms of a ‘fight out’ between the two of them – a fight to the death over ten rounds.

In the Blue (Danube) corner, we have Bratislava, a.k.a. Pressburg – one of the older cities in Europe dating back to the end of the first Millennium. Bratislava has spent much of its time being a regional city administered from somewhere else – Budapest, Vienna or Prague, before finally becoming capital of Slovakia from January 1, 1993.

In the Red (Sea) corner, we have Hurghada, a.k.a. Al Ghardaqah. Hurghada is very much the ‘new kid on the block’, having only been founded just over a century ago. Up until 20 years ago, Hurghada was a simple fishing village until it went on to become Egypt’s leading tourist resort because of the excellent aquatic sports facilities on the Red Sea.

So which of these two locations is going to make for the best investment. Let’s have the two of them slug it out over ten rounds to see which one is the victor.

Round One: Entry Price

Hurghada looks very confident on this one. Prices in Hurghada are still astonishingly low compared to either anywhere in Europe or the other new seaside hotspots like Morocco or Turkey. With prices starting from around EUR600/m2, it’s possible to pick up a small studio apartment for the price of a new car – and not a terribly good car at that. For EUR18,500 or GBP13,000, you could get a basic Ford Focus or a studio apartment in Hurghada. I’m not saying that the Ford Focus is a bad car, but I’d much rather own an apartment in Hurghada than one of those, thank you very much!

Prices in Bratislava are still pretty low compared to anywhere else in Eastern Europe and a steal compared to anywhere in Western Europe. But at EUR1750/m2, it’s still going to cost a fair bit of cash to get a decent apartment. For EUR100,000 or GBP 70,000, which is what it is going to cost you to get a nice apartment, you could get a very nice car indeed.

So Hurghada wins round one with ease.
Hurghada 1: Bratislava 0

Round Two: Price Appreciation to Date

After Hurghada’s runaway success in round one, it has a bit more of a tougher fight in round two as both locations have seen property prices appreciating fast in 2007. According to the Slovak Spectator, property prices in Bratislava increased by 20% in the first half of 2007. However, the old-timer still can’t compete with the young upstart when Hurghada’s prices have increased by a minimum of 30% over the same period. It’s another victory for Hurghada, making it two in a row.

Hurghada 2: Bratislava 0

Round Three: Security

After taking a bit of a battering in the first two rounds, Bratislava comes back out fighting when it comes to the Security round. Hurghada is not a great destination for anyone who is completely risk averse. Although the resort has not suffered any terrorist attacks in the past, Sharm el-Sheikh on the opposite side of the Red Sea did suffer from a very serious attack in 2005 resulting in the deaths of 88 people. Although the Egyptian government is trying to take a pro-Western approach, it is still a Muslim country which has a not terribly good human rights record, is not a true democracy, and where 16-20% of the population lives below the poverty line – which is going to create a bit of friction.

On top of the political situation, you also need to take care that your property is built to the best standards. There are no EU-regulations in force in Egypt and the standards of local Egyptian builders do not have a great reputation.

Compared to Hurghada, even the most nervous investor can relax when it comes to investing in Slovakia. As a fully-fledged member of the EU, there are no more risks involved in buying in Slovakia than there are anywhere else in Europe.

A comfortable win for Bratislava in this case.

Hurghada 2: Bratislava 1

Round Four: Economy

Egypt, perhaps looking enviously at the stellar success of the UAE in recent years, has certainly moved up a gear economically compared to most of its Middle Eastern rivals, finishing 2006 with a very respectable growth in GBP of 5.7% - that’s well ahead of most Western European countries, including both the UK and Ireland. It must be remember, however, that Egypt’s economy was so poor until recently – only 13% of the UK per head of population - that this was not such a miraculous achievement.

Slovakia, despite having a much healthier economy, still managed to beat Egypt with GDP growth of 6.4% in the same period, benefiting from a lot of foreign investment, such as the new assembly plant from Kia, no doubt lured in part by Slovakia’s flat tax rate of 18%. So robust is Slovakia’s economy now that it looks likely to become the second of the Eastern European territories to enter the Eurozone after Slovenia, currently on schedule for 2009.

