By Nigel Hodges of Currency Solutions

As the price of staple groceries soared by more than a fifth, up £1,100 on July last year and UK estate agents report lowest property sales in 30 years, one couple seemed blissfully unaware of how much of the rest of the world is gradually sliding into the pit of recession.

In a record breaking deal, photos of the new Brangelina twins will net the uber-couple an astounding $11 million dollars, although in a gesture of infinite generosity and continuing their commitment to world improvement, Angelina and Brad will hand $5 million of it over to charity (the rest is needed for childcare assistance).

It's a shame however that the US Treasury Department couldn't manage to put its money where its mouth is in quite the same way. Despite claims of a government bailout last week, they failed to produce the dollars needed to support Freddie Mac and Fannie Mae, the two behemoths of the US mortgage-lending market.

In his testimony to Congress on Tuesday, Bernanke finally conceded this point, admitting that no money, at least none without strings, would indeed be forthcoming from the pockets of the Federal Reserve. It was perhaps no more than an empty gesture conceived to temporarily buoy up the dollar, culminating in a return to its nose-down position as the smokescreen cleared.

Further, his acknowledgement that many of the financial markets and institutions were under considerable stress, caused the dollar to fall to an all-time low of 1.6038 to the euro.

On the back of this weakening dollar and with a five-day strike by Brazilian oil workers at the state-run Petrobas, oil prices rocketed to almost records heights at the beginning of the week, gaining by $1.36 to $145.31 p/b on Brent Oil for August.

Just days later they plummeted, undergoing the hardest fall in 17 years, after speculation the flailing US economy would affect global demand.

This precipitated a third big oil sell-off in just over a week with prices dropping by as much as $9 per barrel at one stage.

Back in Blighty, the pound experienced a wobble as labour market data published mid-week reported that jobless claims had risen by 15,500 in June, the biggest rise since December 1992.

Reaction to wage increases was muted though. Average earnings had appreciated by 3.3% in the year to May, but as CPI figures showed inflation for May at the same 3.3%, in real terms, wages experienced zero growth.

With June's inflation rate swelling to 3.8%, however, it seems likely that real earnings growth may now have become negative.

Traditionally this would call for an increase in wages but with the rising cost of raw materials and the slack job market, companies are unlikely to want to put added pressure on their profit margins.

The Bank of England is championing this measure, believing it a necessary evil to bring inflation back under control from the 4 percent level expected by the end of the year.

Realistically, in the short term there is little the MPC can do as the problem is not based on local but global demand and faltering global supply.

Dampening consumer spending power in a sluggish economy by increasing interest rates may not be productive, which is why the MPC has indicated rates may well remain the same until the end of the year.

Inflation elsewhere was similarly gloomy.

The EU hit 4 percent with the fastest price rises in 12 years, while the U.S. trumped this with an outstanding 26 year high of 5 percent. With so much negativity pouring out of the U.S. economy, The Financial Times reported on Thursday that some of the world's largest sovereign wealth funds were seeking to decrease their dollar holdings.

One Gulf fund in particular had reduced dollar assets to 60 percent from 80 percent one year ago.

Many of those withdrawing from the U.S. currency are turning towards the Australian and New Zealand markets.

There, many assets, the recent commodity boom and strong regulations have lured investors to the point where the Aussie dollar strengthened to a 25 year high and the NZ dollar grew to its largest in five weeks. Figures showing a reduction in Aussie unemployment only served to cement confidence down-under.

Although the spectre of impending recession is haunting most nations, Europe's super-power Germany has especially had to take it on the chin over the last few days.

Figures released from the ZEW research institute this week showed a bigger drop than expected in investor confidence from minus 52.4 in June to minus 63.9 in July, the lowest in 16 years.

Marred by storming inflation and high interest rates, the downturn looks set to continue. The poll predicted a number of key factors will continue to hit Germany companies hard for the next six months, including weak domestic demand and the U.S. financial crisis.

Just to the east and the Polish zloty is seeing high appreciation according to Slawomir Skrzypek, the head of the Central Bank.

