Investors are enjoying the bigger yields on sovereign bonds, but these bigger yields reflect increasing risk. The longer these countries struggle the higher risk their debt becomes, the higher risk their debt becomes the less affordable it becomes. If something isn’t done soon this vicious cycle could easily lead to much more drastic consequences. As Scotland votes on its independence from a devolved UK (Ireland, Scotland and Wales are now in devolved governance) and Englishness and Britishness once again take on separate meaning, how long before one nation decides they would fair better outside the EU?

The latest news is that the Spanish economy contracted 0.3% in the final quarter of 2011, making for a slide into a predicted recession in 2012, with the IMF forecasting a 1.7% decline this year and the Bank of Spain predicting a 2012 contraction of 1.5%, they then predict a 0.3% decline and a 0.2% growth respectively for 2013.

If the Euro does collapse or economies do start to bailout of the Euro instead of being bailed out by it, then it will likely be because either Spain, Italy or both can no longer afford to refinance their deficit, and because the EU can’t (or won’t) raise sufficient funds to bailout these European behemoths. Once that happens all bets are off.

With the Spanish economy set to fall back into recession and such a massive unemployment rate (23% and 50% of the under 20), we once again face the danger that the crisis itself will breed its own worst outcome. That, because economies like Spain are caught up in such a mess that their debt will just become so high risk that they will no longer be able to stay afloat and will have to push the bailout button — and then what if no one answers?

Spain now has the highest unemployment rate in the OECD, with 295,000 more people out of work by the end of 2011 taking the total to 5.27 million, some 22.85% of the population, 48.6% if you could only the 18-24 year olds.

Spain was one of five European countries to be downgraded by Fitch after being put on "Ratings Watch Negative" in December last year. Fitch cited in particular Spain’s failure to meet its target deficit-cut for 2011.

Prime Minister Mariano Rajoy has said the 2011 deficit will be about eight percent of GDP — far beyond the 6.0-percent target — but has promised to abide by Spain target of lowering the deficit to 4.4 percent of GDP in 2012 and 3.0 percent of GDP in 2013. Rajoy plans 8.9 billion euros ($11.7 billion) in new budget cuts, tax increases to rake in 6.3 billion euros, and an anti-tax fraud campaign to recoup about 8.2 billion euros. But with unemployment so high, meaning less taxes to pay more benefits, there are real worries that cost-cutting alone just isn’t going to cut-it so to speak.

"[Spain's] material fiscal slippage primarily reflects an over-shoot at the regional government level and underscores a structural weakness in Spain’s fiscal framework and has undermined the credibility of the fiscal consolidation programme," Fitch said in a report. "In Fitch’s view, the official 2012 deficit target of 4.4 percent is now likely to prove unrealistic. The agency therefore assumes that this year’s deficit will come in at 6 percent, and that the stated 3-percent target will now not be reached until 2014." The agency said economic re-balancing in Spain was hindered by a rigid labour market.

Spain is taking the fore because of its huge labour-market problems, but the same questions are being faced by all those caught up in the crisis; how to get back to growth without spending, how to reinvent the wheel and accumulate without speculation. The EU could not afford to bailout Spain without some major assistance, let alone if both Spain and Italy need help at the same time.

Right now, the Euro is akin to a sinking ship and no one knows how or even if it can be saved. As we all know even from recent history it isn’t long in that situation before the calls to abandon ship start ringing out.

Article written by Liam Bailey on behalf of Turkey property developer Wise Move Homes, famous for the Altinkum property gem the Apollon Holiday Village.

Amidst all this volatility, real estate is seen as a safe haven, however, even real estate is volatile in many countries, especially established markets. Within all this instability, volatility and uncertainty stands a rock, Germany.

In Germany only 43% of the population own their own homes. This renters culture builds into a promising investment prospect.

