France, Spain, Florida and Italy have been the traditional destinations for Britons looking to sink their money into property overseas, but the hunger for bargain properties is inspiring them to greater adventure.
New EU entrants Bulgaria and Romania have attracted investors looking for rapid capital growth and healthy rental yields, while the soaring property market in South Africa also catches the eye.
Cyprus may also be a relatively established overseas buy-to-let location, but there are still profits to be made.
Bulgaria
Bulgaria has been a property hotspot in recent years, but is it already in danger of burning out?
Property prices in the capital Sofia rose a healthy 22 per cent in 2005 and look set to rise higher this year, according to international property investors Prestige Group. Rental yields are also reasonable at 6.5 per cent, according to Prestige.
Prices are also still among the cheapest of any European capital. The average property costs £86 per square foot, compared to £108 in Budapest, Hungary, and £133 in Warsaw, Poland. On the Costa del Sol, the figure is a much pricier £232.
The country is steadily modernising its legal and financial systems, bringing them into line with EU requirements and making life easier for overseas investors. It also has relatively low mortgage rates at around 5.25 per cent, with a typical maximum loan to value (LTV) of 75 per cent.
Prestige currently rates capital Sofia as a hot investment, with low prices, high returns and strong potential in the run-up to EU accession on 1 January 2007. That makes it marginally more attractive than Budapest, but trailing Warsaw, which is now reaching boiling point.
Tom Foster, international mortgage adviser at brokers Conti Financial Services, says most UK buy-to-let investors in Bulgaria target new resort developments, and hand over the running of the property to management rental agencies. Bulgaria now attracts holidaymakers from all over Europe, particularly Scandinavia, and developers are offering properties with guaranteed annual rental income. The good news is that local lenders will now take into account up to 20 per cent of that income when deciding how much you can borrow.
Local lenders are getting more sophisticated. Some even offer interest-free mortgages for the first 12 months, to help tide you over until your property becomes self-funding, Foster says.
But watch out for several quirks when investing in Bulgaria. First, non-Bulgarians cannot own land, so if buying a villa or house, you have to set up a Bulgarian limited company, appointing yourself as 100 per cent shareholder. This is fairly straightforward, but you must hire a local solicitor. But if youre buying an apartment, this isnt an issue, he says.
Foster recommends you find an independent solicitor, rather than one linked to your selling agent. Property values have been shooting up, making it very hard to calculate exactly what properties are really worth, so you also need to commission a report from a local surveyor.
Bulgaria is in the midst of a building boom. It can be hard to work out which builders are good and which are cowboys. So ask to see both recent developments and buildings they finished five or ten years ago. If possible, speak to buyers, says Foster.
You can still get one-bed apartments for 60,000, while villas range from 70,000 to 200,000, although it is quite rare to have to pay more than 100,000 for a villa on the coast, Foster says.
Some analysts fear Bulgaria has been over-hyped. The large number of off-plan properties has led to over-supply in coastal areas, killing any prospects of a resale market.
Bulgaria may be hot right now, but take a cold, hard look at your investment, because the boom could always end in a bust.
Next: Romania
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