Another victory for Bratislava leveling the scores.

Hurghada 2: Bratislava 2

Round Five: Ease of Access

No one should really buy a property without checking the market out thoroughly and, after you’ve bought, it’s always a good idea to go and check on the property from time to time, so access to cheap flights is a definite advantage. There are now some good, cheap flights from the UK to Bratislava from both RyanAir and SkyEurope, with a flight time of under three hours. With Hurghada, the only option is to fly on a charter flight. These are harder to find, are more expensive and it’s going to take five hours.

Bratislava eases into the lead.

Hurghada 2: Bratislava 3

Round Six: Financing

If you are re-mortgaging a property in your home country, then this isn’t going to make much of a difference to you. However, if you need to get a loan in order to buy your property, then you’ll find it a lot easier to do so in Bratislava than in Egypt at the moment. Mortgages for foreigners are only just starting to be implemented in Egypt so they are hard to come by and the interest rates are comparatively high. In Slovakia, mortgages are no more difficult to obtain than anywhere else in Eastern Europe and you can get up to 70% LTV.

Buying costs are also very low in Slovakia at 4.5% compared to 8% in Egypt.

It another easy victory for Bratislava.

Hurghada 2: Bratislava 4

Round Seven: Choice

In Hurghada you ‘pays your money and you takes your choice’. Taking the region as a whole, there’s a wide variety of property available. Some areas of Hurghada are pretty rough and properties are only going to appeal to locals or real bargain-basement tourists from Eastern Europe. At the other end of the scale, there are some super-luxury five-star resorts on the coast outside Hurghada such as El Gouna, Sahl Hasheesh, Zafarana and Gamsha Bay where you can expect to get top dollar in rents.

In Bratislava, you can also find plenty of cheap, but less than desirable properties from among the ex-Communist crumbling tower blocks. But why would you want to buy one? Although there are some very nice developments now being built in Bratislava, because it is not a major tourist destination (and probably never will be one) you aren’t going to get the super-luxury resort developments that are currently underway close to Hurghada.

A narrow victory for Hurghada in this round.

Hurghada 3; Bratislava 4

Round Eight: Yield

Of all of the rounds, this is the hardest to judge because you really aren’t comparing like with like. With Bratislava, in the vast majority of cases, you will be looking at renting out your apartment on a long-term basis to a wealthy, upwardly-mobile local or an ex-pat for a reasonable monthly rent. Global Property Guide believes that Bratislava has one of the best yields in Europe at 10% currently. This is probably a little optimistic as property prices have been increasing faster than rents this year – I’d say 8% net is realistic.

In Hurghada, you’re looking at tourists renting by the week. During the winter, which is high season on the Red Sea, you should be getting high occupancy at good prices if you have chosen the right property. In the summer though, you’re going to see the property vacant for long stretches which will bring down the average. Again, 8% net should be possible in the good locations as tourist numbers are constantly increasing.

So, after much deliberation, the judges have awarded this round as a tie.

Hurghada 3.5 Bratislava 4.5

Round Nine: Competition

Bratislava is quite a compact city and the topography is such that there aren’t that many vacant plots in good locations to build on. So, if you get a good property in a desirable location, you aren’t going to have to worry too much that there will be thousands of other developments competing against yours five or ten years from now.

Conversely, the Hurghada region has a lot of coastline to exploit and the town has developed so far as a long strip along the coast. Although beachfront property should always attract a premium, there is sure to be a lot of development inland. The construction boom in Hurghada is only just beginning. As property prices increase, it’s inevitable that more and more construction will take place until the place is likely to end up as some monstrous hybrid of Bulgaria’s Sunny Beach and a poor man’s Dubai. If your property is not in an A1 prime location, your yields are definitely going to come down over time as the supply of property begins to overtake demand.

Another easy victory for Bratislava this time.

Hurghada 3.5 Bratislava 5.5

Round Ten: Exit Strategy

Although it’s lovely feeling smug when you check property prices and discover that your property is worth double what you paid for it, it’s all academic until you actually sell the property and the profits are sat in your bank account. Therefore it is essential to plan your escape route from the market. So you need to know who is going to buy your property once you’ve made your money.

