Overseas Real Estate Blog

Its not a well known fact that the Egyptian government has spent much time speaking directly to the Dubai authorities on how best to undertake its transformation. One of the key issues is how to encourage both business and tourist markets. For tourism the Red Sea Riviera is in a league of its own offering near perfect conditions for strong growth. Accessibility is excellent from the wealthy parts of the world mainly under 4.5 hours flight from most of the key Western/Eastern European, Russian and Middle Eastern states. Hot summers and warm winters and huge cultural pull have already built a thriving tourist industry centred on the main centres of Sharm El Sheik, Hurghada and the Nile.

However, to get the sort of consistent and sustainable price rises back by strong rental you need not just a strong tourism industry but a rapidly growing economy. Here Egypt is making excellent progress although there are still many challenges. Huge growth in new jobs are being created outside tourism, construction and real estate. Progress here can bee seen not just in Cairo, but also in Hurghada where new offices are being occupied by marketing, internet and media companies.

So what are the business prospects? Well I look at Egypt as a mini Dubai in the making. With no VAT, capital gains tax and just 10% tax on rental income along with very low costs of purchasing and a GDP growth in 2007 of 7.1%. It is interesting to see much of the property investment is by Egyptians themselves who are witnessing the growth in prosperity their country in enjoying.

The large growing population of 81.7m people is not with out problems with a high 20% living below the poverty line. For all the facts go to the CIA World Fact Book online:

https://www.cia.gov/library/publications/the-world-factbook/geos/eg.html

If you are in the market to see strong growth rates then Egypt should be considered but, best of all visited, to see for yourself how this country so often makes a positive impact.

If you are looking at an overseas portfolio or are looking for a quality retirement destinations, then one of the best opportunities we have in pre launch is Samra Bay, Hurghada. Samra Bay has on of the very best frontline locations, next to many existing 5 star hotels, Intercontinental, Steigenberger, Hilton and Grand Plaza. Grab yourself a 10% pre launch discount now. Contact us for more details.

Samra Bay is just one of many developments in Hurghada, El Gouna, Sahl Hasheesh and the up and coming Gamsha Bay development, that Jet2Let are marketing. We are showing investors traveling to Hurghada the best of what is on offer. Make sure you view Samra Bay soon and reserve to get the best units.

Part 2 of Legal Due Diligence series...

Top Tip No. 5: Penalty Clauses:

There should be a penalty clause if developments are late by a certain period. This may be 6months, 12 months or there may be no period at all. If not you should advise lawyer to negotiate one.

The builder has a dilemma on this matter. Should they add months to the timescale to give them some flex, or should they simply replicate the period he has contractually agreed with his sub contractors?

The buyer also needs to be cautious, as too harsh a penalty for late completion could mean that the finishing is rushed.

Then there is the matter of you as the buyer late payment. Check this penalty is reasonable.

Typically there will be clauses excluding certain events as countable to penalty delays. These may be specified - temperatures below a certain level, for example. Or they may be wrapped up in a "Force Majeure" clause.

Top Tip No.6: Notification of Payment Clause:

By what means will you be notified for payment of your instalments for off plan property - email, post, telephone? Or is there any onus on the developer to contact you at all? How much notice do you require?

Be careful here there will be late payment provisions in the contract and it may take a week to transmit foreign currency.

Be sure to get a receipt for payment.

See if you can make payments through a UK based lawyer's escrow account.


Top Tip No. 7: Contractual definition of Completion:

Be careful to understand what is meant by completion and if referring to a statutory inspection protocol what this inspection means. If in doubt ask your lawyer for a definition.

Check what provisions there a re for snagging. How about a surveyors report who can check your property for snagging, the building in general if an apartment and utility connections, also follow up for you to check work that has been completed.

Final Tips next week in part 3....

I thought that might get your attention...

Today I start the debate with my views on whether agents are trying to do the best for their clients. Many do for sure, but some I think just don't have a clue.

I was prompted to comment on the question of "Do real estate agents have a clue?" after it I spoke to a "first time overseas" husband and wife investor team had taken at face value all the information they had been given by an agent. The problem was that they were originally enquiring about a single property but instead were told that they stand to make more in a property scheme termed as a "property investment fund".

Where's the detail?

Whilst a slick brochure seemed to answer their every conceivable question, and pointed out some of the risks involved, it was clear to me that they had no real understanding of the true risks involved. More than this, a property investment fund was not what they were after. It then transpired that the agent had simply followed a well rehearsed presentation which sounded respectable and seemed affordable. Those "developer profits" seemed like a good idea and she was ready to sign.

