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DULL, but sustainable
growth of around 2.5% is forecast for the UK
housing market in 2006, according to new
report from estate agent Knight Frank. For
property investors, growth at this rate will
see their portfolios barely tracking
inflation. So, where should they be looking
to outperform the market?
With fears of oversupply in many towns and
cities throughout the UK, some prime city
centres will underperform in 2006 as a glut
of apartments more than satisfies short-term
demand, predicts Knight Frank. But, there is
room for growth in towns and cities in the
north and the Midlands, along the south
coast, in prime central London and student
accommodation, it says.
European housing prospects in 2006
After strong capital appreciation for much
of the past decade, western Europe’s housing
markets are experiencing slower growth,
particularly those which have seen the
highest sustained price rises over the past
few years. These include Spain, France and
Ireland, which have all experienced double-
digit house price inflation.
The strongest growth over the past 12 months
has been recorded in the new EU member
states, including the former eastern block.
With underlying economic and financial
conditions remaining solid, house prices in
most European countries are expected to
increase in 2006, although at a slower rate
than in 2005, with a few notable exceptions.
Southern Cyprus is hotly tipped by
Stuart Law of Investment Specialists Assetz
Property Management. With deposit levels
falling to just 15% in many areas and Swiss
Franc mortgages available at 3.25%,
borrowing is now more affordable. Other
factors likely to push up house prices
include the redevelopment of Larnaca &
Paphos airport and entry to the euro in
2007/8, a year-round rental market and
rental yields of 8-9%.
Bulgaria is expected to continue proving
lucrative as an investment into 2006, with
ski resorts boasting year-round rental and
rental yields up to 12%, double those in the
coastal resorts. With a low cost of living
and more cheap flights from the UK, Bulgaria
offers a cheaper alternative to ski-areas in
France and Switzerland. But, the resale
market is not guaranteed and investors
should exercise caution, warns Law.
Growth is forecast in the Languedoc region
of the south of France, which is currently
considered undervalued. It is becoming more
accessible with new low-cost flight routes
to the area, which is likely to drive up
house prices. The French leaseback scheme is
expected to remain popular with domestic
investors following the introduction of
interest only mortgages. Greece is also
expected to move away from the starting
block in 2006 as reports suggest house price
growth is beginning again.
Euro property hotspots
Cote d’Azur: As always, remains a prime
European location for top-end buyers.
Languedoc: Undervalued, yet highly
accessible region, house prices are expected
to move up.
Southern Cyprus: New airport in
Larnaca & Paphos likely to push up tourism
and house prices. Year-round letting with
high rental yields. Transparent legal
system, similar to the UK.
Greece: House prices expected to take off.
Greek Islands: Still some islands yet to be
developed.
Paris: Strong tenant demand – supply
shortages.
Sicily: Undeveloped market about to be
discovered.
Turkey: Relatively cheap and expected fillip
from EU membership.
Tuscany: No inheritance tax, nor capital
gains tax after five years ownership.
Bulgaria: Scope for investment in the
capital and mountains.
Poland: Buy-to-let in Warsaw and Krakow.
Croatia: Good prospects for investment in
many coastal areas and islands, but don’t
pay over the top.
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