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.
Showing posts with label economic growth. Show all posts
Showing posts with label economic growth. Show all posts
Thursday, June 12, 2008
Front Line or no Front Line - is that the question?
Wednesday, April 30, 2008
Egypt's credit worthiness commended by Capital Intelligence and Moody’s
Reported recently was the following story on Egypt's currency rating and reflects how this economy is likely to be grabbing more news headlines. The big reduction in government debt, and the likely economic growth around last years rate of 7.1%, adds to the positive story that Egypt is increasingly viewed as a key economy and one that will attract increasing amounts of foreign investment as domestic economic activity drives the demand for goods and services.
"Egypt’s long- and short-term foreign currency ratings have been raised to BBB-/A3. At the same time the agency has affirmed Egypt’s local currency ratings of BBB/A3.
The statement from Capital Intelligence pointed out that the change in the foreign currency rating reflects the substantial improvement in external solvency and liquidity ratios over the past few years, which indicate strong repayment capacity and an increased resilience to external shocks. CI’s expects that balance of payments trends will remain consistent with external sustainability over the medium term. Egypt’s ratings are also supported by the good progress being made on fiscal and structural reforms, which have helped to improve economic and financial fundamentals.
The statement commended the fact that the external current account recorded its sixth consecutive surplus in fiscal year 2006/2007, which ended in June, net foreign direct investment exceeded USD11billion, while official foreign exchange reserves reached USD 27.4 billion. Gross external debt continued to decline and is estimated by CI to have fallen to a comparatively low 23% of GDP or 60% of current account receipts (CARs). External vulnerability is mitigated by the country’s net creditor position, with the foreign assets of the central bank and commercial banking sector estimated by CI to exceed the external debt stock by the equivalent of 47% of CARs or 18% of GDP in June. Public external debt service is low and official reserves (excluding gold) are currently about seven times as high as the stock of short-term public external debt on a remaining maturity basis (up from four times in June 2004).
Good progress is being made in implementing the government’s economic reform program adopted in 2004. The foreign exchange market has been liberalized; customs duties reduced and trade procedures simplified; corporate and personal income taxes reformed; and tax revenue administration strengthened. The privatization process has gathered momentum: more than 40 enterprises or joint ventures were wholly or partly privatized during the past two fiscal years, the two largest of which were the Bank of Alexandria and Egypt Telecom. Efforts are also being made to strengthen macroeconomic policy frameworks and improve governance.
The statement added that improving macroeconomic management and more assertive structural reforms have contributed to acceleration in economic growth and increased employment. Real GDP increased by 6.8% in 2005/06 and by 7.1% in 2006/07 and is expected to remain above trend in the current year. The upturn in the economy and drawdown of government deposits to retire debt has led to a substantial reduction in the ratio of government debt to GDP from 103.3% in June 2005 to an estimated 78.6% in June 2007. Moody's Investors Service, one of the world’s most respected and widely utilized sources for credit ratings, also, praised positive developments in the Egyptian economy since 2004. Moody’s report said that this growth was driven by several factors including higher oil price, growth of tourism and increased exports. The past year witnessed a remarkable growth in different sectors, including sectors not related to the energy filed, which implies more jobs and more flexibility in adapting to external variables. The report expected the overall deficit of the public government to decrease in the coming years. The surplus in the balance of payments and economic growth are expected to remain the same.
Egypt's rating of susceptibility to external fluctuations went down from 42.7%to 26.6 percent in 2006 and is expected to reach 21.1 % in 2008. This reflects the economy's increased capability of absorbing external shocks especially with the huge increase of financial inflows and net international reserves.
Source: Ministry of Investment"
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