Luckily, the couple realised just in time that they should seek alternative advice and asked a friend who suggested to stick to their guns and buy a property outright. In hindsight, she admitted that she was close to investing in something that was a long way from what she really wanted - which was a nice place on the beach with sea view and was hot from October to May. She and her husband plan to retire there in the winter. They have just got back from a weeks trip having had a good trip prepared and well equipped. They went understanding the areas to focus on so they felt happy to reserve. As a bonus, they paid less for their property than they thought was possible -just £51,450 in Hurghada Egypt.

I was recently exploring a new development site and was staggered to discover a project that looked great in theory but had a huge shortfall in due diligence work. I was told that the due diligence pack was complete and the other agent was happy. Clueless agent you think - well it is not uncommon for agents to ask precious few questions before taking properties on. Fine for a simple resale in Reigate perhaps but I have learnt that emerging markets require a savvy approach to help avoid poor decisions.


Integrity Pays

Your agent often fails you when they fail to be forceful about the facts of buying a particular property in a particular market. Take this recent example: a client came to us after trying to buy land and rural house in Bulgaria. There are huge risks to deals here known by those, like me who have done this. The agent failed the buyer by not explaining all the many risks and explain the way the deal should really be done. Why? They don't want to tell a buyer what they would rather not want want to hear.

Here I feel that some agents fail themselves as well as their client, because their client will quickly get disillusioned when issues, such as last minute price rises, complex ownership, unclear permissions, road access, utility supply and other complexities emerge that lose the deal. Deal lost, and agent gets no commission. More stories welcome...

Well its the front line question that we hear a lot about and on the face of it the answer is simple, front line. or is it? Before examining the issues my I recommend to check whether it really is front line. Without putting too fine a point on it, I have inspected sites which are called front line and they are not really. They have a road in front of them and then the beach.

Google Earth can help on this, but nothing beats a site visit to be sure.

This may be ok if you are sure there will not be anything built the other side .. but usually there is, or will be a building, so its not front line. The clue can often be spotted in the price... if it seems good value compared to the other front line developments then maybe there is something not right. It could be beach front line but there could be an electricity station next to it.. or a factory.

But is it all about a beach? Well frankly not in some resorts being close to the amenities of shops and restaurants may be highly desireable and then you have to apply town centre versus outskirts argument. All of a sudden its getting more complicated. Then of course you have to look at price. Jet2Let have Tranquilla Town a nine story refurbishment buy to let building in Hurghada town centre. With an expected rental of £400 per week on six or 12 month contracts you are looking at after management costs a pretty certain yield of 8%. This is th sort of deal that suits the non lifestyle buyers who views overseas property as a long term investment proposition and has little intention to visit -or is their second purchase in the country.

I will leave it to another time to talk about investment strategies, but those who invest in shares will be familiar with taking contrarion view. I like this view as it can often work well. Historically those with patience almost always are glad they were brave by buying whilst all around said that price will go continue to go lower and lower.

For example of a typical contrarion view right now would be buying several banking shares at these low prices because the credit squeeze will reduce competition and Banks will be set to restore their balance sheets after their rights issues. Enough of stock markets but the contrarion view is worth thinking about now that overseas property sales have slowed the current deal could well turn out to be very shrewd buys indeed.

Spo turning again to property, in most markets we have see price inflation on building materials (cement, steel) and in some of the emerging countries labour costs increasing significantly. I am also interested as to what local buyers are doing and why. The great thing at the moment is that the squeeze on mortgages means that the speculative element is much reduced - so look for where people are moving to - where are they needing to rent? Possibilities here are Istanbul with a huge population increase under way and even Hurghada in Egypt where a new population is moving to the coast for more than just tourist related activities.

Egypt's growth in tourism is such that local workers accommodation which include expats in real estate and tourism and Egyptian professionals covering legal, construction and media sectors. This is why we have secured a great deal on an existing building which already has tennants. Prices of £410 and £570 per m2 is really good value with minimal risk as the building is already built as of ten years ago and an after fees and costs yield of 8% means this is the sort of deal to be had there right now.

Please post your views on front line and taking a contrarion view.

Any new property destination has its risks. These new risks are often not immediately apparent because an area or emerging country is being heavily promoted with nice glossy adverts and brochures - and often extravagant claims for rental and growth. The common mantra is to use an independent lawyer. A start but you need much more than this - I don't believe this is enough so here I set out what some agents themselves believe but often don't tell their clients because they are either ignorant, inexperienced or simply scared that the sale will be delayed through legal negotiation.