He said that Polish exports have not been negatively affected despite inflation at 4.6 percent for June and an expected peak in August of between 4.6 and 5 percent.

Wages increases were also high, 12 percent year-on-year while interest rates stood at 6 percent.

In neighbouring Czech Republic the crown set a record of Kc 14.55/$ on Tuesday. Data released by the Czech National Bank on balance of payments caused little reaction despite showing a deficit of almost Kc11.7 billion in May and a deficit of Kc1.8 billion on transfers to the EU budget.

Drawing a close to the week and news today unfortunately sees the pound getting a bit of a pasting.

The construction industry announced job cuts of 4,000 since the beginning of July.

While speculation in the Financial Times that Alastair Darling's new spending guidelines may mean government borrowing could exceed debt limits, have sent the sterling downwards. In Tokyo, the pound dropped to $1.9972 while against the euro it fell to 79.33 pence.

Senior currency strategist at Westpac Banking Corp in Sydney, Sean Callow, believes the pound could weaken to $1.9800 in the next few days. He said: "The fact that the Treasury would go this far shows that times are desperate and the economy must be in a pretty poor state."

Similarly, Thomas Harr, a senior currency strategist in Singapore at Standard Chartered Plc, Thomas said: "We're bearish on the pound. We expect the U.K. economy to go into a recession. It's a combination of the housing market and financial market stress."

It is felt the pound could even dip as low as $1.7700 by the end of September 2009.

As a whole, things aren't looking particularly rosy on the domestic front but at least it's comforting to know our inflation isn't anywhere near the whopping 100,000 percent mark Zimbabwe's is currently at.

Not yet anyway.

Or anywhere in Bulgaria's ski resorts or coastal areas for that matter...

The smart investors who have listened to our advice over the years will know only to well the pitfalls of buying on the coast.

Those pitfalls have recently opened up into chasms for anyone still considering an investment in the likes of Bansko or Sunny Beach with this weeks' news that InvestBank, one of Bulgaria's major banks, are effectively pulling out of supplying mortgages on all properties in ski and coastal areas.

InvestBank will make it virtually impossible to invest in anything other than a modest beach hut, by placing a maximum valuation of €500 per square metre "on all properties in tourist resorts in ski and coastal areas".

Investbank add that of this €500, only 60-70% could be made available by mortgage. With prices now averaging €850 psm, few will be taking them up on this offer.

So why are Investbank doing this?

Well, according to their experience, they have seen "substantial decreases in property prices" on mountain and coastal resorts due to over supply and the effects of the credit crunch.

The bank has been slow to catch on...

Property Secrets saw this coming in 2005! The huge supply of new developments has indeed led to an oversupplied market. The boom could only last as long as enough foreigners were willing to buy, the locals were already satisfied.

So with such a huge supply of new properties in these areas there are virtually no buyers on the secondary market.

Then there is cashflow, how can payments on the mortgage be met if investors are unable to find tenants for their properties?

This has led to defaulting on mass as investors have struggled to keep up with mortgages without vital rental income. Tourist numbers are rising but most of them are on cheap package holidays and staying in hotels!

Another reason for the crisis on the coasts and mountains has been agents commissions. Prices paid included 20% VAT and large commissions to estate agents, hence the banks now know that the real value is likely to be far less than the purchase price paid by many unfortunate foreign buyers.

It's not all gloom and doom in Bulgaria...

As far as InvestBank are concerned they would prefer to receive mortgage applications for major cities like Sofia, Varna Bourgas and Plovdiv.

Conclusion - stay clear of the coast and look to the capital Sofia. Here you have all the right fundamentals for growth, shortage of supply, a ready made rental market, high employment with locals who can afford to buy.

The only people making money in the Bulgarian tourist resorts are the agents and developers. With this news even they will be feeling the squeeze.

Despite a huge number of mortgage product withdrawals in the UK as a result of the credit crunch over half of buy-to-let landlords (52%) still believe it is relatively easy to obtain mortgages.

And one in five are currently looking to buy further properties, an increase from December last year.

