When you
are in the early stages of
researching property overseas
it can often be difficult to
pinpoint where exactly you
should start. Agents will make
virtually every destination
look incredibly good to it is
necessary to employ some sort
of a filtering system to
enable you to decide which
countries are in fact likely
to suit your investment
priorities and those which are
not.
One of
the first ports of call if
you’ve absolutely no idea
where you may like to purchase
is to browse some indices.
There are a number of them
about and they will give you a
feeling for what a country may
be like in terms of the safety
of your money, your property
and even yourself.
The three
I will address here are the
Index of Economic Freedom, the
Knight Frank Global House
Price Index and the Jones Lang
LaSalle Real Estate Freedom
Index. All three can be used
to help with decisions as to
what countries you should
consider for your investment
and which should possibly be
avoided.
For over a
decade now The Wall Street
Journal and The Heritage
Foundation, Washington’s
pre-eminent think tank, have
tracked the march of economic
freedom around the world with
its influential Index of
Economic Freedom. The Index
covers ten freedoms – from
property rights to
entrepreneurship – in 161
countries. For the first time,
the 2007 edition also analyzes
regions to showcase the freest
economies in every part of the
world.
The top
seven ranked countries, all
scoring in excess of 80% and
considered ‘free’, are Hong
Kong, Singapore, Australia,
the US, New Zealand, the UK
and Ireland. The index
maintains; ‘Ireland has high
levels of business freedom,
investment freedom, financial
freedom, monetary freedom,
property rights, and freedom
from corruption.’
These top seven have come
ahead of such luminaries as
Luxembourg, Switzerland,
Canada, Belgium, Germany and
Spain who are all classed as
‘mostly free’.
A quick
look down the index will show,
for instance, that Montenegro,
a country which has been
extremely popular with Irish
buyers in recent years,
actually fails to receive a
rating. The site says; “Most
of the economic freedom of
Serbia and Montenegro cannot
be graded because of the
violence and political turmoil
that the country has endured
in recent years. The last time
Serbia and Montenegro was
wholly graded was in 2003,
when it received a score of
39.5 percent. (this would in
any case place it very near
the bottom of the index,
between Burma and
Turkmenistan). This is
particularly interesting as
neighbouring Albania has
managed a ranking of 61.4%
which puts it in a quite
respectable 66th
place, rated by the index as
‘moderately free’. Croatia, on
the other hand, has only
managed to make it to 109th
position which rates it as
‘mostly unfree’.
The Jones
Lang LaSalle
Real Estate Transparency Index
(RETI) is based purely on real
estate transactions,
predominantly commercial.
Similar conclusions can be
drawn for residential
transactions. The latest
report, which is published
biennially, says that;
“Transparency is improving
across the globe. Ten
countries have now achieved
our highest ‘Tier 1’
Transparency level, up from
six in 2004. The new ‘highly
transparent’ countries are
Hong Kong, France, Sweden and
Singapore.” Australia and the
US hold joint first place
followed by New Zealand,
Canada and the UK. Ireland is
considered to be a tier two
location, ranked in 15th
position. Probably more
interesting to Irish investors
are the countries propping up
the end of the table. At tier
five, the lowest level, you
will find Egypt, Venezuela and
Vietnam. Others who don’t fare
so well are Panama, Turkey and
the UAE, although the latter
pair have been deemed to have
shown ‘significant
improvements in transparency’
since the last index was
published in 2004.
The Knight
Frank Global House Index
tracks average quarterly house
prices across a
comprehensive list of
countries around the world.
This index is based on an
assessment of price changes in
the broad mainstream housing
markets of the countries
covered. The most recent
report, issued on March 20th
last, says; ‘There are two
noticeable trends at work
across global housing markets:
Firstly, price growth is
slowly but surely beginning to
decline in most locations
globally. The impact of lower
interest rates has led to
sharply higher prices across
Europe, Asia and the Americas.
This upward trend in asset
prices is moving to a close as
interest rates either remain
level or begin to rise.
Secondly the emerging
economies are still dominating
the top of the growth table -
with the recent EU accession
states being classic examples.
Growth in prices here reflects
wider mortgage market reform
and rising wealth in expanding
economies.’
Latvia has
posted the largest gains with
a staggering 66.6% increase in
prices, although it does
specify that this is in Riga
alone. It is followed by
Poland with 33%, Denmark with
22%, Norway with 16.4%,
Lithuania (Vilnius) at 13.3%,
South Africa with 13% and
Ireland with 12%. Japan and
Germany are once again the
laggards in the table posting
losses of 1.6% and 3.2%
respectively.
Liam
Bailey, Head of Knight Frank
Residential Research,
comments; “The next issue to
consider is where next for
prices? Too many people look
to invest in the top growth
location, assuming that high
growth will continue. It might
be a more interesting and
perhaps rewarding strategy to
look at the bottom of the
table and think which of these
countries will see the next
upturn.” He continues; “For
various reasons Germany has
under-performed as a nation in
housing market terms for a
decade. We think investors
could do well to look behind
the headline figure and look
more closely at some of the
German sub-markets.”
All the
information in such indices is
averaged by its very nature
and as such you can find
considerable variations within
specific countries. Such
information will, however,
help guide you as to which
countries might prove less
risky than others if you are
not in a position to handle a
lot of risk. On the other
hand, if you are a high risk
investor, they can be used to
guide you toward countries
which are likely to have a
strong claim for high capital
appreciation down the line.
Resources:
Index of
Economic Freedom -
http://www.heritage.org/research/features/index/countries.cfm
The Jones
Lang LaSalle Real Estate
Transparency Index (RETI) -
http://www.joneslanglasalle.com/en-GB/research/researchabstract?artid=2489
The Knight
Frank Global House Index -www.knightfrank.com/ResearchReportDirPhase2/11058.pdf
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