With Bratislava, it’s easy to imagine who would want to buy your property three or five or ten years down the line – maybe the upwardly-mobile local who has been renting it from you would want to buy it now he has finally arrived. As the Slovak economy continues to grow, more and more locals are going to be in a position to buy a good apartment, especially if they work in Vienna, as I discussed in a previous blog entry.

With Hurghada though, it’s not quite as easy to see who might want to buy it in a few years’ time. In the short-term, while property prices are increasing rapidly, there are sure to be other speculators wanting to get into the market. However, if you leave it too late, and the area gets overdeveloped in the same way that Sunny Beach has done and Dubai is heading for as well, then you could be stuck with it and might need to discount the price to make a quick sale. As nice as Hurghada is, it’s not got the same potential for selling to retirees as Spain or even Turkey has – it’s never going to end up as a Little Britain.

This potential situation needs a lot of serious thought right from the start because Egyptian law says that foreigners cannot sell their property until they have owned it for five years. You can get around this situation by either flipping an off-plan and selling it as soon as it’s built or by registering an Egyptian company to own the property and then selling the company. But you need to plan this in advance. If you fail to do so, and you buy a property today that is due for completion in 2009, then it means that you would otherwise not be able to sell it until 2014. In my view, you will definitely want to be out of the market by then as it will definitely not have much growth potential left by that time.

So one last resounding victory from Bratislava to make it the undisputed winner of the contest.

Hurghada 3.5 Bratislava 6.5

OK, so this was a pretty light-hearted ‘competition’ here. I still believe that both Hurghada and Bratislava have more potential than just about any other markets in Europe right now and there is plenty of money to be made from either of them.

A lot depends on your strategy and your attitude towards risk. If you are looking to flip a property quickly – in under two years - and you wouldn’t be totally wiped out if something went wrong, then Hurghada could still be the better bet of the two. But, as hopefully I have been able to argue above, Bratislava looks like a sure-fire and safe bet no matter whether you are looking to invest for the short medium or long-term.

Monday, September 17, 2007

Buying in Budapest - Good or Bad Idea?

I received an email earlier today from a Propertastic! visitor asking for some more information on the current state of the property market in Budapest as he is thinking of buying there. I thought that I would post it here in case anyone else is wondering whether now is a good or bad time for buying there.

This is what he wrote:

I'm an italian man who wants to buy an apartment in Budapest to rent it. I'd like to know the tax I have to pay to buy a property in Hungary (the different tax of Italy) and the prices of some apartments. May I have some information about agencies (web sites) which sell properties ? Is it convenient buying an apartment and renting it ? Can I rent it all year long (12 months) ? Hungary entered in EU some times ago, is it convenient again to buy something in Budapest ?
Best Regards
Loris Terzi

And this is my reply to him:

Hi Loris,

Thank you for your email. It is nice to hear from you.

Let me start with your last question first: Is it a good time to buy in Budapest?

This very much depends upon whether you are looking for a short-term or long-term strategy and your attitude to risk.

If you don't like taking risks and are looking for long-term growth rather than to make some quick money over the next one to three years, then perhaps Budapest is the right market for you.

The history of Budapest's property market is something like this:

Of all of the cities in Eastern Europe, Budapest was the first to see large price increases as a result of foreign investors and speculators entering the market. Budapest was especially popular with buyers from Ireland, the UK and Germany.

The result was very fast appreciating prices in the 12 months before and after Hungary joined the EU on 1 May, 2004.

However, since that time, growth in property prices started to slow as the market became saturated and supply of new properties coming onto the market started to exceed supply. In addition, the Hungarian economy, the most robust of all the Eastern European countries during the 1990's, started to run into some problems, leading to a cooling of the economy. The result was that, during much of 2006, prices were actually dropping slightly, although the year did finish up with a slight gain.

The current situation is that the market in Budapest is quite static - prices aren't going down, but they aren't really going up either.

This doesn't sound very promising, does it?

However, the fact that prices have been so static over the past few years means that prices in Budapest now seem very low compared to other major Eastern European properties.

