Don’t rush into fashionable property markets

The British love to buy second homes ¬– 230,000 Brits own one abroad. But with property in the UK, the US and across much of western Europe looking frighteningly overpriced, they’ve started to look further afield for good deals.

The British love to buy second homes 230,000 Brits own one abroad. But with property in the UK, the US and across much of western Europe looking frighteningly overpriced, they've started to look further afield for good deals. But is that such a good idea? Here, we look at three property markets that are not the bargains they look.


Dubai must be one of the most hyped property markets in the world. Property journalists write about it endlessly and the developers never seem to miss a PR trick.

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David Beckham was reportedly given a home on the famous Palm Resort, a huge man-made archipelago that can be seen from space, when he passed through Dubai on his way to the last World Cup in Japan and South Korea in 2002. The ruling Maktoum family (who control Dubai) have spent £200m on appearance fees to persuade top sportsmen, including tennis star Roger Federer, to perform in Dubai and raise its profile.

Still, says Jim Pickard in the FT, so far it has been money well spent if you are the Maktoums. Some of the off-plan units on the island are said already to have been resold four or five times, despite completions being still some years away.

But is buying here really a top idea? Supply is rising alarmingly fast. Dubai is said to be making use of 15% of the world's cranes and 215 big projects are under way, including The Burj Dubai, the world's tallest building, and The World Resort (250 man-made islands with access only by boat or helicopter).

At the same time, the number of properties planned on the Palm Resort is creeping up, despite the fact that there is only one road in and out of it. Who will really want to spend their holidays on an overpopulated island suffering from Oxford Street-style traffic congestion?

But oversupply might just be the tip of the trouble iceberg. Tellingly, professional investors are wary of the whole thing. The reason? Foreign investors are not able to have freehold property rights in Dubai and, despite rumours that this is to change, not everyone is convinced. "The royal family here have been promising that since about 1976," John Sandwick, managing director of Encore Management, told the FT.

Eastern Europe

Right now, eastern Europe is all the rage with UK property buyers. In Estonia, Bulgaria, Montenegro and Croatia, we are told, one can get a second home for the price of a second-hand car. There are ski chalets for £30,000, flats overlooking the beach for £50,000 and five-bedroom villas for £100,000.

These prices look very cheap to UK investors, so it is no wonder that, with the encouragement of the weekend property supplements, they are pouring in in droves. Two thousand Brits have already bought in Poland.

However, it is worth remembering that rather like second-hand cars these markets are cheap for a reason. Take Bulgaria. It may have splendid skiing and an attractive coastline, but buying there isn't easy. Estate agents are notoriously unreliable, commissions are high and, while foreigners can buy buildings, they can't buy the land they're built on. If you want to do this, you have to set up a firm (this isn't easy, but worse, it leaves you embroiled in the Bulgarian tax bureaucracy for as long as you own the land).

There are similar problems with buying in the Czech Republic, Poland, Croatia, Estonia and Montenegro. These are not Western countries and they do not have Western legal systems or consumer cultures. Estonia's Tallin may be "the new Prague" to some, says Tom Dyckhoff in The Guardian, but it also comes with "the Baltic equivalent of dodgy time-share salesmen".

Another thing to bear in mind is that prices in many eastern European countries may be quite high enough already. In Croatia, small concrete houses with no direct sea access go for £150,000 and in Montenegro, a small two-bedroom house on the edge of one of the (admittedly amazing) fjords fetches about the same. Given the state of both economies and their appaling lack of infrastructure (getting from Dubrovnik to the resorts is, for example, a nightmare of a car journey), this is too punchy.

Other countries (Bulgaria in particular) have been attempting to cash in on demand by building huge low-cost resorts, so soon oversupply could end up pushing prices down (as could the fact that English is barely spoken and Soviet housing blocks dominate the market).

There is a similar risk in Prague, where prices have been rising at 20% a year for the last five years or so, but where there has also been a lot of new building and rental yields are falling fast.

Then there are the dirt cheap castles in Poland we hear so much about. They sound nice, but one will not only cost you a fortune to renovate, but anything built pre-war still comes with the possibility of an ownership dispute.

Just because prices in eastern Europe look cheap to the British eye today, that's no reason why they should go up, or, indeed, why they can't get cheaper.

Coastal Spain

Spain isn't exactly far afield for Brits, but it makes it into our list because it is still much more popular with British buyers than it should be.

The coastal areas of the country were once cheap by any standard. But not any more. After a 15-year building boom, most impartial experts now agree that you can't do many more stupid things than pay the asking price for a flat on the Costa del Sol. Last year more houses were built in Spain than in France and Germany combined but there isn't much demand for it all any more.

The Costas have been eaten up by cheaply constructed and intensely ugly developments, their beaches are overcrowded, their seas are not exactly clean and any sense of Spanishness is long, long gone. Worse, the area has long been a gold mine for the unscrupulous: stories abound of off-plan flats and houses bought from developers by Brits who later find that, when built, their dream home bears little resemblance to the architect's drawings.

Then they find that they can't sell their nightmare on at a price that will even begin to match the one they paid. The fact is that in most of Spain the easy money was made long ago. If you must buy there (and we aren't suggesting you do), you'd be better off looking in city centres. Back from the coast, Malaga is beautiful, or consider Valencia, where asking prices are a third lower than on the Costa del Sol and Costa Brava, and where the 300 miles of coastline remains relatively unspolit. If you do buy, do so with your eyes open: prices have risen 25% in the last year and the developers are on their way.

Zimbabwe: the new property hotspot?

Since British holiday-home hunters are feeling so brave, perhaps it's time they considered Zimbabwe. So said Johnathan Haward, managing director of County Homesearch International, last week in the FT. It sounds like an unlikely tip, so we rang him to check.

It turns out he means it. "Seriously," Haward told MoneyWeek, "Zimbabwe is the new hotspot." Most people think that property owned by any white person in Zimbabwe is being forcibly taken from them. But that just isn't true. Yes, working farms with 50 acres or more are vulnerable, but people are not being evicted from freehold holiday-homes or city flats.

And while it is true that Zimbabwe is not exactly stable, that doesn't mean there isn't money to be made. Haward points to Mozambique, whose government realised a few years ago that the route to sustainable wealth was via a tourist infrastructure. In the past five years, property prices there have more than doubled.This, says Haward, could easily happen in Zimbabwe.

Indeed, the "smart money" is getting in already. The market in Harare, where a two-bed flat goes for around £35,000, is the busiest its been in years.

Contact: County Homesearch International, 01872-223349

Emma Thelwell

Emma is a former digital journalist with more than 15 years of experience in national news in the UK and overseas. She was an assistant editor at MoneyWeek, covering property, funds, alternative investments and the share tips pages, then Emma moved on to The Daily Telegraph, first as a personal finance reporter and then as a business reporter. 

Emma also worked as a finance correspondent for Ninemsn (Australia’s Channel 9 online) in Sydney, Australia for just over a year, and since then Emma has worked at Channel 4 News as a reporter and producer, and she spent more than 4 years at BBC online. At present Emma is a senior manager for content and thought leadership at PwC.