October 2008

A current review direct from our partner office in Buenos Aires

Argentina Not As Dependent On Foreign Credit As Other Countries

The current global calamity in the world markets, must have investors wondering how Argentina will par during times of global economic uncertainty. Wall Street is experiencing a correction in the market due to bad mortgage debt that is clogging the financial market liquidity and having devastating effects on some of the largest financial institutions in the world.

Its difficult to predict if the US revised government bailout plan will get passed and how much it will restore confidence to the market in order for lending to continue to facilitate economic expansion. It’s worth noting that even though it was the largest point drop in single day in Wall Street, it ranks 17th in terms of actual percentage points in decreased value. This is well below the 20 percent decrease on Black Monday.

When deciding to invest into a foreign country, having a sound understanding of a the country and its economic conditions are vital in the decision making process.

There are facets of the Argentine economy and property market that one should take into consideration despite some of news concerning Wall Street and the global markets.

In The Economist:

Moving Forward

When speaking about President Cristina Fernández de Kirchner, The Economist stated that the president “began to implement a number of measures that orthodox economists had long suggested” which is a positive continual step in the correct direction. The president is also taking steps to repay its defaulted debt to the Paris Club a group of creditor nations.

Less Correlated Assets

The Argentine Stock Exchange, MERVAL, does not always fall in the footsteps of Wall Street. Having a less correlated market to that of the More Developed countries works to Argentina’s advantage.

Property Market

“Mortgage rates, which had fallen after the government’s takeover of Fannie Mae and Freddie Mac, rose again, removing a glimmer of hope that the housing crisis, the kindling for the broader financial meltdown, was hitting bottom.” writes Ellen Simon, AP Business Writer.

Even though the US and UK housing market has been experiencing its worst market in years, the Argentine property market on the contrary has  been experiencing some of its most opportune and high levels of growth and capital appreciation.

The Economist states that “In recent months, the growth in public works spending has slowed, while utility tariffs have risen modestly, enabling the government to cut its subsidy bills this year by around 10%.”

Argentina is planning to pay off debt to the Paris Club group of creditor nations soon. These governmental strategies are paving the way for sound economic practices.

Mortgages Not Common In Argentina – Very Low Mortgage Culture

Property is purchased in cash with US Dollars. This is beneficial for foreign investors who can benefit from the purchasing power of the US $ in the Argentine market. One can acquire very attractive and profitable real estate assets in the market for a fraction of what it would cost in many parts of the world. Given that strict lending requirements that banks bestow on borrowers and the high rate of capital that is charged, home mortgages are quite uncommon to acquire property in Argentina.

Market Already Acclimated To Credit

After the 2001 economic crisis investors and business have had to build and expand their enterprises with little or no financing from lenders. Large and small development projects alike have been and are currently being funded with private capital.

As the rest of the global economy begins to learn how to do business on a narrower credit supply, Argentina will continue forward as it has done so since its rebound. The Economist states that “Latin American banks also look strong. This is partly because they did not hoover up American mortgage-backed securities, but also because they are not that dependent on foreign credit.”

As the economy has rebounded from the crisis the housing market has like wise The increase of values in the Argentine property market has been financed by private equity as opposed to mortgages and and the credit tightening will have less effects on the Argentine markets.

For the best current opportunities for property investors in Argentina, please click here.

October 2008

Hilton Hotels Corporation has announced expansion plans to quadruple its presence in the Caribbean and Latin America by adding 150 new hotels to the portfolio over the next five years.

This news underscores the company’s stated goal to add 1,000 hotels to its international portfolio in ten years.

October 2008

ING Real Estate  is expanding its investment management activities into South America with the opening of a new office in São Paulo, Brazil.

Brazil is currently the world’s tenth largest economy and home to the fourth largest urban population, with major cities that include São Paulo and Rio de Janeiro.  The country’s economy has grown rapidly for much of the decade and is expected to continue to expand at an average rate of four percent for at least the next five years.  That growth has resulted in significant new job formation and a substantial decline in the unemployment rate for the country’s major cities, and created a compelling environment for real estate investing, according to ING Real Estate.

