The Caribbean island of Margarita is the property investment opportunity of the century. Tourism has increased by 40% in the past two years, bringing visitor numbers up to 2 million per year. Yet only 15% of the island is developed, creating a massive under-supply of rental accommodation for the burgeoning tourist masses. This makes it an excellent opportunity for buy-to-let and holiday home investors.

It’s no wonder tourism to Margarita is growing so rapidly; it has absolutely everything going for it!
• The only Caribbean island outside the hurricane belt
• Low cost of living (and holidaying)
• Tax & duty free zone
• It has warm and sunny climate all year round with very little rain
• Gorgeous sandy beaches, warm turquoise waters
• Wide variety of activities including snorkelling among tropical marine life
• Breathtaking mountainous forest landscapes
• 15% development, the rest is the beauty of nature in a tropical environment
• Direct flights from the UK

Tourism will be boosted yet more when the new Formula One track, approved in March this year becomes a reality. Holiday home investors are attracted by all the above of course, but also the aforementioned under-supply, and the fact that Margarita property is up to 50% cheaper than any other Caribbean island - though that is, I’m sure, an attraction to everyone, as is the growth potential of Margarita property, as Liam Bailey, head of international research for David Stanley Redfern Ltd explained:

“While Margarita continues on its present path to becoming one of the foremost tourism destinations in the world, property values will increase massively, for instance: a property could be worth anywhere up to 50% more on the resale market that it was bought for off-plan, almost immediately after building work ceases. Annual capital appreciation will not fall below 30% for at least the next 5-7 years, and could even frequent the 40-50% p.a. zone over the next 1-3 years.

“Rental yields are currently quite high at around the 10% mark,” continued Bailey “because of the under-supply and the low property prices, and could actually fall as capital appreciation races, and the under-supply becomes less severe. Of course yields won’t fall on off-plan properties, because prices tend not to grow as quickly for off-plan properties, but people selling on the resale market will likely be doing so with the promise of rental yields of 6-8% — until the market levels out at any rate, at which point yields on resale properties may rise slightly.”

One of the biggest benefits of Margarita for property investors is its taxation regime, total round-trip transaction costs are a mere 2.5%, as you only need to pay for the solicitor, and there is no Capital Gains Tax when you sell either - it’s actually a struggle to find reasons not to invest in Margarita

Major investment and development in the Dominican Republic is set to boost the Caribbean islands tourism and property investment industries.

A major investment deal from an as yet unnamed Balearic island development group worth €3.7 billion will include a railway linking Santiago and Santo Domingo and other significant tourism improvements, the government has announced.

Some $30 million for the reconstruction of highways has been granted by the OPEC Fund for International Development, a number of new Aerocaribbean flights and the construction of a ferry terminal costing $10 million at the Sans Souci tourist port, will also significantly add to the island’s attractiveness to investors.

These plans are a major boost for a country where tourism accounts for 24% of GDP and is fuelling economic growth. The contribution of tourism to employment is now expected to rise from 555,000 jobs in 2008 to 743,000 jobs by 2018. By 2012, it is forecasted that the Dominican Republic will receive five million annual visitors, a one million increase over expected 2008 visitor totals.

And according to a recent report by the Dominican Republic Ministry of Tourism, tourist arrivals for the first quarter of 2008 have already increased by 8% compared to the first quarter of 2007.

‘These developments are welcome to anyone interested in investing in property in the Dominican Republic,’ said Liam Bailey of David Stanley Redfern. The company believes apartment that are fully furnished and managed offer good deals for would be investors.

‘Tax free returns and no work for the owner along with occupancy rates consistently higher than 74% offer excellent value in today’s current economic climate,’ he added.

‘Prices are amongst the lowest in the Caribbean and with Dominican Republic’s huge tourist numbers rental yields of 10% can be expected, while property has the potential of 10-20% capital appreciation,’ he added.

Real estate markets have become more active during the last six months with several foreign-backed projects to build tourist facilities and hi-tech zones under-way. 

The tourism real estate projects are increasing in expectation of a boom in the number of visitors coming to Vietnam, a property expert said.

“With several international events being held and planned for Vietnam, the country’s tourism destinations are attracting the attention of tourists from around the world,” he said.

“The local property market is very attractive to foreign investors,” said Francis Ng Sool Lin, director of Malaysia’s Berjaya Land Berhad.

“It is attracting several investors from Malaysia and Southeast Asia to the potential market.”

Several investors from the Middle East were also reported to be interested in the local property market.

Recently, executives from Sovereign Hospitality Holdings visited Vietnam to study property investment opportunities.

In May, Canadian property company Asian Coast Development Ltd. (ACDL) invested US$4.2 billion in one of the nation’s largest tourism projects in Ba Ria-Vung Tau Province.

The completed development will include a five star hotel, an international convention center, an apartment complex and a golf course.

