Turkey and beyond: rewards of buying in the risks and distant lands

Laura Howard seeks out the new hotspots, from Europe's southern borders to Cape Verde and even Thailand

Sunday 02 March 2008 01:00 GMT

Our property prices may be stagnating but for Britons looking to turn bricks and mortar into profits, there is hope on the horizon – the far horizon.

Record numbers of investors are looking at a new raft of property hotspots around the globe – and Turkey is top of the list.

Overseas mortgage broker Conti Financial Services recently reported a 147 per cent increase in enquiries about Turkey year-on-year. For Spain, by contrast, enquiries fell by more than 28 per cent.

Property prices in Turkey rose between 15 and 20 per cent in 2007, reports estate agent Knight Frank, after a change in the country's mortgage law made finance available to overseas buyers. Yet prices are still cheap by UK standards. Julian Walker, managing director at Spot Blue, a UK agent operating in Turkey, says one-bed flats can go for £25,000, two-beds for £50,000 and villas for £90,000.

While no bank or building society on British soil will lend against a property abroad, finance for Turkish homes can be secured, through specialist brokers such as Conti, with a lender in the country. Foreign buyers will need a 25 per cent deposit, and sterling mortgages are available only over 15 years. Unusually, though, British investors living in the UK at the time of applying for finance may be able to borrow up to 100 per cent of the home's value in Turkey if the loan is in euros.

Large advances like this are confined to property in certain parts of the country such as the capital Istanbul, or Alanya on the Turkish Riviera. And as they are based on the "execution", or preliminary valuation), they may also be lower than the final purchase price, warns Conti.

Simon Conn, Conti's sales and marketing director, says: "While Turkey is being hailed as the 'new Spain', it is also undergoing some of the same problems, such as corruption and bad planning – although it is learning a lot quicker."

On a par in terms of risk and potential return, is Cape Verde, a collection of 10 islands just south of the Canaries. "Cape Verde is a good bet because, as an ex-Portuguese colony, it is politically and economically stable," says Mr Conn.

While the very cheapest properties were snapped up three to four years ago when the smallest apartment on the developed island of Sal would have cost just €€30,000 (£23,000), there are still bargains to be had. Now a two-bed home costs around €105,000, according to Mr Conn.

Foreign buyers will need to stump up a 15 per cent deposit for a mortgage with a Cape Verde lender but the loan, which must be taken in euros, can stretch up to a 35-year term. "In my opinion, the Cape Verde islands will overtake the Canaries during the next five to 10 years as one of the most popular holiday destinations," says Mr Conn. "The islands are an average 3.5 degrees warmer than the Canaries and only one hour further away by air."

Investors who can afford to gamble may consider looking as far as Thailand. Some areas, such as Phuket, Bangkok, Koh Samui, Chiang Mai and Pang Nang, have already been "discovered" but cheaper property – for as little as £45,000 – can be found in coastal regions such as Hua Hin.

However, quite apart from the recent political unrest, Thai property carries wealth warnings. If you are buying a freehold or "landed" property, you will have to do so with a local resident, who must also own a majority share. The rules on buying a leasehold home aren't nearly as strict, although there is a rule that over 50 per cent of the properties in a block must be owned by Thai nationals.

Egypt – where stamp duty is low and there is no capital gains tax on the sale of a property – has also piqued investors' interest in recent months. And as many of the developers have moved across from Dubai, the quality of new-builds is very good, says Mr Conn. However, although mortgage laws are changing, it remains difficult to raise finance there.

Buying anywhere abroad – but especially in emerging countries – requires caution and local knowledge, says Linda Travella, spokeswoman for the National Association of Estate Agents International. "Do not expect the buying process to be the same as the UK, where you can be gazumped by a higher bidder after the survey – initial contracts are binding. And you must seek independent advice from an English-speaking lawyer, either from that country or with a good knowledge of its conveyancing process."

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