With a current population of 190 million, including 92 million individuals between 15 and 44 years of age, Brazil is well positioned to benefit from demographic, demand-driven growth for new real estate properties over the next several decades, according to ING Real Estate. In addition to São Paulo and Rio, the country features 18 cities with populations greater than one million. Within these cities, the Brazilian middle class is substantial and growing in both size and wealth.

Office markets in both Rio and São Paulo feature comparatively attractive vacancy rates and compelling rental growth.  Significant opportunities also exist in other major property types, including industrial facilities, retail, and housing. The country is moving aggressively to build on its economic success, with plans for major investments in a range of infrastructure projects including new seaports, railways, highways, and airports.

“We have been analysing the Brazilian market for a while now and believe that the time is right to begin building a presence,” said Beccar.  “With its abundant resources, unique demographic profile, strong manufacturing and services sectors, and growing export economy, the country offers tremendous opportunities for both short- and longer-term commercial real estate investors. We will be focusing on the four main real estate ‘food groups’ of housing, industrial, retail and office which all offer compelling fundamentals.”

Luxury property in Tirana is scarce.  So when an amazing new release, from one of the best quality constructors in Tirana becomes available……….. it is naturally going to be an amazing investment.

Just off Rruga Kavajes and only 1mile from Skanderbeg Square and the Centre, Homeplan Residences is in one of the best locations in the city.

The quality and luxury of construction will be amazing, with similar projects by the developer already sold out at over EUR2,000/sqm.

In comparison, in Bulgaria, apartments in the centre of Sofia are now EUR1,800 – EUR2,000/sqm.  Tirana in Albania will be catching up, as Albania moves closer to joining the EU.

With these apartments only EUR765/sqm the capital appreciation potential will be enormous.

Rental potential is excellent too.  Currently to rent an existing 1+1 near Rruga Kavajes start from 25,000 Lek – 28,000 Lek per month (EUR220 – EUR250) for medium quality.  By the time these reach completion, rentals for luxury quality in this location will be at least EUR400 – EUR450.

With the 1+1’s currently from approx EUR50,000, the yield of around 8-10% is possible, making this an excellent buy-to-let capital city opportunity.

Also, due to the central location, short term/ holiday letting will be possible from minEUR100 for 3 nights.  Based on 50% occupancy for the whole year, and considering Tirana has a 12 month tourist season, yields from 12-15% are feasible.

For more details on this amazing project please contact us.

New 3 Bedroom apartments are rare in Saranda, so this is an excellent opportunity to acquire a full beach front new and spacious apartment with a full view of Corfu Island.  Being very close to the centre and the Saranda Port is a huge advantage for personal use or rental.  The remaining apartments are on the 1st, 2nd and 5th floors. 

There is no possibility to ever lose this amazing sea view! 

3 x THREE BED APARTMENTS FOR EUR122,145 EACH (Approx £96,800) 

• All have full sea views - that will not change
• On the beach
• All 143sqm
• Only EUR850/sqm
• 1 minute walk to the beach
• Overlooking Pllaka Beach
• Full Completion end 2008/ early 2009
• Elevators in building
• Commercial on ground floor
• Intercom entry
• Fantastic Location - only 400metres from Saranda Port
• Only 6 mins walk to the centre
• Amazing Rental Potential – Can be let all year from EUR300/month, or in the Summer season (June, July, August) from EUR1,600 per month.
• Full Property Management available through Fresh Property Albania Saranda Office.

In times of economic turmoil in many countries, Albania, once the most isolated and desperately poor nation in Europe, is showing robust growth and attracting attention from foreign investors.

A modern airport opened in 2007 and in the capital Tirana, Bang & Olufsen sells expensive audio and video products to prosperous Albanians, albeit a few blocks from the main squares where pavement tiles are still cracked.

Economists including the International Monetary Fund expect GDP growth of at least six percent this year, which would be among the highest in eastern Europe, if the country can avoid the chronic power shortages that have hampered it in the past.