The landlords who remain determined to expand their portfolios are looking to new regions and cities, according to independent research commissioned by The Money Centre.

Central London remains a popular investment area with 34% of landlords saying they are looking to buy in the heart of the capital.

However, the North West and non-central London areas are also highlighted, with more landlords looking to buy properties in these areas.

The top five cities where landlords surveyed currently have properties are:

1. London
2. Glasgow
3. Manchester
4. Birmingham
5. Cambridge

London, Glasgow, Birmingham and Manchester have featured in the top five locations throughout the last 12 months, but this is the first time Cambridge has entered the top five, pushing Leeds out of the top of the table.

Flats remain the most popular type of property for both buying and selling prospects, but the research has highlighted a possible trend towards terraced houses with more landlords looking to these than sell off existing terraced stock.

Proximity to a town centre, or university and travel links have remained the top three influences for landlords choosing a location.

The Money Centre has carried out regular waves of research into landlord's perceptions and activity since October 2006.

This latest survey shows that overall optimism about business expectations in the next year has dropped to the lowest level recorded.

However, over half (52%) of the 508 landlords surveyed still believe the overall prospects look positive and 61 per cent believed rental yield expectations would remain strong.

The majority of landlords entered the market to help secure their financial position or to generate an extra source of monthly income.

They remain committed to buy-to-let in the long term with over half (52%) of those surveyed in March reporting that they expect to stay involved in property letting for more than 10 years. Only 19% said they expected to stay in letting for less than 5 years and 8% said they were unsure.

Lynsey Sweales, director of The Money Centre, said: "Buying property is always best viewed as a medium to long term investment option and that's how most buy-to-let landlords see it.

"The research shows the average length of time landlords expect to be in letting is 17.5 years, which is why scaremongering over house prices dropping is not a major concern for professional landlords."

Property Secrets' Head of Legal & Business Affairs, Debbie Le Goff, was recently in Prague, Czech Republic, meeting with mortgage brokers, lawyers and other related companies. Here, Debbie describes what she found on her latest visit to the country...

The first thing that struck me about Prague this time round - and I am a regular visitor - was the sheer number of tourists from all over the world. The city's attraction continues to grow and it is quite a site to see groups following that single person with an umbrella held in the air. I was almost tempted to buy an umbrella hold it up in the air and see if anyone followed me!

The mortgage market in the Czech Republic remains the most advanced in Central & Eastern Europe with, as Star Capital Finance were keen to remind me, 100% Loan To Value (LTV) mortgages available.

The problem for investors, however, remains that there is still a tendency for banks to give a lower valuation to properties. So even if you obtain 100% LTV, this is likely to become around a 80% to 90% LTV.

Of more interest to investors was a meeting I had with Younique, a new company started by Martin Benik who worked for companies.cz, who enable the formation and registration of Czech companies online.

Younique claim to have a new way in which clients can obtain the EU Card without travelling to Prague. I am waiting for in-depth information concerning this.

The whole EU Card process with Younique is in the region of £1,800, which includes the application costing around £600. If you take into account the cost of travel to Prague, accommodation and food then you meet the £1,200 rate.

Highland Trust, who offer mortgages in Poland, Czech and Romania, were another company I met with, looking to expand the options open to Property Secrets clients - in the Czech Republic and also in Romania.

In addition to expanding the number of finance options available, I also met with a lawyer to discuss possibly increasing the legal options you can choose from. More on this in the future.

The market picture that I was given by all the parties I met was that it is anticipated that property prices will continue rise for about two more years before they start to settle.

Property Secrets member Neil H started a running post on our forums late last year on his experience of applying for a mortgage in Poland.

This was to fund his investment in the Piastow development in Katowice, Poland.

His series of posts turned into an excellent resource for others investing in Poland and applying for a mortgage.

The development ran over by a month, much to Neil's joy as it gave him an extra few weeks to complete the mortgage application process.

Neil felt that allowing six months for the mortgage process was giving himself sufficient time but the reality was very different.

