As many of you would already know, the ‘Global Property Guide’ has become the one of the most definitive web resources for investors looking overseas. Please take the time to read our brief interview with international property expert, author and owner of the website – Matthew Montagu-Pollock – who took some time out of his busy schedule to answer some of our questions:
“Your website www.globalpropertyguide.com has long been established as a central resource of information for investors looking for cold hard facts on a country’s specifics. What is the general current sentiment of your authors and users towards overseas property investing – bullish or bearish?” Bearish! The UK, US and many continental countries have just come out of a decade when house price appreciation made everyone happy and encouraged people to wind down personal savings rates – so there was an economic boom. Has reality now hit? Well, what many people don’t realize is that, temporary crisis aside, there’s a huge amount of structural adjustment to do. First World countries face tough growth problems. The phoney profits of the housing boom made First World countries look fine, for a while. Well, the immediate crisis may be over, but they’re not fine. The 3rd world has brains, knowledge, and massively lower costs. The First World has tough competition ahead. It’ll have to adjust – heaven knows how, frankly. It’s over-priced and increasingly under-skilled by comparison with the most dynamic growth patches in the Third world. Remember, strong growth = strong housing markets. The reverse is also true. Weak growth = weak housing markets. That’s quite aside from the fact that in most developed countries, housing markets have not fallen enough and are still overvalued, in price/rent terms.
“Most people reading this interview believe in the concept of ‘building a margin of safety’ when buying investment property – how can they do this when acquiring foreign stock?” Diversification! Buy in several different countries. But of course, above all, don’t be dim. Don’t buy the rubbish that the marketing people are pushing at you. READ the Global Property Guide and FIGURE OUT where the rental returns are good, because high rental returns are the absolute touchstone, like P/Es in the stock market. Visit the countries yourself. Book into a hotel in the capital for 3 weeks, make appointments with all the leading estate agents, and get a sense of what is what. You’ve got to touch it and feel it. Get a gut feeling for whether this is going to work in the long term. Make contacts that, when you go home, you may be able to trust to look after your interests. They won’t, probably, be the guys with the big golden name-plates on their doors. But dig around, you can find people who you can trust. Normally, hard-working, middle-class people who aren’t trying to sell you anything except their services, and those at a fair price.
“Following on from this, what sort of due diligence steps should be taken when looking at a property overseas?” Work through a good bank. Find a lawyer who is low-cost but you feel you can trust. But you have to be there. You cannot do these things at a distance.
“What can investors do to limit their long-term risk exposure in foreign countries..?” There’s no magic bullet. All countries have risks. Foreign countries have different risks, which is good because they provide diversification. Spreading is always a good idea in my opinion. It’s more tax efficient, for one thing (depending on where you are based for tax purposes) – investments in many countries can mean you are under the tax threshold in each.
“How important is it to look at the macro-economic factors of a country as well as the investment deals themselves?” Very important. Economic growth = increases in property value. And countries go into boom for a good reason – usually it is good government, structural reform, reduced corruption – all those things the World Bank encourages. So you can see the good times coming, to a remarkable extent. Everyone foresaw the rise of China. Well, China has risen!
“What about exchange rates – many foreign investors forget to incorporate them into their costs (both initial and ongoing) – do you have any tips/pointers?” A specialist exchange house salesmen will open a discussion with you, which the dealers at the big banks won’t. Look at this as an advantage – you can learn from them. Personally I have always used HSBC to shuttle money around the globe, because internal transfers are free between different HSBC branches.
“What about lending – are there any countries where banks are actively encouraging investors to come in? And, if so – how easy is it for a foreign investor to get lending?” It’s always more difficult for the foreigner to borrow. I’m personally not a great fan of leverage, except at the start of one’s career (that first mortgage).
“Can you give our us a brief overview of your philosophy at the ‘Global Property Guide’?” We look at property investment from a fundamental perspective. The Price/Rent ratio is key for us, after taking into all account taxes and all other costs, and institutional obstacles (landlord and tenant issues, for example). The Guide is a massive exercise in data-building, allowing comparisons of residential property returns across countries. This is not some spivvy marketing-led exercise. This is deeply-researched, hard-won data, and we believe the results are very helpful to investors.
