Landlords look abroad for richer returns

The Sunday Times, 7th May 2006

As the buy-to-let market withers in Britain, more people are looking at far-flung destinations, writes Clare Francis

THE downturn in the UK buy-to-let market is forcing many investors to look as far afield as Dubai and Canada in their search for better opportunities.

Recent research from Landlord Mortgages, a broker specialising in buy-to-let, has found that rental yields — income as a proportion of a property’s value — fell in all areas of Britain apart from Scotland in the first quarter of this year.

Mike Boles, a broker, said: “With property prices continuing to rise much more quickly than rents, investors are being forced to look overseas rather than in the UK in the hunt for decent yields.”

Bulgaria is eastern Europe’s hottest market. HIFX, a foreign- exchange broker, said that 10% of all its inquiries from people buying overseas were from those investing in property there. The main pull for investors is the growing tourism industry: Bulgaria is becoming increasingly popular with skiers, and investors are buying in the Bansko and Pamporovo area. Black Sea resorts are also in demand.

Over the past four years the number of foreign tourists has increased by 50%.
While there is rental demand from holidaymakers, there is little demand from Bulgarian nationals.

Prices rose by 47.5% in 2004, but this is already slowing. In the first quarter of last year, property values rose by 10.6% but there was a marked slowdown towards the end of 2005.

However, prices in some of the mountain areas bucked the trend, rising by 24.6%. So anyone thinking of investing in Bulgaria needs to do their research.

The legal system in eastern Europe is different from that in the UK, so make sure you speak to a solicitor who specialises in the law of the country where you are buying.

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