Saturday, May 3, 2008
Learn more about international real estate investing in International Living Postcards—Saturday Edition
There are more than 24,000 condos listed for sale in Miami, according to the Florida Association of Realtors. They say that is a five-year inventory…but with another 19,000 units coming online in 2008, it seems like it’ll be closer to 10 years before that market reaches equilibrium again.
A similar glut hit Spain along with a corruption scandal that put many of the ocean-front condo projects under scrutiny. Prices along much of the Spanish Costas have been declining for a couple of years.
Commodity real estate, like most of the condo complexes in Denia, Spain, or many of those condos in Florida, might be likened to tulips in Amsterdam in the 1600s. Unless you find a greater fool, you’re going to be holding an asset you probably paid too much for. You need a rental yield from your property, or your return on investment is limited to capital appreciation. You can’t expect much appreciation from your property when there are thousands of similar units right next door…and you might expect your property to depreciate when they are throwing them up like Legos.
Intrinsic value is the key to long-term security with real estate. Your investment property will turn out to be a much better investment if it has a unique quality to it. Location is always held as the best unique quality for real estate. Property located in the center of a bustling city will generally perform better long term. Just take a look at Kensington and Chelsea in London or the 7th arrondissement in Paris. These locations are in the middle of the action and have been for hundreds of years, so you can safely expect them to continue to be sought after.
Waterfront is another key location. Whether it is oceanfront, riverfront, or lakefront, humans have always gathered around water. Of course, oceanfront is the most desirable these days (global warming and rising sea levels notwithstanding). Beachfront is even better if you can find it. There will always be a market for property that has direct access to a beach.
Still, be careful, as beachfront in some countries can be classified as a commodity. Vietnam, Brazil, and Australia have thousands of miles of beach. [ Editor’s note: In the case of Brazil, here’s how to find the most desirable beach investments.] You don’t want to invest in a property on the beach when thousands more properties can and will be built next door on the same stretch of beach. If that’s the case, then you need to go back to location…accessibility of the property…and quality of development or property. In Spain, the developments on the beach that have building after building of the same apartments have seen prices drop, while individual villas are still in demand.`
Buying a quality property in a good location is the best way to protect your investment funds. Buy with the masses and you end up being…well, one of the masses. And you can see for yourself what investing with the masses can do to you…in Florida or Spain.
Lief Simon
For International Living
Editor’s note: Lief will be speaking about “How to Profit from International Real Estate” and “Understanding the Real Estate Market” as well as more tips and tricks you’ll need in the global real estate market at the Ultimate Event in Cancun, Mexico, May 28–31.
Read related articles:
- The Truth About Investing in Panama City
