Not everyone crashed and burned in the 2008 housing spiral, which many economists say was the worst crash since the Great Depression. So who were the real winners? Surprisingly, they were not the Europeans, who are now considerably poorer than when they were in their boom, late 2006. The US crashed, but not as badly as, say, the Australians. Iceland? We’re not even going to go there. For us, it opens up opportunities abroad in pseudo-third-world countries, especially in the real estate sector. The moral of this story is that every cloud ultimately has a silver lining.
The real winners, I would point out, are the people whose currency is more valuable now than it was in 2007. In 2007, what you could have boughten for 105 Yen now only costs 58 Yen. Expect more mansions with swimming pools in Australia owned by anyone who previously owned Yen. On the other hand, the Latin Americans are even bigger losers than the US. What used to cost 2100 Colombian Pesos in Jan 2008 now costs slightly south of 2400. However, there are also several Latin American countries that are pegged to the USD, which means there was considerably less movement. These countries include Panama and Costa Rica.
Another major loser is the South Korean Won. What could have been boughten for 950 Won is now worth 1500.
There are plenty of opportunities, especially for Americans and Japanese. While the big investment for the Japanese is Australia, the opportunity for Americans is Latin America. On the down side is the killer Capital Gains tax and in distant second, the Rental Income tax.
Venezuela is out of the question; the risk of a complete military takeover of western assets is too high. Yes, it’s fading since early 2008, but that doesn’t mean it still isn’t a threat. Plus, most (recent) real estate laws have been madly pro-tenant. If you’re convinced you want to go this route, however, gross rental yields can be in the upwards 12%. (To compare, most US yields are in the high 4%.) Or, if you’re not into the heart-attack-producing risk factor, Panama may be a better bet. Gross yields are 10.8% at a much lower ‘general transaction cost’ rate than Venezuela. Prices per Sq. metre are higher, yes, but Capital Gains tax is only 10%.
Another possibility is Peru. Peru is also scary, because Peru’s government is highly unstable. Nevertheless, the risk is still lower than Venezuela. Lima having enjoyed an 8.5% growth in recent rental economy.
So where is the happy, long-term medium? Uruguay. 8.7% yields are maybe a bit lower than what you’d expect in Latin America (still higher than USA). The economy is steady, the country is relatively safe, beach front property hasn’t dropped as much as beach front property in the rest of the world, and Rental Income Tax is very low, only 10%. Capital Gains are also very low; only 12% having started in 2007.
Latin America isn’t your only option either. There are plenty of other possibilities, take for example, Egypt. Much like several other Middle-Eastern countries, Egypt has no Capital Gains tax, and Rental Income tax is relatively low. Also, price per sq. metre is VERY low, at only $400 dollars per. However, there are several very harsh controls for non-citizens. You can not sell, or rent your property for five years after purchase (you or a family member may live there, however.) Also, you can not own more than two pieces of Egyptian property. An alternative to Egypt is Jordan, with 9.6% gross rental yield.