In July, Kingdom Hotel Investment started to sell apartments in Raffles Residences in Da Nang Province at a price of more than $1 million.

The apartments are located alongside a 30-kilometer beach and Ngu Hanh Mountain.

Hong Kong’s Starbay Holdings is also considering investing in a $1.6 billion tourism complex on a 500-hectare area on southern Phu Quoc Island.

Recently, France’s Accor Corporation broke ground on the luxurious 400-room Novotel Hanoi on the Park, which will become Accor’s fifth hotel in the capital.

Property investment is of the most popular ways to make money, although uneducated investors can easily make mistakes when it comes to taxes.

There are a number of common mistakes in the tax returns of rental property owners.

Construction costs are a big issue, with confusion common about what items can be depreciated and what is a capital works deduction of 2.5 per cent a year.

“Deductions can be claimed for the decline in value of some types of depreciating assets in residential rental properties, for example curtains, blinds, dishwashers, refrigerators, stoves, television sets and hot water systems.”

*CONVEYANCING costs, which instead form part of the cost base.
*TRAVEL expenses where the main purpose of the trip is a holiday and the property inspection is incidental to that.
*EXPENSES relating to private use of the property.
*INTEREST on any private portion of a loan that is used for both investing and private purposes.

“Depreciation schedules have been around for a while but not well advertised. It’s amazing what the quantity surveyors find that can be depreciated,” he said.

A depreciation schedule costs about $500 for a typical three-bedroom investment property.

People should keep records of their expenses with their tax return. “You must keep records of rental income and expenses for five years from the date your income tax return is lodged, and records of ownership and all the costs of acquiring and disposing of your property for five years from the date you dispose of your rental property,” it says.

Francois Fillon, French Prime Minister, has recently detailed his planned to get 70% of property owners in France.

“We will make big efforts so that the French citizens can access the property ladder” said Mr Fillon, adding ” we want 70% of property owners”. Currently 56.6% of the French household owns their property, i.e. 15 millions inhabitants, whereas this figure reaches 71% in the United Kingdom and Sweden, 76% in Greece, 77% in Ireland and 84% in Spain.

In order to facilitate the purchase of a property for first-time buyers, the French Government introduced tax advantages. A tax “credit” will be introduced equating to 20% of the total interests during the first year of ownership. The French Government has also set the target of 500,000 new accomodation to be built per year until 2012, of which 120,000 social housing.

AS with the stock market, speculators have hijacked the property market, turning mostly residential assets into quick-return speculative investments.

Resultantly, property has become one of the most expensive investment options in the local market.

Mortgage financing has not helped much in filling this gap; it has assisted individuals acquire stands that will take long to develop.

The demand for housing, as a social and basic need has been trashed, as speculators go for hard currency.

Development of new homes is at its lowest, property analysts said yesterday, because “it makes little sense developing a property that you will have to wait for years before earnings start to accrue.”

WordHouse Properties partner Mr Lennon Muchingadare said yesterday regrettable, as it may, the real estate sector now had more speculators than developers.

“Investors are looking for immediate returns,” he said. “Property development is not providing this in the current economic set up.

“It makes more sense buying properties and then leasing them.”

Traditionally, property investment here was generally regarded as the preserve of genuine home seekers, unlike in other parts of the world, particularly developed economies, where it has always competed with other investment options like shares.

Kingdom Stockbrokers noted in a recent report:

“Today this traditional norm has changed and buying properties is now more than just finding a place to call home. Investing in real estate has become increasingly popular over the last seven years and has become a common investment vehicle.”

Then there is also the high cost of construction materials, which has turned property development a costly operation.

The cost of building has followed the break-neck pace on food and service prices, which know no gravity.

It has taken more than ten years to develop the 22-storey Joina Centre in the heart of Harare’s central business district.

Joina Development Company, developers of the structure which will house offices, car park, shopping mall and cinema, has routinely cited rising costs, as the major handicap to fast development.

Several Government infrastructure projects are now white elephants due to limited funding, as high inflation relegated budgets to the dustbin.

Three years ago, Government set up the Infrastructure Development Bank to spearhead the development of infrastructure such as roads, houses and other commercial structures.

IDBZ has so far partnered with the private sector and helped develop a housing project in Masvingo, and has completed the development of middle-class apartments in Budiriro.

Other private property developers have also stormed to the scene. Pinnacle Properties, owned by Harare businessman Mr Philip Chiyangwa, has been developing residential and commercial properties.

Even with public housing schemes such as Operation Garikai, which has built more than 5 000 high-density houses, the demand for residential property in Harare alone remains unsustainably high.

It is clear that without increased investment in the property industry, the demand for homes will remain high.

Property prices, whether residential or commercial, have risen to unsustainable levels, fuelled strongly by speculation and high demand.

