'Hot' is a much used word when it comes to discussions regarding the overseas property market; one that can have two very different meanings depending on the type of purchaser you are.

If you're a holiday home seeker then 'hot' will more than likely describe the kind of weather you'll be looking for in the destination where you choose to buy your new property. If, on the other hand, you've got your eyes on increasing the size of your wallet more than you have on the lifestyle advantages of owning a home abroad, then the word 'hot' will mean something different entirely: investment potential.

A country which is described by property experts as being the next 'property hot-spot' will often spark a rush of excitement amongst investors as they all scramble to secure the right home for the lowest possible price and then wait for the financial rewards to roll in. So, which countries do experts predict to have particularly 'hot' over the next few months?

Europe
In the past few years British interest in once scorchingly hot overseas property markets like Spain and France has cooled significantly. Instead, an increasing number of Brit investors have had their heads turned eastwards by the rapid improvements being made to the infrastructure and economies, not to mention the cheaper properties available, in Eastern European destinations. This has led to countries in this once ignored corner of the continent being viewed with considerably more warmth by British investors than more established locales.

However, the next few months could see some of the old guard, particularly France, become hot destinations for investors once again. "While many investors have taken their money to emerging destinations such as Bulgaria and Croatia in the last couple of years in search of higher capital gains, more established markets such as France are currently providing strong competition at considerably lower risk," explains Stuart Law of Investment specialists Assetz. "France is perceived as a high-quality destination where investors can see themselves living upon retirement, with an established infrastructure, culture and lifestyle. We predict an 8 per cent national growth in prices during 2007," he adds.

Nick Fullerton, a director of Foreign Currency Exchange, concurs with Law's forecast. "Prices in France are among the most competitive amongst the established European countries and bargain prices can still be found which have the potential to appreciate, sometimes steeply, in value."

Cyprus is another perennially popular European market that can currently be described as 'hot'. Says Law: "When Cyprus adopts the euro in 2008 it will have to decrease interest rates to the currently lower euro rate, making borrowing cheaper, which is likely to further strengthen the property market." Once again Fullerton agrees with this prediction. "The property market in Cyprus is one of the fastest growing in the European Union and prices in some areas are increasing by an annual average of 20 per cent," he says. Not that it's only the island's EU-affiliated southern half which is likely to experience a boom in its market. "It [Cyprus] is an attractive country for foreign residents permanently residing there, because you only pay a 5 per cent flat rate of income tax and property prices are still lower than in many other European countries, particularly in the north," adds Fullerton.
 
Fullerton also highlights Portugal as somewhere those looking for a property in an established European location may wish to keep an eye on over the coming months, albeit not necessarily on the British homebuyers' mecca that is the Algarve. "The Portuguese market has strengthened over the past few months," he notes. "Properties in Central Portugal are increasingly in demand, probably as a knock-on effect from the stalling Spanish market. The investment return in property in the country is healthy, due in part to an increase in demand and a lack of supply, but the beautiful beaches and an increase in low-cost airlines are also a factor."  

However, the re-emergence of some of the more traditionally popular markets does not mean that investment potential in Eastern European countries has gone cold. "In 2006 Poland established itself as the top investment location in the world," explains Simon Tweddle, the head of research and analysis for Property Secrets. "It received high levels of foreign direct investment (FDI) in 2006, has extremely good mortgage packages with demand for
property far outweighing supply. We will see this growth continuing long into 2007 because supply will continue to be restricted, whilst prices will continue to rise strongly throughout 2007." Law also lists Poland as being a particularly hot market at the moment, mentioning a change in the deposit required to purchase a property there as one of the main reasons for the market's strong outlook. "Economic growth in Poland will underpin the
continuation of 20 per cent plus capital gains levels," he says, adding "Lenders halving the deposits required to invest in a property to just 15 per cent has raised the potential returns dramatically and will continue to do so as long as prices carry on rising consistently."

The EU's two newest members, Romania and Bulgaria, are also tipped by some experts to be good short-term investment bets, although you will need to be careful about where you choose to buy, particularly as far as Bulgaria is concerned. "The Sunny Beaches and Banskos of this world may well face oversupply," warns Chris Howard of 4:Property. "But the Borovets ski region is a growing opportunity for second homes for the residents of Sofia and for international investors." With regards to Romania, Tweddle says: "Romania's entry into the EU, its increasingly diverse finance options and its economic performance all point towards an extremely good investment location for the foreseeable future – we're expecting growth of 30 per cent by the end of 2007."