If you look at our Key Statistics page of the site, you will see that currently prime Budapest property costs around EUR2250/m2. This definitely looks cheap when compared with Warsaw at EUR3500/m2, Prague at EUR3000/m2 or Ljubljana at EUR3250/m2.

The chances are that, at some point, the Hungarian property market should take off again and prices will rise to join those of its Eastern European neighbours. However, it is anyone's guess as to when this will happen. If you are looking to remain in the market for at least five years, then I am pretty sure that you will catch the 'next wave' of Budapest property increases, but you might have to sit back and watch your property's value remain the same for the next two or three years. The likelihood that prices will go down much further though is quite low - Hungary is, after all, a very stable country (even if it is not going through the best of times at the moment).

You can read more of our thoughts on the stats of the market in Hungary in our Hungary -Overview section.

If you are still undecided about Hungary and are looking to see the vale of your property increase faster, then maybe it is worth looking around 120km north-west of Budapest to the Slovakian capital of Bratislava.

Currently Bratislava is our top tip as the prices are still low (EUR1750-2000/m2) yet are increasing fast - showing 20% growth in the first half of 2007 alone.

If you want to know more about the reasons why we think Bratislava is so interesting a market, you should read our Slovakia - Overview section or a recent entry about Bratislava's potential that I posted to this blog.

Moving on to your other questions now about taxation:

You can read all about the different stages that you will need to pass through in order to complete purchase of an apartment in Budapest in our Hungary - Buyer's Guide section:

The tax system in Hungary is rather complicated compared to many of the other Eastern European countries and it is highly recommended that you speak with a qualified Hungarian accountant in order to advise you as to what would be the best way to buy a property. The main ways are to either buy as a person, or to establish a Hungarian company and to buy the property in the company's name.

The disadvantage of buying a property through a Hungarian company is that it takes an investment in both time and money in order to register it and keep it running. However, the costs should be more than made up for by the tax savings that you will receive over the duration of the time you keep your property.

Here are the main taxes and how they vary according to the different types of ownership:

Tax on rental income:
Personal: 20%
Corporate: 18%

Deductions for expenses:
Personal: Not allowed
Corporate: Allowed together with 5% depreciation on property and furniture, etc.

Capital Gains Tax:
Personal: 20% (but lower if you hold the property for at least six years)
Corporate: 10% (but you can reduce this to 5% if you sell the company and not just the property)

Personal: 25%
Corporate: 25% (but you can reclaim the VAT on all purchases that you make through the company including the property itself)

Hungary has a Double Taxation Agreement with all EU countries and so you will only be charged once on your income - not in Italy as well.

Next question: What are the prices of property in Budapest?

As has been previously mentioned, prices for high quality apartments in areas where there will be good demand from people looking to rent is around EUR2250/m2 - so around EUR135,000 for a 60m2 apartment.

Obviously there is a huge difference in the prices depending on where you are looking to buy and the condition of the apartment. Cheaper apartments could be 50% cheaper, but there is the risk that no one will want to rent them from you. Super-luxury apartments could be 50% more expensive, but will attract premium rental prices.

Information on web sites with properties for sale:

You can find links to all of the companies you will need to deal with in order to buy a property in Budapest in the Hungary - Directory section of the site.

Not only will you find details of real estate agents in Budapest, but also other companies that you will need to deal with such as lawyers, accountants and letting agents.

It's also worth checking out some of the ads on the same page as well which advertise Hungarian property.

What is the rental market like?

Propertastic! usually recommends investing in capital cities rather than coastal holiday resorts because there are more options when it comes to renting out the property. With cheap flights to Budapest, the city has a tourist market year-round, so you aren't just dependent upon a few months in the summer to make all your income.

But where capital cities really score over holiday resorts is that there is a good market for long-term rentals - either to ex-pats or to wealthy Hungarians. Although the price per week is lower for long-term rentals, there is a lot less hassle involved and there are likely to be only short periods when the property lies empty.

The occupancy rate that you get on your property is very much dependent upon the property's location and condition. We recommend getting the best apartment that you can within your budget as, the more centrally located and the better condition a property is in, the more you can charge in rental fees and the more bookings you will get.

