When investing in property overseas the advantages of finding a country with a fast-growing population, a young demographic, and above average expectations for economic/GDP growth are obvious. The supply of new homes nearly always fails to keep up with rising demand, especially in the larger cities, and inflation is usually higher than GDP growth, and property price inflation is usually higher than standard inflation. However, property investment is not that simple.
There are other factors that are equally, and often more, important than population/economic growth, or even the most often quoted 'supply and demand'. These factors are based around who is in control of the country. The strong case for investment listed above can be far out-weighed by high levels of corruption and poor economic management.
Looking globally for countries with bad cases of hyperinflation reveals that Iran, North Korea, Argentina, Venezuela, Egypt and Syria all have one thing in common - the collapse in the confidence of their currencies. Contrary to what many investors think, hyperinflation is less related to the quantity of money in circulation and more directly related to the confidence in the currency, which often translates to a lack of confidence in the government.
While it can be argued that hyperinflation can 'inflate away' your mortgage on a property, turning it into an insignificant
sum compared to the new value of the property, (assuming you were able to pay the sky high interest rates to service the debt during the inflationary period), when it comes to investing in property abroad, you are likely to have bought with cash or at the very least put down a sizeable deposit. This means that your primary concern will always be how many £'s will you get back when you sell the property so a currency crash will nearly always destroy your investment.
In this article we will look at two countries - Turkey and Egypt - that both have fast rising populations and are often tipped as 'emerging' economic powerhouses and yet both are causing property investors major concerns at the moment.
