Real Estate Investing

So what is in your five-year plan? Does it involve international real estate investing? If so, you may want to take a look at a recent Forbes article projecting the “up-and-coming” real estate markets around the world. The article analyzes housing conditions in capital cities and business centers of several countries, based on “economic expansion, inflation rates, strength of individual property rights and access to lending in emerging markets.”

So a second home or, say, a vacation rental purchased in one of the following locales could yield big rewards down the road.

Tel Aviv, Israel’s strongest real estate market, is on the rebound from an extended period of deflation. In 2007, things started turning around with a 2% increase in housing prices. Gross domestic product increased simultaneously just over 5%, and is expected to see a 3.8% growth this year. All things that bode well for economic development and the real estate market.

Kuala Lumpur, the capital of Malaysia, has seen economic growth rivaling that of nearby Southeastern Asian countries but some of the area’s lowest inflation and consumer prices, according to Forbes. The housing demand in Kuala Lumpur is so great that builders are running to keep up and prices are as much as 70% higher than initial asking price in some cases.

Santiago, Chile and Aman, Jordan have seen economic inflation and development grow proportionately. This means, as Forbes put it, “economic expansion represents a greater value in the real estate market because it speaks to what people can afford in the loan market.”

Forbes’ article took an extensive look at the overall economic health of these developing countries, because that is extremely important in determining the likely returns on real estate investments. For instance, the article points out that Latvia and Estonia excited investors in 2006 when home prices grew 66% and 24%. But considering the economic instability of those countries, it is little surprise that prices depreciated 7% and 14% in 2007, taking the wind out of investors’ sails. No one can predict world events, which is practically what you’d have to do to feel comfortable investing in smaller international markets. It is by no means a stable investment, but could be an interesting and possibly a profitable one if you have some serious cash to gamble.