Rental yields in Budapest are currently quite good at around 6% net. This means that, on a EUR135,000 property, you should be looking at generating an income of around EUR8,100 per year, or EUR675 per month.

Hopefully this answers all your questions. It is advisable, however, to speak to as many people as you can regarding possibilities for purchasing property in Budapest in order to get as clear a picture as possible as to the potential of the market.

Good luck!

Kind regards,


- - - - - - - - - - -

Have you got any burning questions about Central & Eastern European real estate that you would like an answer to? Then just drop me a line at and I'll be happy to answer you.

Friday, August 31, 2007

Property and the Schengen Effect

I remember walking around an overseas property exhibition in London in 2003 listening to everyone selling property in Eastern European talking excitedly about ‘The Dublin Effect’. This was not long after it was announced that the eight major Eastern European countries were going to be joining the EU on 1 May, 2004.

The agent’s point was that, as a result of joining the EU, Ireland had gone from being one of the poorest countries in Europe to being one of the richest, and property prices in Dublin had gone through the roof as a result. Surely the same thing was going to happen in the capital cities of the new Eastern European entrants as well?

With hindsight, these agents weren’t exactly wrong, but they weren’t exactly right either.

Prices did go up for sure, and anyone buying property in Prague or Budapest, for example, would have made a tidy profit if they had got into the market at that time. However, the reason was different from the promised ‘Dublin Effect’.

The reason why property prices went up so fast in 2003 and 2004 was very close to the old Wall Street proverb of ‘buy on the rumour, sell on the news’. It was the speculative buying frenzy before EU accession that led to the gains, not as a result of great economic improvements afterwards. In fact prices in Prague and Budapest plateaued shortly after accession.

This shouldn’t have been too much of a surprise to anyone who thought about the situation logically. Ireland was a tiny country compared to the size of the EU as a whole. Just a small part of the EU budget going into Ireland was able to make a huge difference. But when the ten new members of the EU joined all at once, adding a population of 70 million to the EU compared to Ireland’s 4 million, it should have been obvious that the effects upon each of the Eastern European countries were going to be substantially diluted, although certainly highly beneficial in the long-term.

The next EU related factor that the sales agents are getting excited about is entry into the Euro, a feat that only Slovenia has managed to achieve so far. Despite agents’ best efforts, Slovenia’s adopting the Euro on 1 January 2007 doesn’t seem to have had a huge effect upon property prices, probably due to the fact that prices there are already pretty expensive.

Next is the turn of Malta and Cyprus to join the Eurozone on 1 January 2008 which, again, the agents are making a big song and a dance about.

However, there’s another big change in Eastern Europe happening on 1 January 2008 which no one really seems to be talking about so much, yet which I personally believe could have a bigger impact upon some property prices than Euro entry. This is the enlargement of the Schengen zone to include Lithuania, Poland, the Czech Republic and Slovakia.

The what?

The Schengen area constitutes a border-free travel zone within the EU among the old member states, with the exception of Great Britain and Ireland. Non-EU countries, such as Norway, Iceland and Switzerland are also included in the Schengen zone.

Currently, whenever you cross the border from one Eastern European country to the next, or from any of them into Western Europe, you need to go through passport control. Not really a major problem on long journeys, but not something that you want to go through on a regular basis, week in, week out, on shorter journeys.

From 1 January 2008, all this will be changed, and the only notification that you are leaving one country and entering another will be the ‘Welcome to …’ signs.

So how could this affect property prices?

Across most of the region, the answer is probably not a huge amount:

Lithuania: Faster entry into Poland. Not so much difference in property prices either side of the border. So probably not so much difference.

Poland: Easier access into Germany. But it’s Eastern Germany, which is not where the money is. So again, probably not a major factor.

Czech Republic: The southwest of the country borders the rich Bavaria area of Germany. The problem is that the areas on both sides of the borders are mountainous and depopulated. Nuremburg is 65 miles from the border; Munich is over 100, so it’s not really commutable. Maybe there will be a few more Bavarians who would be interested in summer cottages in the border regions, but a round trip of this length takes such a time that the time savings by not having to stop at the border are fairly insignificant.