Firstly, because there was no rush on mortgages Germany has not fallen prey to the great sub-prime crash, and German banks are as stable and strong as ever. Secondly, in Germany house prices are controlled by rents, and rents are controlled by laws (tied to wages), because they can’t have the population priced into homelessness by greedy landlords. When wages grow rents are allowed to grow and when rents grow prices grow, but only slightly.

Anyone who has known the German property market for a few years knows that a boom is always just around the corner but never actually arrives. If you want an investment that will appreciate rapidly or even at all, then Germany is not for you. However, if you are happy to invest into a property with practically guaranteed 100% occupancy, allowing you to calculate yields beyond a shadow, and then look towards Germany.

Berlin is particularly interesting, because up to 90% of the population there live in rented accommodation. What’s more there is an abundance of refurbished and modernised apartments in the city offering top quality apartments are undervalued prices. Even in Berlin rental yields average 5%, but again, we are talking about a reliable, long-term buy to let investment.

In Paris demand accelerated greatly in 2010 and it became staunchly a seller’s market. According to reports if buyers didn’t make an offer almost immediately on the best properties they lost out, and most paid the full asking price or above.

Limited supply of properties for sale in Paris led to prices rising in 2010, with estimates putting the growth at between 7.5% and 10% for the year.

There are twenty different arrondissements in Paris, and thirteen of them have seen house values increase, with the average cost of a 50 square metre apartment being 334,000 Euros.

The most expensive area is St Germain des Pres, where prices have increased by nearly 20% in the past year. Paris is beginning to feel like the preserve of the very wealthy. However, healthy rental rates and strong potential for capital growth mean it is still popular with investors, who favour 1 bedroom apartments.

The price rises are not limited to Paris. It is estimated that house prices across the country have risen by nearly 6% this year, which compares very favourably against falls of just over 7% in 2009. It is thought that prices will continue to rise as there is likely to continue being a shortage of properties for sale, which with low interest rates will drive up demand.

New building throughout France may satisfy growing demand over time, especially with the gradual lifting of building restrictions, but this is less true of the glamorous capital, where building is closely monitored. It is likely that Paris will continue to become France’s premier destination for property prices, but eventually, with populations growing and living longer, and as more and more buyers are priced out of the Parisian market, other cities will begin to catch up.

After much talk of bottoms and beginning recoveries reality is once again dawning on the Spanish property market, as it comes to terms with its massive oversupply and the dire state of the wider economy.

According to the Spanish housing ministry sales of Spanish properties across the board (domestic and foreign buyers) fell 47% between July and September. Widespread reports tell of prices now down 50% and of sellers finding it difficult to sell even at that.

Barbara Wood, a buying agent acting for Britons, bought a seven-bedroom home in the tourist hotspot of Ronda; it was advertised at €1.5m (£1.25m) but the seller accepted €850,000. An Estepona villa had a €750,000 price tag but went for €485,000.

She says: "Discounts of 20% are way too little. Few sellers have the guts to advertise an asking price close to what they actually take, so buyers have to wade through masses of property with daft asking prices."

This is a million miles from talk of massive sales increases as developers cut 20% off their prices, as we heard in the middle of the year, including a report of one Marbella developer seeing sales rise 200% compared to 2009.

And it is not going to get any better for a while yet. Experts are predicting that prices will fall between 15 and 30% further before stopping, and even then we will be looking at stagnation before growth.

The Spanish economy is still is one of the few in Europe still in recession, and its incredible 19.7% unemployment rate is far worse than anyone would have dared predict for an established market like Spain.

If you want a holiday home in Spain, have the cash to buy, and don’t mind the fact that it may fall in value after you buy, then you should definitely be out there now looking for bargains. But if you are outside that criteria in anyway then wait, because prices are almost certainly going to fall further in the weeks and months ahead.

The National Association of Estate Agents have reported negatively on markets throughout the height of the downturn. But now, when the tide of international confidence has turned and things are looking brighter, their members would not be happy/would revolt if they were not to do everything they could to assist in the turning of public opinion, the increase in confidence and ultimately to increase demand for property in the markets they serve.

