REVEALED: Where and where not to invest in property in 2012

IP Global's property outlook report reveals this year’s best and worst overseas investment markets
HOTSPOT - London, UK
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HOTSPOT - London, UK.\n

\nWith strong growth forecasts of 5 percent for 2012 and 23 percent over the next 4 years, prime London property continues to attract foreign investors. \n\nSales volumes increased 85 percent over the last year, as a result of 11 percent price growth and rental demand remaining strong. \nRental forecasts from Savills indicate growth of four percent this year in Greater London, but the strongest growth is expected in smaller properties that are less centrally located.\nAccording to consultants Jones Lang LaSalle, smaller flats saw rental growth of 17.1 percent during 2011. \n\nDemand will continue to be highest here, as tenants seek better affordability during 2012.\n

HOTSPOT - New York, US
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HOTSPOT - New York, US.\n

\nAmid economic uncertainty in Europe, the Middle East and Asia, New York City is again, a destination for those seeking a safe haven. The New York market is experiencing renewed interest from cash rich investors looking for real estate opportunities with prices still 20 percent below their peak.\n\nAccording to the Association of Foreign Investors in Real Estate, New York has been ranked for a second year running as the top city for foreign investment for 2012.\n\nManhattan rents jumped 9.5 percent in the fourth quarter of 2011 as demand increased on the back of mortgage lending standards remaining strict and supply of residential stock stilted.\n (Getty Images)

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HOTSPOT - Kuala Lumpur, Malaysia
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HOTSPOT - Kuala Lumpur, Malaysia.\n

\nMalaysia’s economy grew by a rate of 5.3 percent in 2011, supported by strong exports, expansion in financial and business services and continued government investment in key economic areas via its Economic Transformation Programme (ETP).\n\nAdditionally, having recently been ranked the 3rd most open economy in Asia by Nomura Research and 18th in the World Bank’s ease of doing business report, Malaysia will likely continue to be a top destination for foreign direct investment. \n\nAmidst this continued growth and diversification of the Malaysian economy, the property sector has continued to deliver strong returns to investors nationwide, with the greater Kuala Lumpur region leading the way with average price increases of 5-24 percent.\n

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ONE TO WATCH - San Francisco, US
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ONE TO WATCH - San Francisco, US.\n

\nAccording to the Association of Foreign Investors in Real Estate, San Francisco has overtaken Paris in their annual survey for international investors. \n\nThis survey monitors investor’s sentiment and San Francisco is the fifth most likely place for foreign investment in 2012. Although San Francisco has always been a strong US target for investors this is the first time since the survey began that San Francisco has landed a global top five spot.\n \nThe USA in general is still seen as the most stable and secure place for investments in 2012. San Francisco is the second most densely populated city after New York where 64 percent of the population rent. \n\nAfter posting strong rental growth of 14.8 percent last year, San Francisco is also expected to remain among the top 10 markets in effective rent growth in 2012.\n(Getty Images)

ONE TO WATCH - Brisbane, Australia
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ONE TO WATCH - Brisbane, Australia.\n

\nAccording to the APM Annual State of the Market report, Brisbane house prices took the biggest fall in 2011 in comparison with other state capitals. However, the outlook for 2012 is much stronger with many analysts predicting growth of between five and ten percent on the back of the Queensland resource boom in surrounding areas such as the Surat Basin.\n \nAccording to the report, dwelling shortages, population increases, rising incomes and the Queensland reconstruction program are expected to improve buyers’ confidence and contribute to a recovery in buyer activity over the next year.\n\n(Stuart Edwards - own work)

ONE TO WATCH - Perth, Australia
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ONE TO WATCH - Perth, Australia\n

\nAccording to the APM Annual State of the Market report, Perth’s median house prices fell six percent during the year to October. APM research has suggested that the continuing low levels of construction and the US$100 billion of mining activity in the area will lead to house price increases of between five to ten percent in 2012. \n\nAccording to The Australian newspaper, more than a quarter of passengers travelling through Perth's domestic airport are on their way to resources projects.\n\n(Getty Images)

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ONE TO WATCH - Istanbul, Turkey\n

\n2011 saw prime residential property values in central Istanbul continue to rise although prices fell in some parts of the overdeveloped coast. \n\nAccording to Castle Research, the past 11 years have seen exponential rises in the values of the best new developments from US$1,500 per sq m in 2003 to US$10,000 per sq m in 2011.\n2012 also marks a change to the laws relating to foreign nationals purchasing property in Turkey.\n\nPreviously citizens of countries where Turkish nationals are unable to purchase property were not allowed to buy property in Istanbul. This amendment to the law should have a positive impact on sales and could push property prices up to US$30,000 per sq m.\n\nForeign direct investment into Istanbul increased by 27 percent in 2011, a clear indicator that Istanbul is already becoming a popular property hot-spot.\n

ONE TO AVOID - Hong Kong, PR China
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ONE TO AVOID - Hong Kong, PR China\n

\nThe consensus view of real estate experts is that in 2012 prices in Hong Kong will continue to fall. The mass residential market in Hong Kong is likely to be the worst affected, with many analysts predicting a decline of up to 15 percent. \n\nThe falls have predominantly been brought about by the government imposed measures to cool the market introduced in 2011 (new taxes, increased stamp duty and land supply) but also by the fact that prices on Hong Kong Island are currently 28 percent higher than the previous peak in 1997. \n\nHowever, there remain pockets of Hong Kong that are less affected and still show value. Real estate prices in luxury areas of New Territories are still 13 percent under previous peaks which has begun to attract more investors to niche areas of this region who are looking to gain from the capital potential.\n

ONE TO AVOID - Athens, Greece
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ONE TO AVOID - Athens, Greece.\n

\nThe Bank of Greece has forecast that house prices will continue to fall in 2012, particularly in prime areas. The most conservative analysts feel that house prices will drop a further five to ten percent in 2012.\n\nPrice falls in Athens have been severe in the past: since 2009 they have fallen 21.5 percent in real terms and in Q3 2011 house prices were 4.6 percent lower year on year.\n\nBank loans are still relatively inaccessible, and property developers are sitting on over 150,000 unsold properties. \nMost developers are reluctant to lower their prices as they continue to live off their profits from the previous decade. Given the current economic crisis in Greece, prices seem unlikely to recover in the medium term.\n\n\n(Getty Images)

ONE TO AVOID - Prague, Czech Republic
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ONE TO AVOID - Prague, Czech Republic.\n

\nSales volumes were strong in Prague in 2011, due to heightened interest from buyers prior to the increase in VAT, which came into force at the start of 2012. In addition, there had been a seven percent decline in average asking prices to CZK 61,500 (US$3,296) per sq m during the year, meaning buyers saw value. \n\nHowever, the VAT increase, coupled with forecast GDP growth of 0.7 percent for 2012, will likely dampen interest in the city this year.\n\n(Sean Gallup/Getty Images)