Looking for a holiday home in foreign land?

If, in an attempt to escape the summer heat of Dubai, you have recently found yourself daydreaming of good times spent relaxing by the pool on far-away shores, or chilling at the top of a snow-covered mountain peak, the thought of an overseas real estate investment may have entered your head. After all, many people enjoy owning properties abroad.

In the last few years there has been a growing trend for people to buy property overseas, perhaps fuelled by the extensive media coverage of celebrities buying places here and there on a whim, a move that seems to further increase their status. While the non-celebrities among us may not have the same deep pockets with which to fund a luxury villa in the Seychelles, there are some great opportunities to be found in various international property markets.

As a starting point, when considering purchasing abroad one must first decide on the objective. Are you looking for a retirement or holiday home for personal use or is it more of an investment property that will hopefully bring in some additional income through rental or resale? Perhaps you are looking at an off plan project that you can quickly flip and release the capital before the bricks are even laid. Whatever the reason, a bigger question perhaps is, "Where to buy?"

There are currently many opportunities in consolidated markets such as the UK. Yes, prices have been hit by the credit crunch but that in itself creates a potential bargain for the would-be investor. The nature of real estate suggests that the UK market will recover and reach its former peaks. Properties in prime cities like London, New York and Paris do not stop appreciating in value and while cyclical, the general trend is that these properties are consistent performers.

As with all portfolios, it is wise to diversify your capital when investing by looking at both consolidated and emerging markets. Recently we have seen Eastern Europe as well as the Middle East region emerge as potentially strong and stable markets. However, like all markets it is important to be sure that there is an adequate amount of due diligence performed as there are benefits and risks in any market. When operating in unfamiliar territories it is always wise to be aware of the pitfalls. Like the laws, taxation, currency controls and the quality of the developers.

Emerging market

The allure of an emerging market is the vast potential for growth. The returns over the short-term can be a lot more aggressive and the economics enable speculators to trade off plan projects more readily than in mature arenas. However a lot depends upon what is going on within that emerging market along with the economy of the neighbouring countries. For instance, if we consider the Gulf region, we are now seeing the entry into the markets of countries such as Oman, Qatar and Bahrain largely on the success and stability of the UAE.

With this in mind, when considering an emerging market, look at factors that may influence its future growth, including a change of government, new found resources, and increased activity in the region as examples. Other factors to be considered when investing in an emerging market are: the country's banking system, cost of labour, level of education, population growth, judicial system and its relationship with its neighbours.

So, when looking for that dream location, some foreign markets do offer an attractive investment opportunity, providing that you do your homework before putting your life savings on the table.

The writer is managing director of Better Homes.