In June, the former Stalinist Balkan country of 3.3 million moved up to a “middle income” country from low income in World Bank classifications, receiving an invitation this year to join NATO. It expects to apply for EU membership next year.

A World Bank study this month rated Albania as best in the Balkans and among the world’s top 10 countries for easing business regulations.

“Three years ago, although there has been growth and macroeconomic stability, still the country was really not at all preferred by foreign investors,” Prime Minister Sali Berisha told Reuters in an interview earlier this month.

In his post since September 2005, he says he has fought corruption, lowered taxes, reduced the size of government and introduced a series of business-friendly laws.

Construction is key.

The government has made building a road linking Albania’s main port of Durres and Kosovo its top priority although the 600 million euro artery has stretched its resources. Berisha says it will integrate Albania’s agriculture with Kosovo’s, help trade and tourism, and revive the poor north.

Italy’s power utility Enel wants to build a coal-fired power station and is looking into nuclear opportunities. Austria’s EVN is about to clinch a 1 billion euro ($1.39 billion) deal to build hydropower plants. Greek and Spanish firms are building cement factories. The British want to build ports.

In another sign Albania is keen to work with global institutions, finance ministry officials say it plans its first Eurobond later this month, for 250-300 million euros. “We want Albania to be listed on the euro markets, in the financial markets,” said Deputy Finance Minister Sherefedin Shehu

Argentina’s trade surplus increased sevenfold in August from a year earlier to reach a record $2.25 billion, as growth in imports slowed sharply and exports surged 50 percent, the government said on Friday.

The trade surplus had narrowed to $313 million in August 2007, hit by higher energy imports as demand ballooned during an unusually cold southern hemisphere winter.  

Argentina’s export earnings have jumped this year due to high global prices for its grains and oilseeds. Argentina is one of the world’s top suppliers of soy, corn and wheat.  

Meanwhile, the value of Argentina’s exports jumped 50 percent in August year-on-year. This was explained by an 11 percent increase in volume and a 36 percent increase in the price for Argentine products, the INDEC statistics agency said in a statement. 

The government forecasts a trade surplus of $12.23 billion this year and $11.98 billion next year, according to the 2009 budget bill, which Congress is currently debating.

I was very happy to attend the event of the ABCCI (Albanian British Chamber of Commerce) held at The House of Lords on Wednesday the 24^th of September, 2008.

It was the first gathering of the event, and about 50 people turned up to network and hear the latest on the state of the Albanian economy and the plans for the future.

The main aim of the event was “to expose the export and investment potential of Albanian (and neighbouring country) companies and markets to senior ministers, parliamentarians and officials, businessmen, investors and opinion formers, as well as promoting direct level contact between leading Albanian and UK businessmen and investors.”

The event comprised of presentations by senior participants from governments of Albania/ UK and focussed business sessions.

The presentation by Albinvest gave a very good overview for what investors might be looking for when investing in Albania.  Here are a few of the key interesting points:

·         The economy has been growing at 6% and inflation is currently 2.9%

·         FDI (Foreign Direct Investment) has nearly DOUBLED from 2006 – 2007 from EUR260 million to EUR460 million.

·         Exports grew 27% in 2007

·         Accepted in NATO in April 2008, to join by April 2009.

·         Huge opportunities and investment incentives in the areas of power/ electricity and tourism

·         Infrastructure – 70% of the government’s budget is going into new and upgrading roads.   There will be new roads linking the capital to the southern towns of Vlora and Saranda.  Also there is a highway under construction from Durres to Pristina (forming part of the Corridor which will cut driving time from 8-10 hours to 2-3 hours.  The Corridor 8 will comprise of a high quality road system for purpose of transporting goods between Albania, Kosovo, Macedonia, Bulgaria, Greece and via shipping to Italy, linking into the Corridor 10.

·         Ports – Durres and Vlora, which will form part of the Corridor 8 Transportation network, will continue to be the 2 largest ports.  Saranda will be kept as a tourism port.

