France best investment market, says property tracker

France has been judged the best overseas property investment market in the Assetz August Property Investment Tracker index, despite a predicted slowdown in its capital gains growth in the coming year.

The Property Investment Tracker rates the return on investment, weighed against a variety of issues in countries relevant to UK property investors, recently expanding its remit to include South Africa, Portugal, Poland, Italy and Greece.

Despite France's likely slowdown in capital gains growth over the next year, it remains the strongest investment prospect, said the group. With a minimal deposit of only 15 per cent, along with stable yields of 7 per cent, France offers significant returns of 92 per cent on a small initial outlay.

Cyprus is also performing strongly says Assetz, with prices in southern Cyprus rising by 18 per cent through 2004, and expected to rise further ahead of the islands accession to the euro in 2007/2008.

Rental yields remain at a confident eight per cent with a year-round rental market in some parts of the island, accumulating a total 72 per cent return on investment. The uplift provided by the Cyprus boom is such that it is dragging mainland Greece and surrounding islands up in its wake, the report found.

Assetz has also highlighted a number of troubling issues in several UK investor favourites, notably newcomer Bulgaria and old favourite Florida.

"Investors should be cautious in Bulgaria’s immature market," said Assetz managing director Stuart Law.

"Property prices are growing significantly in the more established areas such as the Black Sea coastline and the major ski resorts, but many of the apparently ‘bargain’ deals citing properties for under €30,000 will be located in the more rural areas and are unlikely to enjoy such high growth rates and certainly not high rental yields."

Mr Law went even further in the case of Florida, saying that the company has issued a 'beware' warning to would be investors.

"With interest rates rising fast in the USA and a widely forecast faltering in property price growth, Florida is a risk for investors who would gain on rental income alone and would therefore be forced to consider only a long-term investment strategy," he said.

"I would recommend caution in America. The property boom was based on extremely low interest rates, which are now rising in an effort to turn the heat down on the housing market. Buyers are realising a period of instability is pending, which will trickle down to affect the resale market in the States fairly rapidly."