And, further, now knowing this I must ask: has all the information they have disseminated in the last 18 months been solely to be informative about international property, or to build credibility and add weight to the message when it became positive.

The article that made me ask this was on Spain, the NAEA’s Des Rowson, the organisation’s spokesperson for Spain saying that investors should buy quickly to capitalise on rising house prices in the country.

Apparently Rowson conceded that the Spanish market endured a "difficult 2009", before highlighting the bargains that are currently to be had. He said that while the organisation doesn’t expect any significant changes before the pound strengthens, but still sees a 3% growth over the year, for that reason Rowson said:

"So if you are thinking of purchasing a property, do so in the early part of 2010," he noted.

To say that the Spanish market had endured a difficult 2009 is like the understatement of the decade. Yes, there are bargains to be had but prices won’t grow by 3% unless they can shift the 1 million unsold properties — left from the construction boom that saw Spain build more properties than Germany, France and Italy put together. And this will need to be done quickly to leave enough time for a growth of 3%.

This is clearly an attempt by NAEA to spur on the sales increases that have already been seen, as I said, I don’t blame them for this, it is just an observation. In reality though, the recent sales increases have been from bargain hunters, but there is no rush to secure a bargain; banks are holding thousands of properties back to avoid flooding the market, there’s a good few months left before the end of discounts and distressed sales in the Spanish property market.

(Read full entry…)

This trend is so great that we felt it needed to be addressed; exactly what qualifies as a cheap property in Spain? The answer can be applied to other countries and other buyers as readers see fit.

Firstly, one must remember that a property being repossessed is the end of a process. The time this process takes is usually one of the least pleasant times in the former owner’s life. It is likely that the former owners would have suffered from some form of depression during this time, and/or at the very least deep anxiety and apprehension about the future.

When a person feels like that, going about the business of an average day becomes difficult, let alone the upkeep of a property.

There is also the fact that the people being repossessed now are in large part those who have overstretched themselves to buy a home on 100% finance and/or at many multiples of their salary.

Bearing these facts in mind it is likely that a proportion of repossessed and distressed sale properties will need substantial work to bring them up to standard.

Another thing that people fail to consider is that the banks offer the best repossessed properties — i.e. a foreigner that had defaulted on the loan of a luxury property that had hardly been used — to their staff and their family members. This means that the proportion of poor quality properties among distressed property sales in Spain is increased further still.

Finally, there is the fact that Spanish property, for the most part was grossly overvalued during the boom years, by as much as 40% according to some analysts. This means that when you see a property at a discount of 20% or 30% off its peak price for a quick sale, the property may only just be realistically priced, not cheap and not a bargain.

So, what is a cheap property in Spain? The answer is: the same as a cheap property anywhere; a property that you bought for a good price, and that when it is up to a liveable standard, is valued at more than it ended up costing you.

Therefore, to buy a property that is cheap, one must do a lot of research into the area and also go and see the property to assess its quality vs. its price.

Thus, repossessed and distressed properties that are selling so quick that you don’t have time to go and see them first, are not necessarily cheap. It is a Russian roulette; you may well buy a property that proves to have been cheap for what you get, but you may end up with a complete nightmare.

It is up to you whether or not you want to take the gamble — there are some at such low prices that they have to be worth a punt. In closing: repossessed and distressed property sales ads tend to pressurise people into snap buying, when in reality you should always go and see a property before you buy it.

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I thought it was only right that I should write one for my own blog, and so I am undertaking the arduous task of charting my ultimate top 5 property investments for 2009 and 2010.

Egypt:

I have recently fallen in love with Egypt, and it is my hot tip of the day (the one I tell my friends and relatives to go for if they ask me). For the price of a mid-range saloon I could buy a luxury apartment in Hurghada, one of Egypt’s fastest rising tourism destinations.

Hurghada is doing a roaring tourism trade at the moment, especially with Brits, who, keen to holiday outside the Eurozone are finding the low living costs in Hurghada an additional draw.