·         Airports – Tirana International is now at capacity taking 1.1 million passengers in 2007.  This is a 20% increase over 12 months.  There are plans to double the airport in size.  9 Italian cities are directly linked to Tirana Airport.

There are also plans to open additional international airports in Albania, with the airport near Kosovo most likely being the first.  A southern airport in Albania may take at least 5 years.

The attendees included members of the chamber, as well as representatives from banks, law firms, electricity companies, and construction companies.

Mortgages

Banks in Albania are remaining optimistic, but are holding back a little at the moment, to see what will happen.  Especially in relation to foreigner mortgages.  Currently only First Investment Bank and Raiffeisen Bank are lending, and with very restrictive criteria.

The additional foreigner mortgages from additional banks, will probably start early next year.  But we shall see…

Overall, the vibe of the day was very optimistic, as Albanians and foreign investors and companies sense the huge opportunities available now, leading up to joining the EU.

Property investors also know what is happening in Albania.  And getting in NOW, is the best time…..

10 October 2008

Our inbox is full at the moment of emails from our clients and prospective clients all asking one question-

“How is Albania being affected by the financial breakdown shaking US, UK, Europe?”

My first response is – just remember – the press are reporting on the very worst and paying little attention to all things good and profitable in the world at the moment.

My second response is – it’s important to remember, that the markets most affected by these events are highly leveraged, highly mortgaged markets relying on borrowed money or financial products tied to borrowed money.

Now, looking at Albania, of course there are some links from Albanian banks to banks in Italy, Greece, Austria and Bulgaria, which are linked to major banks including US banks. However, being banks in an emerging market like Albania, most have done due diligence and have been proceeding very carefully. Does this make the banks or the Albanian economy immune? Definitely not.

There will be some fall-on effect and most likely a tightening in lending personal and mortgage finance at the riskier end of the scale – to foreigners.

But luckily the housing market is a low cost, cash financed market at the moment. Current resales and most offplan projects are correctly priced and relative to demand, and prices will continue to rise.

An example of this is a project we have been marketing – Kashar View Apartments in Kashar, Tirana. During the crisis in August, the developer was selling up to 20 apartments a day to locals, with some locals buying more than one apartment. Now 80% of the project is sold out.

Why is this? Well Albania’s economy is doing very well, and the locals are aware of this. Tirana, the capital city, is changing on a weekly basis. In the lead up to the next election, the government is extremely busy – improving roads and services, new schools are being constructed, a new huge hospital is under construction in Kashar, and buildings continue to be painted a variety of creative colours. The masterplan for the city will see an amazing new ring road being constructed which will improve access and traffic flow enormously. And some construction teams improving the roads are currently working through the day and night.

More information on Albania’s economy coming soon…

Unlike other countries in Eastern Europe or the Balkans, Albania’s population will continue to rise. As the economy improves, new companies set up offices and branches, and Albanians will return from abroad to take advantage. So the property market will continue to grow under this demand.

Also as a holiday destination, this is one of Albania’s greatest untapped resources. 2008 was one of the busiest summer’s ever, with accommodation and facilities being pushed to their limit on the coast – Saranda, Vlora and Durres.

Experts believe the increased numbers had to do with many reasons including Albania being incredibly affordable as a beach destination, compared to neighbouring Greece, Montenegro or Italy. And of course this demand will mean hotel rates will continue to rise, seen by the increase of up to 30% this summer. Meaning demand for apartments will be greater than ever.

Anyhow, back to the banks, who only continue to generate huge incomes in Albania. They do this through ways we take for granted in the UK and Europe. They are charging:

· transfer fees to transfer funds from bank account to bank account

· for new services, like e-banking

· for account keeping fees

And the mortgages currently offered, are safely above the Euribor rate, as an extra buffer.

In summary, Albania will continue to growth, despite world events. The population is going up, wages are going up, unemployment is going down, company taxes are very low, infrastructure is improving, FDI is going up and the scenery and coastline is just stunning.

If a property investor waits for the global economic crisis to settle, they may just miss out on the best property investment opportunities in Europe.

For the latest and best available properties in Albania – Click Here