OVERSEAS OVERSEAS PROPERTYPROPERTY

INVESTMENTINVESTMENT

Monday 18Monday 18thth October 2004 October 2004

Overseas Property Overseas Property investmentinvestment

What it isWhat it isComparison v other marketsComparison v other marketsThe returnThe returnThe risksThe risks

Overseas PropertyOverseas PropertyToo big to be dealt with hereToo big to be dealt with hereSnapshot onlySnapshot onlyNeed a working partyNeed a working partyNeed professional adviceNeed professional advice

WHY?WHY? Investment recordInvestment record No fun in investmentsNo fun in investments Loss of 5 membersLoss of 5 members

UNIT PRICE HISTORYUNIT PRICE HISTORY

Unit Price History

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FTSE 100 INDEXFTSE 100 INDEX1999 - 20041999 - 2004

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•So what!So what!

Re – mortgagingRe – mortgaging Main driver of UK overseas property Main driver of UK overseas property

investmentinvestment Equity release in UK was £57bn 2003Equity release in UK was £57bn 2003 Coupled with –Coupled with –

Strong poundStrong pound Cheap flightsCheap flights Desire to retire to the sunDesire to retire to the sun Lower house prices in EuropeLower house prices in Europe Mortgages down in real terms in Mortgages down in real terms in

W.EuropeW.Europe

European Property PricesEuropean Property Prices

Spain tops the property leagueSpain tops the property league Up 18.7% to Jun 03, 17.2% to Jun 04Up 18.7% to Jun 03, 17.2% to Jun 04 UK, up 17.6% to Jun 03, 13.8% to Jun 04UK, up 17.6% to Jun 03, 13.8% to Jun 04 France 12.9% to Jun 03, 14.5% to Jun 04France 12.9% to Jun 03, 14.5% to Jun 04 650,000 houses in Spain now owned by 650,000 houses in Spain now owned by

Brits.Brits. In 03, 40% of all houses built on the Costas In 03, 40% of all houses built on the Costas

were bought by Brits.were bought by Brits. 1.4million Brits own properties abroad1.4million Brits own properties abroad

BUT:BUT:

Western Europe now represents Western Europe now represents high cost entryhigh cost entry

Investment would need to be in Investment would need to be in new or relatively new property.new or relatively new property.

Entry level too high for CCCICEntry level too high for CCCIC Missed the boat ?Missed the boat ?

WhereWhere

TURKEY – Mediterranean coastTURKEY – Mediterranean coast CROATIA – Dalmatian coastCROATIA – Dalmatian coast MONTENEGRO – Adriatic coastMONTENEGRO – Adriatic coast BULGARIA – Black Sea coastBULGARIA – Black Sea coast SLOVENIA – Adriatic coastSLOVENIA – Adriatic coast MOLDOVA – Black Sea coastMOLDOVA – Black Sea coast

Why would we want to Why would we want to investinvest

Jump on a bandwagon that’s still rollingJump on a bandwagon that’s still rolling Anticipated growth rates of 20% + paAnticipated growth rates of 20% + pa If necessary could fund mortgage out of If necessary could fund mortgage out of

subssubs Rental income, > £300pw would cover Rental income, > £300pw would cover

mortgage of £50k + maintenance.mortgage of £50k + maintenance. Cheap holidays in the sunCheap holidays in the sun In effect we would :In effect we would :

Learn about property investmentLearn about property investment

Earn a handsome incomeEarn a handsome income

Have fun watching our money Have fun watching our money growgrow

RisksRisks

Collapse in property prices in W.EuropeCollapse in property prices in W.Europe Have a mortgage to fund in a sliding Have a mortgage to fund in a sliding

marketmarket Political instabilityPolitical instability Property securityProperty security Reliant on local managementReliant on local management Stability and longevity of CCCICStability and longevity of CCCIC And many moreAnd many more

What would we needWhat would we need

To get in on “ground floor investments”To get in on “ground floor investments” New or relatively new propertyNew or relatively new property Coastal resortCoastal resort Serviced by low cost airlinesServiced by low cost airlines Max. 3 –4 hours flight timeMax. 3 –4 hours flight time Sound legal systemSound legal system Political StabilityPolitical Stability Local mortgages ?Local mortgages ? Maintenance servicesMaintenance services

CROATIACROATIA

Very popular with Brits when part of Very popular with Brits when part of Yugoslavia under TitoYugoslavia under Tito

> 1000km Mediterranean coastline> 1000km Mediterranean coastline Av. Summer temp. 27 deg.Av. Summer temp. 27 deg. 2600hrs sunshine annually2600hrs sunshine annually In EU by 2008 – member of NATOIn EU by 2008 – member of NATO Beautiful girlsBeautiful girls Houses now becoming expensiveHouses now becoming expensive Apartments start at c. £40kApartments start at c. £40k

But – I concentrated on But – I concentrated on BulgariaBulgaria“The new Spain”“The new Spain” Among the cheapest in EuropeAmong the cheapest in Europe Joins EU in 2007Joins EU in 2007 3 hours flight from UK3 hours flight from UK All major tour operators by 2005All major tour operators by 2005 220km of sandy beaches – 1700hr 220km of sandy beaches – 1700hr

sun May to Octsun May to Oct Last year property rose by 30%Last year property rose by 30% Ski and beach resortsSki and beach resorts

£17,

800

Why Bulgaria?Why Bulgaria? Cost of living one of lowest in EuropeCost of living one of lowest in Europe Pint of lager – 40p, 3-course meal -£5Pint of lager – 40p, 3-course meal -£5 Member of NATOMember of NATO Currency stable and linked to the EuroCurrency stable and linked to the Euro Predicting ROI 100% in 3 yearsPredicting ROI 100% in 3 years New properties start at £40k / lessNew properties start at £40k / less Maintenance fees c.300euros per Maintenance fees c.300euros per

annumannum

The problems are manyThe problems are many

Apart from normal investment problemsApart from normal investment problems How do we as a club make a purchase ?How do we as a club make a purchase ? How do we raise a mortgage ?How do we raise a mortgage ? Should we form a limited company ?Should we form a limited company ? Any volunteers for treasurer ?Any volunteers for treasurer ? How do we deal with new and departing How do we deal with new and departing

members ?members ? Etc., etc., etc.Etc., etc., etc.

RecommendationRecommendation

Form a study groupForm a study group Define Group remitDefine Group remit Group to report back in say 3 monthsGroup to report back in say 3 months Invite UK Overseas Property Agent to Invite UK Overseas Property Agent to

address the Clubaddress the Club Invite Ivo Hesmondhalgh of Bulgarian Invite Ivo Hesmondhalgh of Bulgarian

Property Developments (BPD) to address Property Developments (BPD) to address the Clubthe Club

BPD set to join AIM within weeksBPD set to join AIM within weeks