PIGS versus BRICs – which property hotspots are best?

Individual European property markets vary dramatically, with country annual growth ranging from minus 14.8% in Ireland and minus 3.7% in Spain, to stronger European countries like Poland at 8.1% growth and Turkey at 2%.

Emerging markets might be considered higher reward than European markets. However it is important to note that they can overheat and also be higher risk, Dubai is a classic example of this.

Europe, the PIGS and BRICs

The troubles encountered in the Eurozone, including financial bail outs, the banking review, the establishment of a permanent, Eurozone financial rescue mechanism, all played a role in shaping the developed nations' property market in 2010.

Add to the mix, property buyers wanting to raise finance, as well as watching exchange rates. For example, European banks' exposure to the debt of Spain is €257bn, (according to FT/CEBS analysis) that is a sizeable sum. This will influence access to funding for overseas property purchases.

The Euro area is forecast to grow at 1.3% 2011, vs 6.8% and 6.4% for emerging economies. Economic growth bodes well for property markets, since the wealth generated creates property demand and acts as a driver of the property market.

On the face of it, the emerging economies look a better bet, however they will need resources to grow, both money and raw materials (witness the spate of lead thefts to supply china with base metal requirements). Some emerging markets have not yet got a proven, "foreign property buyer" track record.

Sustainability of the domestic, property markets will also be a key question to bear in mind, as well as how foreign property buyers are treated by regulation.

What does this mean for Overseas property buyers in 2011/12?

A country need not be showing booming property growth right now, for it to be a good future, investment opportunity, but it must have the potential to recover in the medium term. This way property can be bought at keen prices and has the scope to grow as an investment.

Choosing the bank a buyer deals with, could be as important as the country chosen to buy in, for 2011 and beyond. Banks with low exposure to weaker economies and bad debt may be worth seeking out.