Overseas property investors should be wary of Bulgaria as market growth collapses and rental competition hots up, but prospects still look good in France and Poland, according to a report this week.
Total annual returns on Bulgarian property have plummeted to 44 percent from 104 percent three months ago, according to the latest quarterly investment tracker from property investment firm Assetz.
Annual house price growth in the country has slowed to 17.8 percent from 36 percent, with the Bansko ski region showing price falls of 2.1 percent.
Property prices in Bulgaria as a whole only grew 1.6 percent in the second quarter, while the oversupply of investment properties has led to fierce competition for rentals.
Stuart Law, managing director of Assetz, said: This is an interesting time for many overseas markets.
Bulgaria is facing a period of readjustment after a huge initial foreign investment. While longer term investors are still set to benefit over the next five to 10 years, as low cost property continues to attract holiday home buyers, there are no longer instant returns to be made.
An oversupply of rental properties is being aggravated by stories of dishonest local management agencies, some of which are reported to be letting properties and keeping the cash.
House price growth in the American property market has also slowed, the data showed. It has fallen to 10 percent per annum from 12.9 percent in June, and is expected to slow further.
With quarterly growth of just over 1 percent being the lowest since 1999, Assetz predicted negative house price growth in the US over the next 12 months.
The United States could be on the brink of a significant house price retracement, said Law.
It's quite possible we will see price drops on an annualised basis for the first time in decades, through 0 percent into negative growth.
Assetz expected to see the exchange rate reach more than two dollars to one pound sterling spelling losses for those investors who bought property in the US for cash or re mortgaged a UK property to buy, but potentially good news for investors planning to buy property Stateside next year.
Returns were found to be the highest in France, while Polish property has also putting in a strong performance over the past year.
With a consistent rental market and capital gains of 9.1 percent, French property investors are now enjoying a total annual return of 62 percent.
In Poland, low property prices, good bank lending and capital growth of 20 percent in the past year driven by accession to the EU and the arrival of low-cost airlines flying to the major cities has boosted investors' interest. Here, total returns have reached 61 percent in the past year.
The UK, meanwhile, ranked fourth behind France, Poland and Cyprus. Gross rental yields of 6.04 percent and capital growth of 7.4 percent have pushed total returns on cash invested a year ago to 47 percent.
The effect of UK immigration has been massively understated, but it is resulting in increased rental incomes, reduced void periods for investors and strong house price growth, added Law.
He predicted UK house price growth of some 5 percent per annum for the next three years.