The Telegraph has just published the top 20 buy to let investment destinations in the world based on data from the Global Property Guide. Given our specialism in buy to let we thought it would be a good idea if we took a few examples from that and gave our views on each market now and into the New Year.
Number 1: Lima Peru
This is just one of many emerging market cities on the list. In fact 10 out of the 20 markets are emerging markets, 3 of which are in either the CIVETs, or the MINT groupings of the hottest emerging markets in the world. According to the Global Property Guide report rental yields in Lima range from 7.8% for very large 250sqm apartments to over 10% on small 75 sqm apartments (although the tabular data shows 8.86% for the smaller apartments). Global Property Guide's rental yield data is a year old, but given the strength of the market over the last year, especially price growth yields are likely to be at around the same level.
Number 2: Panama City, Panama
If you are an internationally oriented buy to let investor (or any other kind of property for that matter) and you haven't heard anything about Panama and its capital city of the same name - you need to look at your information streams.
Panama has been at the central of global trade since 1914 when it became home to the only waterway connecting the Atlantic and Pacific Oceans through the American continent. Since 1914 ships have gotten bigger and some of the biggest ships can no longer pass through the Panama Canal. So it was decided in 2006 that the canal would be expanded to carry the newer bigger vessels and also to allow more than one vessel up the canal at the same time. The construction of the canal alone has brought thousands of workers into Panama City all letting properties, and making buy to let investors in the city very happy.
But the real benefit will come when the canal is complete. Panama is already one of the fastest growing emerging markets in the world. Most of its GDP comes from the Canal, and the expansion is expected to triple capacity, which means revenues will also triple. This will mean a massive boost to the economy, including more jobs, more affluence and more demand for property to buy and rent in Panama.
According to the Global Property Guide, rental yields in Panama city ranged from 8.37% on a 160 sqm beachfront apartment to 9.67% on a 75 sqm beachfront apartment as of November last year. Yields on inner-city apartments ranged from 8.91% on a 200 sqm apartment to 9.20% on a 300 sqm apartment. Although this data comes from last year, due to the fact that the Panama economy has held up well against the financial crisis and kept the rental market strong, we can expect yields to have either stayed around that level or to have grown.
Number 3: Amman Jordan
Unfortunately the Global Property Guide's data for Amman in third is also a year out of date. But again, because of the market's resilience to and continued growth during the financial crisis yields will either be around the same level of better.
According to the report apartment yields in Amman last November ranged from 7% on a large 350sqm apartment, to 9.25% on a small 150sqm apartment. Villa yields ranged from 5.48% on a large 1250sqm villa to 6.24% on a smaller 500 sqm villa.
Although at number 17 on the chart, Istanbul in Turkey is probably the most worthy of a mention. Despite the blip of a year-long recession in 2009 the Turkish economy has been going from strength to strength since 2002. Not only has economic growth averaged 6% per year since then, but the government of the AK Party has also made the economy a lot more stable and safe to invest in, with banking reforms and excellent fiscal management.
This includes massively paying down public debt. When the AK Party took over Turkish debt was 74% of GDP, by 2009 it was just 39% of GDP. During the same period debt to the IMF was reduced from $23.5 billion to just $7 billion. By 2011 Turkey owed the IMF just $5.5 billion according to Erdogan.
After coming out of recession with a year on year GDP growth of 6.4% in 2009 Turkey went on to become the fastest growing economy in Europe last year with GDP growth of 8.5%, following the growth of 8.2% in 2010. During that 2 year period Turkish GDP growth hit double figures in 4 out of the 8 quarters. Now growth has slowed to about 4% this year, but at the same time FDI and exports continue to grow strongly and the current account deficit is closing as a result of the consolidation.
At the heart of this growing economic giant lies its cultural and financial centre Istanbul. Istanbul is one of the most economically vibrant cities in Europe, with its population growing rapidly in numbers and in affluence, generating exceptional demand for property to buy and rent. According to official data 500,000 homes will be needed in Turkey by 2015, 250,000 of them in Istanbul – developers regularly state that demand is not only outstripping supply, but growing far faster than they can keep up with.
The Global Property Guide issued a report last year titled Turkey: Europe's Best Residential Property Investment? The report displayed Istanbul property as being grossly undervalued, with average per sqm prices of just 2,386 Euros making it among the cheapest of European cities.