Property is so cheap in Hurghada because it is still in a very early stage of its development, with more developments in progress than useable holiday accommodation. There is a risk factor in that, as well as the risk factor for buying property off plan. But if you do your research carefully including several trips to the development then all those risks become benefits.

You are buying in cheap because you are buying into a building site, the value of the investment when it is a luxurious apartment on a world-class resort in a popular tourism destination is impossible to say accurately, but it will certainly be a lot more than the 12,000 – 20,000 GBP that you can buy in for now.

Egypt property is a versatile investment choice, because you can buy in with the hope of making short-term profit when more of the resorts are completed than not, but if that doesn’t pan out the profit will still come over the long-term.

The Philippines

I really am favouring countries that have shown their ability to grow economically this year; kind of like: if your (emerging market) economy can keep its head (of steam) while all those about you are losing theirs…

The Philippines is expected to grow by over 4% this year according to the International Monetary Fund, and unlike some of the economies expected to grow this year based on bumper crops that could be regarded as unreliable, the Philippines growth is based on the comparably solid worker remittances from overseas Filipinos, and on the outsourcing fuelled services sector.

Another benefit the Philippines has from an overseas investor’s perspective is its being worst affected by the Asian economic crisis at the turn of this century. This led to reforms in the banking sector which are neither here nor there in honesty, but it also led to Philippines property and commodity prices being lower compared even to its neighbouring competitors.

On top of that you have the fact that the capital Manila is a city emerging into a modern metropolitan wonder faster than most, and this means bargains in the form of off plan apartment complexes. I know for a fact that £30 grand will buy you a luxury apartment in a Manila high-rise, and in the growing financial district of Makati. As Manila’s middle class grows these properties will be in high demand, first for residential letting, and then for purchase.

Albania

I can help it, I just love Albania. Don’t get me wrong, its economy is likely to avoid the recession this year by only the skin of its teeth with a 1% growth forecast by the International Monetary Fund, and you won’t find 12% guaranteed rental yields in Albania. That said, Albania’s government is one of the most economically astute in the developing Eastern Bloc, having brought a quarter of its population out of poverty in the last decade and become a middle-income country in 2007.

Even now as most of the world is pulling in its purse-strings, the Albanian government is investing in future growth; using its new status to secure loans from the Japanese government, the European Bank for Reconstruction and Development for projects like a new terminal at the country’s largest port Duress, and a new super-highway linking the hills of Kosovo to the improved port.

Again the low price of property is not a downside in Albania; you can get a 2 bedroom luxury apartment in Tirana for just the wrong side of £50k if you know where to look. The good thing is that in Albania’s case the developments are not all resorts; many of them are suitable for the local population. This means that you can resell to Albanian’s who will be looking to buy property in increasing numbers as the economy continues to grow.

However, Albania property is very much a long-term investment; I have no doubt that in time the property being bought off plan now for £50k, will be resold for 3 times that amount, but this will only be when the local population can afford to pay that for quality housing, which may be 10, 15 or maybe even 20 years down the line

Panama

I just wrote a long article detailing why Panama property is one of my investment tips for 2009, rather than repeat or rewrite it you can read it by clicking the link above.

Repossessed Property in Developed Markets

The international economic crisis has led to hundreds of thousands of homes being repossessed around the world. For me the three main investment hot-spots where repossessed property is in abundance are: the UK, Florida (and the US) and Spain.

Many people are seeing this as an opportunity to buy cheap property, but that is not the way I recommend capitalising on it. I think people should spend the amount of money they would have spent, and use it to buy the ultimate repossessed property that they could buy.

For instance: if you are looking at Florida or Spain, then go for coastal property or property near Disneyworld in the former. But most of all buy a big property with plenty of land, especially in Spain, because this will prevent developments from springing up all around you. And in the UK it’s all about location, location, location; look for swanky up-market properties near the best schools.