Top overseas property hotspots revealed

Cyprus, Bulgaria, France and Greece are set to be the best places for buying overseas property in 2006, a new report predicts.

But property investors should avoid buying second homes in Spain, Florida, and South Africa, property investment firm Assetz advises.

"Southern Cyprus is set to become the overseas investment hotspot of 2006, with deposit levels falling to just 15 per cent in many areas for higher income clients and with Swiss Franc mortgages now available with rates of just 3.25 per cent, making borrowing even more affordable," said Stuart Law, managing director of Assetz.

"The complete redevelopment of Paphos airport, due for completion in 2008, will bring increased levels of tourism to the country and additional investment opportunities, prompting an increase in house prices. Entry to the euro is beckoning in 2007/8 which will pre-empt further price growth. Rental yields remain at a confident eight to nine per cent with a year round rental market in some parts of island."

But Cyprus was not the only area marked out as a good prospect for the year to come.

"Bulgaria is likely to continue proving lucrative as a long term investment into 2006, with ski resorts boasting year round rentals and yields of up to 12 per cent - as much as double those in the coastal resorts," Mr Law added.

"The ski resorts thrive through the summer months, offering activities such as hiking, fishing and mountain biking. The low cost of living (a pint of beer for example, costs 50 pence), new cheap flight routes and world-class ski facilities, mean Bulgaria is now providing healthy competition to the French and Austrian ski markets."

But he did sound a note of warning.

"[Bulgaria] it is still an emerging market and although investment prospects are strong, the resale market is not guaranteed and investors should exercise caution," Mr Law explained.

Closer to home, France was marked out as a good prospect, with predicted house price rises of ten per cent. Inside France, the Languedoc region - with relatively low prices and good tourism prospects - is marked out for above-average growth.

Assetz predicts Greece will also return to house price growth after a year of stagnation.

Turning to the areas to avoid, Mr Law predicts that after 17.2 per cent growth in house prices in the 12 months to June 2005, Spanish properties will not continue to grow in value.

"Valuations on Spanish property have overshot the mark and investors may come down to earth with a bump in 2006 as prices fall back into line," he explained.

Florida was described as "one of the riskiest investment zones" as US interest rates rise and buyers realise hard times could be ahead. Additionally, properties in the Gulf of Mexico are proving difficult to insure due to natural disasters.

South Africa could also prove problematic for investors, with an oversupply of high-density apartments coupled to a fall in demand for rental space. This has led to a halving of rental yields in 2005 as house prices double.