The situation on the Czech Republic’s southern border with Austria is quite similar – mountainous and depopulated for the main. The South Eastern corner of the country might see some slight gains. Breclav, for example, is 45 miles from Vienna and has a direct rail route, so it could be interesting. The Czech Republic’s number two city of Brno is a bit further away – 70 miles. That’s pushing it a bit for a daily commute though.

Which leaves one big winner from the Schengen entry and that is … Slovakia!

Or, more precisely, its capital, Bratislava.

Discounting the Vatican City, Bratislava and Vienna must be Europe’s two closest capital cities, if not the World’s. Just 35 miles separates the two city centres. That’s nothing at all – about the same as Reading or Dunstable is from London’s West End (and the traffic certainly is nowhere near as bad).

In terms of property prices though, the two cities are worlds apart. Prime city centre property in Vienna is currently going for EUR3500. The best new developments in Bratislava are exactly 50% of that – at EUR1750.

I just can’t see that this situation is going to last forever. Sooner or later, prices in Bratislava are going to start catching up with Vienna (which looks far from overpriced itself and is showing steady growth). Once it gets more easy to commute from Bratislava to Vienna, more Slovaks are going to start working there earning a much higher salary than they would be able to do so in Bratislava, and they will start using that money to start buying decent apartments back home.

Conversely, poorer Austrians could decide that they would get a lot more for their money in Bratislava (although this is less likely due to the fact that not many Austrians speak Slovak, whereas many educated Slovaks will speak German).

Even without entering the Schengen zone, all of Bratislava’s prospects were looking great already, with Slovakia’s low taxes attracting a lot of inward investment into the country such as Kia, leading the country to be dubbed ‘the Tatran Tiger’. Add to this the fact that prices are still among the cheapest in Europe, that rental yields are among the highest in Europe and that Slovakia is currently on schedule to adopt the Euro in 2009 and it’s hard to find a single negative about the city.

Click here for a more detailed look at the current state of the Slovak property market.

For the best potential, look for high-quality developments on the west side of the Danube – the closest side to Vienna, and I’m pretty sure that you’re on to a property with some of the best potential for growth in Europe at the moment.

Sunday, August 26, 2007

Property and ‘The Tipping Point’

In my last entry, I warned of the dangers of ‘following the herd’ and ignoring common sense for the sole reason that ‘everyone else thinks it’s a good idea’ because you risk getting into a market just as everyone else decides that it’s about time to get out.

So getting into a property market too late is definitely a bad thing to do. But is there a danger at the opposite end of a spectrum? Is it possible to get into a market too early?

These thoughts have been on my mind for the past few days because Albania has been on my mind. It first came on the agenda because my girlfriend is looking for a new job. She started as a real estate agent in Latvia in April, which proved to be very unlucky timing for her as it exactly coincided with the downturn in the market – the result being that very little property is moving in Riga at the moment, so she’s not earning any commission.

I told her in May that I thought that she should get involved in selling overseas property in Latvia. As was the case in the UK ten years ago, Latvians now realize that there is good money to be made in buying property in an emerging market and, if there aren’t any gains to be made at home, then it’s time to look elsewhere to catch the next wave.

She wasn’t convinced at that time that it was a good idea but, sure enough, there has been a large number of companies established here that have started selling overseas property to rich Latvians. Many of them are selling the same Bulgarian properties on the Black Sea that the Brits are getting a bit wise to the problems of.

But anyway, she has an interview on Monday with a company selling property not only in Bulgaria but also in Montenegro (now that’s better!) and, interestingly, Albania.

The same day, I saw some articles that were based on a press release from UK developer Barrasford & Bird publicizing a new development that they’re promoting in Albania.

I haven’t done a lot of research into the market in Albania to date because I considered it too small and undeveloped to be viable yet, but I began to ask myself whether now was the right time to start looking at it or is it still too early?

Perhaps like you, I have been constantly kicking myself for not having bought in markets earlier. “If only I’d bought in Montenegro last year,” I sigh or, “prices in Sharm el-Sheikh are up 20% already this year – I should have bought there in December.”

