This month we speak with Adam Samuel, author of Nubricks, an influential international real estate blog documenting the ins and outs of overseas property. Along with great articles, Nubricks Overseas Property Podcasts probe a bit deeper to some of the issues affecting the international property development industry and have garnered a strong following of listeners seeking a snapshot on the different overseas markets emerging.
Adam, thanks for making the time to speak with us.
1. As a long time observer of the market, how has the current state of the mortgage market changed the outlook for overseas properties?
The overseas property industry has come of age over the past 5-10 years with new emerging markets appearing on the scene on what seems like a weekly basis, as soon is Thailand heralded as an investment hotspot Vietnam comes along as the new kid on the block. The strength of the established property markets of Spain, France and Portugal is very much associated with a strong, diverse mortgage market, offering buyers and investors the opportunity to borrow money against property in these locations. These overseas property markets are essentially driven by wealthy northern Europeans seeking a warm climate in close proximity, that is easily accessible through a choice of low-cost carrier alternatives and above isn’t too far out of their comfort zone where property practices are well established and ‘safer’ than say an emerging market it is these factors which ensure these countries remain the most popular and diverse within the market for overseas property. The lack of mortgage option available to foreign purchasers in many of the new emerging countries means they enjoy limited appeal from mainly cash rich investors who are able to purchase buy property outright. They are perceived as being riskier with greater risk of fraudulent buying practices taking place due to poorly regulated marketplace. The upside of a market being less accessible means property prices on the whole are lower and as the property market there develops there is greater potential for a return on your investment.
In general when mortgages become available in an overseas property market it opens up to the mass market and demand increase and prices go up. This can have a negative effect because once the market is saturated with buyers there is an oversupply of property and funding is too easy to get, the market will stagnate and even begin to fall in value in some areas. This has happened to Spain in recent years.
2. What are your hot tips for the overseas investor?
2008-2009 are rumoured to be tougher years economically speaking, with the cost of credit increasing and the ability to get credit becoming harder. This shouldn’t necessarily put you off buying abroad because it means as a buyer you are in the driving seat and in a strong negotiating position to call the shots. Don’t be afraid to ask for a deal, they can only say no. Don’t get your heart set on something and be prepared to walk away, in markets such as Spain and Portugal, a flurry of building has meant thousands of new builds are reaching completion which translates to a raft of properties to choose from.
Buying to sell in this climate can be very difficult, finding that property that you can flip and still make a decent profit on these days is tough and requires you do some serious homework into locations, who’s buying and what is driving property price increases if its just hearsay I’d think again. Buying to let is a more solid prospect but again market good research is key, if your buying location is seasonal will the rent you achieve at maximum occupancy cover all dead periods a resort with year-round appeal might be better or invest in a condo hotels where management and more importantly marketing is someone else’s worry.
Due diligence might sound boring but time and again continues to be a stumbling block for thousands of buyers of property abroad who make the same mistakes. Independent legal advice is mandatory before you sign on that dotted line. It is imperative that you have recourse for any further problems and by ensuring you are working with a reputable agent/developer goes a long way towards damage limitation. Talk to other buyers in forums or at exhibitions, don’t just take the sales patter at face value and jump on the next plane with the intention of buying a property in a weekend. Be strong, come back to the UK, talk it over with family or friends and then decide whether you want to proceed or not.
Finally in terms of where is best to invest I would keep an eye on the Malaysian property market, a real estate investment in Slovakia looks a good bet and Cape Verde has a lot going for it long term.
3. What are your thoughts on the developments in the online property search sector in the last 18 months?
Online property search has moved on leaps and bounds from the days of an html site with 20 pages in 2001. The overseas property industry in particular I feel still see very little attempt at innovation and agents are very reactive as opposed to proactive in their marketing approaches, it takes a long time and a lot of persuasion for the market to adopt new technologies. It has taken 5 years for property professionals to realise the value of internet marketing and jump on the bandwagon.
In the world of property portals, it seems they are being launched all the time and come and go. The established players don’t seem to want innovate which I believe is principally because they don’t have to. Online property searchers have been conditioned to accept that this is the only way to search. Whilst mapping has proved to be a boon for UK and US online property search, it is difficult to implement with overseas property, as there are vast differences between different countries with some not even having been mapped online yet. Nestoria seems to be a UK property search trying to innovate the search process but trying to compete on a level with established and trusted brands is a challenge. I think this will change as the buying demographic gets younger and demands technology advancements, this shift leaves open a market space for models like Nestoria and the potential to gain market share.
Video feels like the last known frontier for this industry, as the costs of hosting and syndicating video become cheaper and easier to embed it will become more of a standardised feature within property listings, after all what better way to view a property without having to visit it in person.
4. What do you think are the challenges that a vertical search engine for property like Nestoria faces?
I think an inherent problem facing the Internet as a whole today is choice, today there is too much choice in every genre from social networking to online property search and the space has become crowded and noisy. Success online today has come down to shouting loudest above the rest. With blue chip internationals cottoning on to the value of organic search engine rankings and with multimillions to throw at online marketing, good optimization is becoming a fundamental part of online success as the competition becoming fierce. You may have the world’s best product or service but if you can’t be found online you are at a disadvantage from the outset.
I think that the vertical search engine model has two challenges; monetisation and adoption. The model needs to be able to sustain itself and for that it needs customer eyeballs and fast. Without a doubt, adoption is the single most important factor, as without an audience, the model is nothing more than great technology, the audience represents a revenue stream whether that be pay per lead, subscription or advertising. I think Nestoria is doing well in the adoption stakes but we can all try and tweak things to make them better.
Thanks again Adam for sharing your insights. We’ll keep working on the innovation. For anyone contemplating moving abroad or buying a second home abroad whether it be an investment or vacation home, make Nubricks.com an essential part of your reading research!
past Nestoria interviews: Gabor Cselle, Gregory Marler, Artem Pavlenko