An upmarket house sells for anything between US$100 000 to US$150 000 and most house owners now demand rentals in hard currency.

Rapid demand has been seen among the Diasporans, who - backed by the strength of the US dollar or the British pound - have found the property sector a cheap option.to store value in the face of high inflation.

From luxury investment spots like Cannes, Frejus and St. Tropez to the winter slopes in the French Alps, property in France is highly diversified. You can invest in a luxury villa or apartment and gain a lucrative profit from a combination of rental sales and capital appreciation.

Many areas in France have a great potential for property investment. Depending on your budget and needs, there are various schemes to choose from for investing in French property. Thus, prime properties in France can be purchased at prices well below market price.

One option is buy to let, which is where an investor purchases a new build or refurbished property and leases it to a permanent tenant, thus earning rental income on a monthly basis while the property goes up in value. With property prices in many areas of France much lower than in UK, many Britons are considering French property as an investment by purchasing houses and apartments and earning from the rental income. In some cases investors purchase these properties off plan. Despite the fact that you are purchasing into a yet-to-be-constructed property, buying off-plan offers the least cash shell-out and at a very competitive price in most cases. Furthermore, buying off-plan means that the property will be brand new, thus making maintenance and running costs minimal while offering excellent rental and resale profitability.

Yet another option is investing in reversionary property, which an increasing number of people are considering as a good alternative investment. Property is purchased from an elderly homeowner at a highly discounted price, with the usual arrangement being a payment of a minimal lump sum and monthly annuities in exchange for ownership of the property when the homeowner dies. The price depends on the age of the property owner, the location and other characteristics of the property.

DTZ, a leading global real estate adviser today recommended the Arabian Gulf property market as a strong proposition for investors seeking to escape a global fall in property investment transactions.The recommendation follows the publication of DTZ’s annual Money into Property report, which looks at global property trends. The report revealed that the value of the real estate capital market reached US$12 trillion in 2007, up 18% on the previous year.

Global investment transactions also grew to US$730 billion in 2007, but, following the sea-change in the global investment environment over the course of last year, DTZ expects a fall of 30% in 2008 to about US$500 billion. Global direct real estate transactions were down some 50% in Q1 2008, compared to the same time in 2007.   

“Although the worst of the first phase of the ‘sub-prime’ crisis appears to have passed, we firmly believe that the credit crunch has further to go and will continue well into 2009, across the European and US property markets in particular. This means we will see a significant decrease in property transactions in these markets, as revealed by the Money into Property report,” said Robin Williamson, Managing Director of DTZ Middle East Operations.

“Few regions will escape the effects of the sub-prime fall out, however we predict that the Gulf region will, to a greater extent, be significantly less affected, along with certain other markets in the Asia Pacific region. Based both on our research and our on-the-ground experience of dealing extensively across the Gulf markets, we have seen strong indications that the regional property markets are much less likely to succumb to these global trends.  Indeed, we are planning to expand our operations in the region to take advantage of the strength of the local property sector,” added Williamson.

DTZ is the most established firm of real estate advisors in the Middle East, with its first permanent operations beginning in 1975. Today, DTZ has a presence in six GCC locations (Abu Dhabi, Dubai, Bahrain, Kuwait, Qatar and Saudi Arabia), and is currently undergoing aggressive expansion across the region to match a growing high-profile client list. Each DTZ office provides a full range of real estate services staffed by qualified expatriates and experienced nationals.

Investors are pouring money into the property sector, a sign that they remain confident in the long-term prospect of returns from the real estate market.
Almost $20bn (£10.2bn) of real estate funds are to be launched this week as equity raising for property investment shows no sign of slowing.

Most of the money is going to emerging economy countries where value is to be had, in particular Asian and eastern European markets.

Liam Bailey, head of international research for overseas property specialists David Stanley Redfern Ltd said:
“This is yet more proof that the credit crunch is having a positive effect on emerging markets and on property investment therein. The credit crunch tightening company purse strings is intensifying growth in business sectors in emerging markets, both from businesses relocating to more cost effective emerging market locations, and consumables being bought cheaper from suppliers in emerging markets. Emerging market tourism may well also be boosted if the credit crunch worsens, as people look for ever-more-affordable holidays.”

“That said,” continued Bailey “it is little wonder confidence is not falling in real estate investment in emerging markets, because as research and possibility turns into fact, confidence is actually growing.’

David Stanley Redfern Ltd are emerging market property specialists. As part of their portfolio the company has property in eastern European countries such as Albania and Montenegro; Asian property hotspots such as Cambodia, Malaysia, and the Philippines; South American markets such as Nicaragua, Panama and Costa Rica; as well as other emerging markets in the Caribbean and more established markets where value is still to be had.
The company’s business model is built on their clients’ success and David Stanley Redfern Ltd only sells property that is capable of making substantial returns, be it over the short term, or the mid-long term.