But what if I’d bought in Montenegro or Sharm el-Sheikh five years ago? What would have happened is that I would have seen the value of my investment hardly increase at all for the first four years of that period. I would have been a lot better off investing in Bulgaria or Latvia.

So what influences the timings? One of the most influential books over the past few years has been Malcolm Gladwell’s ‘The Tipping Point – How Little Things Can Make a Big Difference’. In it, he talks about “social epidemics”, or sudden and often chaotic changes from one state to another. In all of the examples he gives, changes do not happen steadily or regularly – there is a sudden breakout, which is better explained by the graph below:
Take the Internet as an example, once again. For several years, the only people using it were a bunch of academics and computer geeks. Then, in the mid-Nineties, everyone suddenly discovered it and, within just a few years, everyone was online.

So why do these changes suddenly occur? If you’d really like to know, read the book, or a synopsis of it here.

Looking at the graph, it’s easy to see that the same curve can be applied to all of the other property hotspots in the past, so it’s almost inevitable that it will happen in territories like Albania as well. The only question is: how far along the curve is Albania at the moment?

The other factor affecting property prices is the basic economics of supply and demand once again. Prices are only going to start skyrocketing if demand substantially exceeds supply.

Is that really the case in Albania today? Probably not. Not yet, at least, but it is sure to come. The trick is to predict exactly when. Ideally you want to get in just before other people start talking about it. The fact that I’m talking about it here and you’re reading about it shows that the process is already starting.

Albania’s big plus point is that it is the last remaining piece of the European Mediterranean to be discovered. If you want some beachfront property in Europe for under EUR1000/m2, Albania is your last chance of getting some.

On the downside, however, Albania was, by far, the most screwed up country in Eastern Europe and there is a hell of a lot of work to do to bring it up to European standards. There’s also traditionally been a lot of organized crime in the country which the government is struggling to tackle.

But let’s go back to supply and demand for a moment. In order for there to be strong demand, someone is going to need to occupy the properties – the economics of jet-to-let simply don’t work if a property lies empty. So who is going to be living in these new apartments?

Local Albanians? No chance – the only people with money in Albania at the moment are the mafia dons, and they’ll be buying their own palaces for sure – not renting 60m2 off you!

Ex-Pats? Doesn’t really have all of the comforts of home, does it? I think that even the most adventurous of souls would think twice about moving from Basingstoke to Vlore just yet.

Tourists? Do you know anyone who’s been on holiday to Albania yet? Or anyone who’s considering it? I didn’t think so. There isn’t really any tourism infrastructure in place in the country yet – most important of which are charter flights into the country, let alone some decent hotels in order to accommodate them once they are there.

“But what about Bulgaria and Montenegro?” you may ask. “Their tourism industry grew very fast.”

This is true, but you need to remember that Bulgaria and Montenegro were major holiday destinations for Eastern Europeans all through the years of Communist rule, so they didn’t need to build a tourist industry from scratch – they just needed to bring it up to Western European standards.

In summary, although such cheap prices for beachfront property do seem very attractive, I don’t think that they will see the same rapid growth as Montenegro and Bulgaria has witnessed until the Albanian Tourist Board is able to start attracting tourists to the country in significant numbers. Personally my strategy at the moment will probably be to buy in Egypt, keep the property for two or three years and then the time might be right for Albania.

Wednesday, August 8, 2007

The Herd Mentality

I spent much of 1999 watching Internet stocks exploding in value, seeing how everyone else seemed to be making vast quantities of money.

“But this just doesn’t make sense,” I spent 1999 telling myself. “There’s just no way that these unprofitable companies are ever going to make enough money to justify the kind of money that they are currently valued at.”

And so I sat back and waited to see what would happen.

By the start of 2000 though, I started to doubt what seemed to be common sense to me. I was no investment expert and everyone else who (theoretically – highly theoretically) knew what they were doing were leaping in and getting rich, rich, rich.

So on 1 March, 2000, I leapt into the market investing a big chunk of my savings. For the first week I saw some nice gains and was feeling very smug.

Then, on 10 March 2000, the bubble burst and I ended up losing 75% of the money I had invested in just a couple of weeks before I decided to cut my losses and run.

