It’s been an eventful week or so with various news items having a direct impact on property investors in the UK and overseas.  For those who borrow in Yen, the Bank of Japan has maintained rates at 0.5%.  For those who invest or borrow in the US dollar, it is likely that the Federal Open Market Committee (FOMC) will reduce its target fed funds rate by 25bps at its meeting today which has sent sterling racing to a 26 year high against ($2.0694) the Greenback.  I am off to New York soon to do the Christmas shopping so at this rate 5th Avenue will be a doddle!

In the UK, it is likely that the next move in interest rates will be down, but not yet.  The market is looking at February or March.

In Eastern Europe there is a danger of the boom and bust economics associated with high inflation.

Inflation in Bulgaria is 12%, Latvia 11%, Estonia 7% and Romania 6% (50% higher than the Central Bank of Romania’s target) and has reached levels that will compel central banks to rein in lending by raising interest rates and utilising other monetary policy tools.

Property prices are falling in the Baltics, and will go south in other countries where central banks are forced to intervene to put a break on high inflation.  Also the level of the current account deficit in some of these countries, for example 30% of GDP in Latvia and not much better in Bulgaria and Romania will have a major impact as credit is squeezed.

Eastern Europe has experienced a considerable economic boom in recent years, but the signs are clearly there that some of the economies of this bloc are overheating. Overheating economies require medicine to cool them down.  Until the financial markets settle and we can visibly see some semblance of order, prudent investors will look elsewhere for their investments or simply wait to pick their moment.  But that’s not now.  Have another look in 6 months and certainly do not enter these markets as a negative cashflow investor!

Elsewhere, the news that easyJet has bought GB Airways (with effect 30th March 2008) will have a significant impact on routes operated by this franchise carrier of British Airways.  It is a smart move by the low cost carrier and will open up a host of new routes which will benefit travellers and property investors alike.

As many of you are aware Cyprus will become an oil and gas giant over the next decade, achieving revenues which will dwarf any other sector in its economy.  This is the BIG story, not low cost carriers, golf courses, casinos and marinas, although they are very welcome.

The news that Prosafe SE has moved its headquarters from Norway to Cyprus, and specifically Larnaca is significant. The figures speak for themselves.  They had a turnover for 2006 of USD 365 million with an operating profit of USD 150 million and employ around 1030 people.

The important news is that their new domiciled headquarters is in Larnaca which is a pretty strong endorsement for Larnaca to be the oil capital of Cyprus, as is Aberdeen for the UK, Houston for the US and Calgary for Canada.

Larnaca was undoubtedly chosen because of the airport and its proximity to Cyprus’s oil blocks off the south eastern coast over Nicosia and Limassol.  Logistically this would mean all the relevant personnel and support staffs are going to need to be accommodated and even live around Larnaca and the surrounding areas in the years ahead.

The launch of our 5-Star project, The Grove Spa Resort, Larnaca was a great success and we are now putting the finishing touches to our second new scheme which will be launched early in the New Year.

If you would like further information on The Grove Spa Resort which is ideally placed to benefit from the major infrastructure investment in Larnaca, then please e-mail me direct at dominic@jet-to-let-magazine.com

If you are an agent and wish to work with our property development company then also please e-mail me on the above address.

Latest Property Investment News

House prices rise in October

House prices rose 1.1 percent in October, the biggest increase in four months, taking the annual rate up to 9.7 percent, the Nationwide building society said on Wednesday.

October's gain, the strongest since June, came after a 0.7 percent monthly rise in September, when the annual rate was 9.0 percent -- a year low. The average house price rose to 186,044 pounds in October.

The figures are in stark contrast with recent data that have suggested the housing market is cooling in response to higher borrowing costs and also far exceeded analysts' forecasts for a rise of 0.3 percent on the month and annual 8.6 percent gain.

But Nationwide chief economist Fionnuala Earley said it would be "misguided" to think the housing market was immune to a slowdown.

"The rise in the annual rate temporarily breaks the slowing in price growth we have seen since June but is unlikely to mark the start of a new upward trend," she said.

"Most leading indicators of housing market activity are continuing to weaken. Mortgage approvals are falling from recent highs amid weaker demand and tighter lending criteria for riskier borrowers."

Bank of England data this week showed the number of home loan approvals fell to their lowest in more than two years in September.

Earley said that while limited housing supply would help support prices, strong house price growth at the end of last year was unlikely to be replicated this year which would also depress the annual rate of house price inflation.

"The underlying dynamics of the market, however, are clearly not as strong as this time last year."

Source: Reuters

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