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I have never forgotten the maxim of one of my University Professors, who said there is one secret to successful investing – “Buy from the needy and sell to the greedy.”

 

These words resonated inside my head on a recent flight back from Poland, where the previous day a well respected developer had explained why they were not interested in cooperating with foreign investors. “As soon as we place a bag of cement on the ground, we can sell half the project,” were his words.

 

There has probably never been a better time to be a developer in Central Europe – access to competitively priced debt is increasing, the level of demand outstrips supply several times over in markets such as Poland and Slovakia and the emerging middle classes are enjoying increasing buyer power.

 

Why then, at a time when most markets are seeing healthy price growth, do we feel the need to ask this question?

 

Quite simply, we are seeing too many investors ignoring the fundamentals. When property markets have a long run of growth, most mistakes and poor decisions are covered up by the general pace of growth. As markets mature, there is less room for error.

 

In more speculative markets, where demand is investor led (places in Bulgaria come to mind), the best profits are made long before you read about them in magazines and newspapers. Canny developers are buying sites now in locations you may have never heard of and by the time a rush of foreign investors arrives in search of a bargain, they have made substantial profits.

 

The key then is to understand the drivers of any particular market. In Poland and Slovakia, a strong majority of demand comes from the domestic owner occupier markets and prices are increasing due to some sound fundamentals, such as positive demographics, the cost of borrowing, a shortage of supply and increasing prosperity. This makes these markets less dependent on the whim of foreign investors and much more closely tied to the performance of the domestic economies.

 

Even so, we would counsel against being one of dozens or even hundreds of foreign investors buying into a large new development which is primarily being sold to investors. Everyone likes a bargain and the idea of purchasing discounted property is a very attractive one. But ask yourself this, if a developer exists to make money and there is a very strong local market, why would they offer foreign buyers a discount?

 

Buy to let continues to be a good investment in many markets, provided the fundamentals stack up. Short periods of “exclusive opportunities to secure a property with a 10% discount” where everyone appears to be buying will probably not offer you the best investment.      

 

More adventurous investors should also consider investing in land at an early stage. Such an investment can of course carry more risk and it is not for everyone. At Dare Property, we are now looking at Albanian land for example. Your reaction to this may well be one of “No thanks” but how many people would have bought in remote areas of Bulgaria even five years ago, or in Croatia and Montenegro in the aftermath of war?

 

If Albania is too risky for you, we are also carrying out due diligence on sites in up and coming areas of Warsaw. Some of these will be developed, others will be split up with individual plots sold on and others will be turned once the detailed planning has been granted.

 

By investing in one of our projects, you would of course be selling when everyone else is buying.

 

For further information or if you have any observations or questions on the above, please do not hesitate to contact us.