Top Tip No 1: Use a solicitor covered by the UK Law Society.

Buyers should be prepared to pay the often much higher price for a UK based firm covered by the UK Law Society. But to do your job as properly when buying overseas real estate is that you should learn how to manage your lawyer. Local lawyers have been known to engage in corrupt activities as we have seen from the Marbella/Spain stories.

Top Tip No 2: Check what your legal service includes for the money

Don't assume employing a lawyer that they will be clear on what the service includes. Lawyers normally charge out at £100 + per hour. Be mindful that if you start asking for extra services, such as signing of notary deed, meeting developer, snagging reports you may be charged more. Anything that takes extra time such as periodic liaising with the developer, periodic status reports and local Wills will cost you more. Make sure you ask for what is included and consider taking out a package price which will include more or at least what their rate is for extra work.

Top Tip No3: Manage your Lawyer

So now you may think I have got, and paid for, a top (UK/local to me) lawyer - I can sit back and relax? Well no actually. The problem is that lawyers are often trained to perform set tasks and not to consider the whole deal. Remember that despite you having an initial consultation with a senior lawyer your day to day contact could be a less experienced lawyer.

So be proactive and kick the process off by establishing the set tasks they said they would do. I like to start with the most important bit first. Confirmation of clean title needs to be thorough and you need to request to see what information they are relying on. Let me give you an example:

Recently when conducting my own due diligence for a project in Egypt, I discovered that the power of attorney document that should accompany a land sale was missing. This power of attorney is required so that all relevant permissions granted to the original land owner can be passed onto the next owner and so on. What became apparent was that this absence of documentation meant that there was a risk of a claim being made on the land by one of the previous owners. Not Good. So being sure of who owns the land and that the paperwork for previous owners is correct is the first step. Your lawyer will typically check for any mortgages, title or liens on the land (or property). So be sure to ask them that they have done this or check its in the list of activities they said they would perform for you.

Top Tip No4: Check you get in your contract what you have been promised

OK now its now time to study what is included in your property. Extras, often we have seen extras promised not appearing in the contract (like air conditioning) or kitchen. Not in the contract and you are relying on trust - don't risk it.

Make sure you get all the details you need to see in the contract. For example Net area, balcony, common parts, Gross area. Materials for doors, floors, tiles are important. Some countries have special language for these such as first grade, local grade, European standard. Ask what these mean and get these specified. Facilities in a development are often excluded from contracts, but we have seen sports centres and swimming pools not actually built as promised and guess what there was no mention in the contracts.

Remember your purchase contract (sometimes called the preliminary agreement or promissory contract) is your only way to prove what was meant to be included. If its not in there then it might not happen.


Next week I will post my next four tips when reviewing purchase contracts. But in the meantime post on this site your top tips for others to see.

If you quote ref CV310A when reserving with Jet2Let Property a Cape Verde property before July 31st 2007, then you will receive a FREE seven day holiday in Cape Verde in 2009!


So bag a free holiday and a deal now. Yes the overseas market is all about buyers getting really good deals right now. Cape Verde offers loads of value and Dunas and Tortuga Beach Resorts set the standard for value for money for the location and quality.

Both are well located front line developments. Compare these prices with other low density front line developments and then call us for more information.

We always have Cape Verde viewing trips - always relaxed with many clients combining with a holiday over a week. Call (+44(0)113 3131000) or email (info@jet2letproperty.com) Jet2Let Property for details. More information on web site www.jet2letproperty.com. Whats more, we have FULL DUE DILIGENCE report online.

THESE ARE THE EXCEPTIONAL DEALS OF THE WEEK!

We have handpicked the following properties and applied bespoke terms and prices.

Here are some great deals with excellent offers and prices – so get in there quick!

Deal Number 1 on Tortuga (SPECIAL LOW PRICE) €154,750 (with option 3)

Block 25, Apt C0 (Type D) – this apartment is on the ground floor, is south-west facing and close main pool.

MARKET PRICE €192,950, DISCOUNTED PRICE €175,000 (excluding option 3)

Deal Number 2 on Dunas (SPECIAL LOW PRICE) €323,907.50 (with option 3)

Dunas Villa 8 (Type B) – this villa has its own private pool and garden and is north facing.