It was a good – but very expensive – lesson in the mentality of following the herd. I vowed that I would never again let other people sway me from going with my gut feel – a gut feel that is based upon common sense and the most basic economic education, which is how prices are influenced by supply and demand.

I can understand how easy it is to happen because of my own experience with the Internet stocks, but it is still quite horrifying to me how people can forget about the laws of supply and demand and fall prey to sales hype coming from someone whose job it is to sell some development – whether or not that development really does have good potential or not.

I have seen two examples of this at close hand recently.

Just a few weeks before I met her in late April, my new girlfriend had signed a contract to buy an off-plan property under development in the ski resort of Bansko, Bulgaria.

My reaction was, “Noooooooooooo!!!!!!!!! How could you have done such a thing? All of the reports coming out are saying that Bansko is saturated and it’s going to be impossible to either sell or rent out the properties once they’re completed.”

Unfortunately this was not what she wanted to hear, and she ended up getting into a horrible temper. So now I have learned just not to talk about it at all.

Then, just yesterday, my ex-girlfriend called me up all excited. “Hey!” she said, “I’ve just been given a tip-off about a great new development in Bulgaria that’s got enormous potential.”

“Where in Bulgaria?” I asked.

“On the Black Sea Coast.”

“Where exactly on the Black Sea Coast?”

“Some place called Sunny Beach.”


“But all of my friends are investing in developments there so it MUST be a good investment.”

I won’t repeat the rest of the conversation, but it had a lot of references to ‘a bargepole’ and ‘not touching it’.

I told her to go to Propertastic! and educate herself a little bit about what’s going on with the property market in Bulgaria right now. OK, so my opinion that the market is already saturated is just that – my opinion – which anyone is free to agree with or not, but it’s hard to argue with solid facts and news items telling the actual state of the market as it is already.

After a long conversation, I told her that she should check out Egypt as this is the market that seems to be happening right now. It’s not so easy to get out to Hurghada or Sharm el-Sheikh at this time of year as the temperatures are uncomfortably high – it’s currently the off-season – but when the charter flights start going out there at the start of the winter season in October, I think she’ll be going out there to check out the opportunities.

It is exactly the type of people like my ex and present girlfriends that we created Propertastic! for, so they can make an informed decision about which markets to consider and which to avoid. Neither of them are millionaires with vast amounts of wealth to invest. They are ordinary people who understand that investing in property is the best way of acquiring wealth in the long-term – providing that you get it right. Once you have developed a decent property portfolio, it’s possible to make a mistake from time to time and recover from it. In the early stages though, making the wrong decision concerning which property to buy can kill off someone’s chances of making it big totally.

My one hope is that we don’t end up ‘preaching to the converted’. During the countless hours that I spent online researching the market for international property, I have noticed that investors tend to fall into two distinct groups:

The first are very savvy. They have considered a large number of different options, researched each of them carefully and, after considering all of the facts, have gone with the best options. These are the people who are buying property and real estate in hot markets like Montenegro and Egypt right now. They realize that, if you get it right, there’s a huge amount of money to be made from international property and so it’s worth taking a while to make the right choice.

The second group are not so well-informed. They read the Sunday papers and read articles like “Bulgaria is the next boom market!” and then start contacting agents selling property in Bulgaria. Of course the sales people are quick to tell them everything that they want to hear and so members of the second group end up buying from them. It’s only a couple of years later when they end up with a property that’s impossible to sell or rent out that they realize that they have made a mistake. But it’s too late by then – their life savings are spent already.

Our hopes with Propertastic! are to make it as easy as possible for ordinary people to make an informed decision as to where to invest. The vast majority of information on the site can be found elsewhere, but it would require hours and hours of research to find it all and would require the reader to use their judgement to separate the hard facts from the sales hype and PR-puffery. Another problem is that most of the useful information is written in such a dry and turgid style that people can very easily get bored of the whole exercise and just give up.

Propertastic! has been established in an attempt to resolve all of these problems. We just hope that the second group of buyers are able to find us somehow in order that they avoid making some very expensive mistakes.