2013 will be remembered for two things:
- It was the year when we could finally say yes the worst is behind us!
- The economic recovery has finally arrived.
So there is no more need to hide behind the sofa now as we can look ahead to better things in 2014 safe in the knowledge that even in the worst of economic times, property is still the number one investment for financial gain.
At least this is true if you invested in the right places. In some countries you may need to wait a little longer to come out from behind the sofa. In these countries it is not safe – just yet.
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Property prices in Italy have slumped by 5.1%. Just when other parts of Europe are worrying about property bubbles – Italy has lost all the fizz out of its property market.
Italy has suffered the longest recession since the end of the Second World War and, with consumer spending low and exports not competitive, the economy is forecast to shrink by 1.8% this year.
The head of Croatia’s Chamber of Commerce was recently arrested on suspicion of corruption and embezzlement. This is news the country can do without, after years of recession and plummeting property values which saw another 5.5% fall in 2013.
Croatia is a beautiful country and a nice place to visit for cheap holidays, but a property investors’ paradise it most certainly is not. After four long years of recession there are rumours that Croatia may seek assistance from the International Monetary Fund (IMF).
Spanish property developers have been trying all sorts of incentives to attract investors to purchase property in coastal resort in 2013. The result? Another 7.6% fall in property prices. This wipes nearly 40% in total off prices in some areas since the peak of 2007.
There is a bright side now with Spain. Fitch, the credit ratings agency, has removed the country’s negative outlook, even though Moody’s (another major credit ratings agency) continues to see Spain’s creditworthiness as “just above junk”.
This central European country continues to offer property investors nothing. However, there are some crumbs of comfort to be gained the recent announcement that Hungary will record some economic growth in 2013.
1% GDP growth might not sound like much but, for a country that has been through the mill, this is a huge boost and might hint at better things to come even if the fact remains that property prices have slumped by 8.2% in 2013.
The real downside for Greece in 2013 was another 12 months of double-digit price falls. Property prices were down another 11.5%, according to Knight Frank.
It has to be said that the situation is still grim in Greece, even if it hasn’t been in the news so much lately. Youth unemployment is over 60% now and general unemployment is more than 27%.
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Loxley McKenzie’s View
I look back on 2013 as the year when the recovery really got started.
Before 2013 arrived, there really were only a handful of countries that could be considered as truly investible for property investors. The USA, Turkey, the UK and Brazil all offered a combination of rising prices and rents.
Those countries remain the best places to invest because they have stable, growing economies, good capital growth prospects and a reliable rental market.
As it becomes easier to get hold of mortgage finance after years of tight bank lending figures, I expect to see more countries joining the investible list and making the world a much more exciting place for property investors.
If there is one lesson the recent downturn and recovery has taught us, it is that property should always be an investment that pays for itself no matter what direction an economy is moving in.
If the return you get from property does not cover your outgoings on things like property management and repair bills, then it will be a challenging investment.
Looking ahead, I expect to see at least two, possibly three of the five countries in our Worst Property Markets Report 2013 — to continue to see price falls in 2014, particularly when the economic prospects for those countries remains bleak.
The recovery will continue to be a slow one but it will be strong in the UK, the USA and Brazil in World Cup year. With the Olympics also on the horizon for Brazil, I expect big things in 2014.
Property cycles come and go and history has shown us that sometimes a hard recessions are followed by a dramatic recoveries. These are exciting times because we are still at the beginning of the next property growth curve.
Let me know your thoughts, leave your comments below.