So where should you look to buy in Romania to make the most of these opportunities? "Look to ski in the short term and coast over a longer run. For continuing opportunities look to residential investment in Bucharest and the other commercial centres," answers Howard. Central Eastern European locations such as the Czech Republic, Slovenia and Slovakia, along with the Baltic States of Latvia, Lithuania and Estonia are also all tipped by the various investment experts to be 'hot' European markets for the next few months.

The Americas
While Florida will undoubtedly dominate the thoughts of most people who consider buying a home across the Atlantic, the US is not rated by everyone to be a particularly hot destination for investors at the moment, largely as a result of the country's economic instability.

While the pound may currently be extremely strong against the dollar, those prepared to wait until the market has 'bottomed out' may just find there to be even better purchasing opportunities waiting for them in the States in a few month's time. "The continuing slide of the US dollar means better buying opportunities will arise towards the end of the year in the States," confirms Law. But this isn't to say there are no sizzling property markets across the pond. "The Americas contains more than just the USA; Canada, the Caribbean, Central America and South America are all seeing great interest in tourism developments and residential growth," Howard remarks. "Look for quality developments in prime locations, especially where there is limited supply. The American economy may be wobbling again, so it's important to pick the right locations."

So where are the prime locations for investment purchasers to be found at the moment? "Home to Panama, Costa Rica and Brazil, Central and South America boasts some of the world's key emerging markets," says Emma Holifield of Property Frontiers. "Brazil, especially, is of significant interest for investors looking to take advantage of a relatively young market. Goldman Sachs predicts that the country will have the world's fifth-largest economy by 2035 and with increasingly frequent direct flights and extensive coastland available for development, Brazil is currently a very promising investment destination," she adds. Sticking with the Americas, Property Frontiers also picks the Caribbean to be another particularly large growth area at this moment in time. "Seen by many as the ultimate lifestyle second home destination, the spice islands are also an exciting investment hot-spot with numerous new five-star hotel and villa complexes being built on previously undeveloped islands such as Grenada and St Lucia," adds Holifield.

Rest of the World
Over the last two or so years Dubai has been by far the most talked about destination outside of Europe and the Americas – possibly even more talked about than any destination in these areas as well, with the possible exception of Bulgaria. However, with available property in the Emirate currently limited while it prepares its next assault on the wallets of second home seekers – The World residential development is due for completion in 2008 – the next few months arelikely to give properties from some of the world's less developed investment markets their chance in the spotlight.

"Asia is likely to gain increased credibility as an investment hub over the next few months," says Holifield. "China's status as one of the World's fastest growing economies (economic growth is expected to grow at around 10 per cent per year in the near future) is having a huge knock on affect on various countries around it – namely Thailand and Malaysia with their rapidly growing middle classes."

Not that Holifield believes these are the only hot Asian markets at present. "New areas to watch out for include Japan which is set to continue on its expansion voyage due to increased investment from small firms which should result in job growth, despite lagging consumption, and Vietnam," she says. "Having joined the World Trade Organisation on 11th January. Vietnam is considered by some to be the new 'emerging China'."

Away from Asia, a small African nation made up of 11 islands and lying some 400 kilometres off the west coast of Africa is also being predicted to be ripe for investment at the moment. "The Cape Verde Islands have been causing a stir over the last 18 months, with the planned development of four international airports over the next ten years," says Howard. "These 'Caribbean style', sandy resorts are readily accessible from Europe, and there is land and properties available on most of the islands, with a strong conviction of returns," he adds. The islands of Sal and Santiago are widely tipped to be the two most promising islands in Cape Verde for immediate investment opportunities.

Of course, buying in any one of these predicted 'hot-spots' will not guarantee that you will be well on the way to becoming an overnight property millionaire – even making a minimal profit is not a certainty. In order to be completely successful in maximising your profit margins when buying a second home overseas, a number of factors, such as  ensuring you have the right house in the right location – in otherwords one which people will either want to rent out or buy off you when you come to sell it – will first need to be met.  That said, though, getting on the property ladder in any one of these currently 'hot' locations certainly won't harm the chances of your bank balance taking on a slightly healthier outlook in the future.

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For further information:
Assetz
Foreign Currency Exchange
Property Secrets  
Property Frontiers 

Article published on 5 February 2007