SHOULD BE €384,950, DISCOUNTED PRICE €366950 (excluding option 3)

Deal Number 3 on Tortuga (SPECIAL LOW PRICE) €154,750 (with option 3)

Block 34, Apt A0 (Type D) – this apartment is on the ground floor and is south facing, close to the beach and second pool.

MARKET PRICE €183,500, DISCOUNTED PRICE €175,000 (excluding option 3)

Deal Number 4 on Tortuga (SPECIAL LOW PRICE) €150,500 (with option 3)

Block 43, Apt C0 (Type C) – this apartment located on the ground floor and is west facing and has clear pool views.

SHOULD BE €178,500, DISCOUNTED PRICE: €170,000 (excluding option 3)

Deal Number 5 on Tortuga (SPECIAL LOW PRICE) €150,500 (with option 3)

Block 44 Apt C0 (Type C) – this apartment is on the ground floor is south-west facing and has clear views to the main pool

SHOULD BE €178,500. DISCOUNTED PRICE €170,000 (excluding option 3).

call us on 0044(0) 113 3131000 for more information and our FREE Legal Guide to buying in Cape Verde.

Yes you read correctly, Iraq. Yes Iraq could be the new property hot spot! Well believe it or not but today the well known Middle Eastern developer DAMAC has announced its plans to build a $4.5billion mixed-use project in Kurdistan, Iraq.

Located in the town of Erbil, the 170 million sqft Tarin Hills master development is a conglomeration of residential, retail, commercial, hospitality, entertainment, health and sporting facilities.

Peter Riddoch, CEO of DAMAC, said that the project will help deliver a much needed centre point from which to start the region’s transformation. “The hills of Tarin will be transformed into a golf course residential community with villas surrounding and intertwined amongst the 18-hole course,” he said. “This community will be augmented with a golf club and health centre, which will be a focal point destination for recreation and leisure. In addition to this, the community will encompass a water and theme park, arts and crafts centres, retail complexes, besides schools and business parks."

To entice investors wary of the region’s may security problems, DAMAC said that Tarin Hills will exist as a fully gated community with security fences, 24-hour guards, a police station and a civil defense base on site.

Nechirvan Barzani, prime minister of the Kurdistan Regional Government of Iraq, welcomed the initiative and thanked DAMAC for working to help boost the region. "The Tarin Hills development will not only help promote the global face of Erbil, it will also create jobs and support growth in related sectors, such as tourism and hospitality. We thank DAMAC for taking this initiative, which is very positive statement and symbol of the stability and growth potential of the Kurdistan region. We are confident of the success of this project and pledge our full cooperation with DAMAC and its investors in making Tarin Hills a world class development."

So holiday in Iraq may not be so far off a possibility as you may think! I think some enticing of investors may well be required but. However DAMAC quite rightly has some very loyal clients and we are very supportive (as one of their agents) is their projects in the Middle East and more recently in Cairo and soon near Hurghada. I look forward to seeing the due diligence on this one when ready and I am sure Iraq property discussion will continue for a long time now.

Market Commentary

After steadily climbing throughout the early part of the session yesterday, sterling lost significant ground to the dollar after a rare speech about the recent poor dollar strength by Ben Bernanke, chief of the U.S. Federal Reserve at a press conference.

Mr Bernanke said US interest rates were “well positioned” for an economy facing both price pressures and threats to growth. “We are attentive to the implications of changes in the value of the dollar for inflation and inflation expectations and will continue to formulate policy to guard against risks to both parts of our dual mandate,” he said, referring to the central bank’s goals of ensuring sustainable growth and low inflation.

“Talking up the dollar would mean the Fed could keep a check on inflationary pressures, allowing them to keep US interest rates on hold for longer,” said Adam Cole at RBC Capital Markets. “The Fed could be looking to actively use the exchange rate as a policy tool.”

The comments caused a positive response for the dollar suggesting that unlike the UK their central bank is in fortunate position where it has a few cards to play with balancing inflation and recession. The pound put up very little resistance after just managing to fight back from a 2 week low on Monday as poor data relating to the housing and banking sectors continued to confirm the UK’s weak economic outlook.

On Monday, Bradford and Bingley, Britain's largest buy-to-let mortgage lender issued a statement showing a sharp drop in profits and announced the resignation of its CEO. Throughout the course of Monday’s trading B&B shares had lost almost a quarter of their value.

Mondays run of UK data continued with weak mortgage and manufacturing figures and building activity dropping at the sharpest pace in the last decade as falling property prices and tightening credit restrictions caused havoc in the industry. Ratings agency Fitch also said that as time goes on more banks would start to feel the pressure.

It is quite apparent that Britain's economy is currently caught between a rock and a hard place with slowing economic growth and rising price pressures, while consumers are still feeling the pinch of the global credit crunch which now enters its tenth month.Analysts and investors won’t be paying quite so much attention to tomorrow’s interest rate decision as usual. The Bank of England’s hands are tied so it is very unlikely that they will change the current interest rate of 5%

Focus turns to the release of the purchase manager index (PMI) service data from the Chartered Institute of Purchasing & Supply today. This provides an insight to the condition of sales and employment in the UK. Traders want the highest possible reading, any reading above 50 shows economic expansion, below shows contraction. It’s a fairly safe bet given the state of the economy today’s figure, if above 50 will only be by a very small margin.

"This wave of weakness in terms of the data is likely to continue for the time being," said David Woo, head of currency research at Barclays Capital.

As predicted in previous reports, we are encountering a wave of volatility for all currencies. Buying at the right time is crucial to avoid being bitten by intermittent falls in your particular currency. At IFX we can provide you with up to date market data helping you make an informed decision when to trade or perhaps when not to trade.

We regard Egypt as offering superior ‘relative value’ to the international property
investor for a number of reasons:

• With strong economic fundamentals and political and economic reform well-underway, long term prospects for the economy are very good. The Government has streamlined the property ownership process for overseas investors and is actively seeking inward investment, thus providing favourable conditions now for property investment by foreign nationals.

Wider availability of mortgages for foreigners (which carry 0% tax on interest) will add liquidity to the market, and there is no inheritance, income or capital gains tax for overseas investors in Egypt. Furthermore, investment entry points are low and projected yields are high.

• Egypt is at the beginning of an expansionary cycle, in contrast to many property investment markets. In Spain, for example prices, on the coastal regions have been falling****, while Florida has been hit-hard by the recent ‘credit crunch’*****. Property markets in other less established
areas eg Dubai, Bulgaria, Croatia have already attracted significant foreign investment, so investors seeking aggressive capital growth opportunities are looking further afield. As well as the obvious buoyancy of the underlying economy in Egypt, the fact that the country has historically under-exploited its role as a major tourism centre suggests there is substantial value currently in Egyptian real estate related to the tourist markets. Growth in European tourist traffic will have the effect of driving short-term rents (and therefore yields) higher. This effect is likely to be particularly pronounced in the Red Sea Region, where there are plans for
a major new international airport at Ain Soukhna.

• Indeed, Egypt’s year round sunshine, relative proximity to Europe, low crime rate and rapidly improving infrastructure will in our view see it emerge as one of the world’s major tourist destinations over the next few years. Finally, we feel property prices in Egypt should benefit from petro-dollars: Gulf investors (who often have a preference for assets in the Middle East) are increasingly likely to be attracted to Egypt’s strong fundamentals, and the fact it welcomes foreign investment.

* International Monetary Fund Statistics, 2006
** International Monetary Fund Statistics, 2006
*** International Monetary Fund Statistics, 2006
**** Financial Times, 30-09-07
***** Financial Times 30-09-07

The Deal:

Its always good to be first with an offer that is very much in the vain of buy2let or, as I would say, "jet2let" investment. With prices from just £26,000 up to £52,000 you can invest in an existing building which will be refurbished. This suits many who do not want to be concerned about the financil viability of a builder or developer.

Tranquilla Town is on Sheraton Street right where the fast growing numbers of local workers wish to live. This population is growing fast with the growth in tourism in Hurghada and also the growth in general business activities. Lawyers, accountants, doctors from Cairo and Luxor are in need of accommodation in this area.

In addition there are those involved in the Hotel and Hospitality industry and of course the huge diving and boat trip industry. Final there are those expatriates involved in the fast growing real estate industry who need accommodation. Sales people from UK, Germany, Russia, Italy and elsewhere. All of these people arriving have pushed up property prices and rentals.

All monies held in escrow account at UK lawyers until title transfer. You pay 90% of the price and get title. The final 10% is paid when the refurbishment is complete (within 6 months).

All you need to buy is appliances and furniture and packs will be offered for around £2,500.

Just £1,000 refundable reservation fee will reserve your unit in this building of 53 apartments.


For further details on Tranquilla Town contact Jet2Let Property Ltd
Tel: 0044(0)113 3131000