Here's what Neil wrote:

I started off the mortgage application in mid September when I filled in initial assessment documents and returned then to Jakub Krol at Open Finance/Noble Bank and Anna Zuber at Rednet.

On the 15th October and still in the process of filling out the application forms having queried some of the terms on the forms with Noble Bank and Rednet, I commented on the forum that I believed turnaround times were getting better now re mortgage applications. Hindsight is a great thing!

The month of November was spent collecting documents. Jakub is filling out the blanks on the application forms and Anna is doing the same - having suggested I forward a copy of the PPC (preliminary purchase contract).

I was worried about sending all the original documents away and it also prevented me from applying to another bank in the meantime. Had hoped to send these away by the end of the month but didn't end up sending them until mid December.

23rd December Jakub received my application but requested more up to date payslips and bank statements as it took me so long to gather the relevant information that the latest ones were a month or so old now.

Anna Zuber from Rednet has requested the same documents with my application but this is hard to do as they are now with Jakub and replicas are expensive to retrieve!

By January 11th, I still had not got all updated documents to Jakub, thanks to the Christmas holidays and delays in getting documents and I am not starting to worry about only having a couple more months to get this sorted. I finally get these out by the end of the month and Michal Jezewski is now dealing with my application and appears confident I can meet the beginning of March deadline for the first stage payment.

At the start of February, Michal informs me I need a Polish address and POA in place BEFORE they can make a mortgage offer to me. I wasn't aware of this detail and asked him for a recommendation for a local solicitor to provide this.

I get a positive loan decision from Noble Bank on the 19th February at 80% LTV and a rate of 6.6% dropping 1% when the property is handed over.

Getting the solicitor is a delay I could have done without.

By the end of February I've engaged a solicitor and had to go to Dublin to get the POA notarised and apostilled as my local notary advised that the UK foreign office might take 3 weeks to do the apostille. I did the lot in a couple of hours for €100euro total and posted it off.

The next hurdle was to pay the solicitor which turned into a nightmare and was down to the wire.

The Polish solicitor received payment and was in touch with Noble in time for the official transfer date although the solicitor didn't seem to think a few days here or there would be a problem.

The last step was getting an account with Noble Bank to transfer initial funds into.

The offer I received from Noble was the following:
Interest rate: 5.66 %
Interest in a bridging period: 6.66 % (before the bank's mortgage is written in a mortgage book of a property; interest rate is higher in this period due to higher interest rate)
LTV net 80 %
Currency CHF
Repayment period: 360 months

My solicitor signed the agreement on the 11th, so I was only over the deadline by 5 days.

I was pleased to have finally got to the end of the process...I have another 2 investments coming up in Bratislava and Krakow and hope these work out ok and don't take as long!

Neil shared the entire experience with us on the forums to highlight some of the things fellow investors need to look out for. He concluded with some key points:

Neil had intended to apply to 3 lenders, however he ended up applying to only one.

This was because he had to send original documents to each lender and it is costly to request certified copies.

Most of these documents are only valid for a month and by the time lenders get back to you most documents have expired and are not valid. One of the key things is to gather the documents in time.

Also, allow for the time spent posting the docs - couriers are expensive and might not be an option.

After receiving an offer from Noble Neil then had to provide them with an address and solicitor. For this he had to make a trip to Dublin to the local notary, then to the foreign office. Again, this was time-consuming and was not something he had planned for. You need to allow time to go through the process.

Neil's advice then is: Get your paperwork organised in advance, before you apply. Put everything in order - make sure NO pages are missing.

Bank statements should be for at least 3-6 months. Check with your bank as requesting certified copies of statements can cost money.

Know exactly what documents are required and if there is an expiry time on documents, for example, does a statement of net worth need to be valid within the last 3 months.

If certain documents expire within a month - then plan ahead and make sure this is the last document you arrange. This might sound obvious but it is very easy to get caught out.

When dealing with the mortgage broker, or going directly to the bank, make sure you are the one calling them. You need to be foremost in their minds - although Noble Bank were very good and he has no criticisms of them, you need to call them and don't wait for them to call you.

Try and do as much as you can while waiting for the offer so you can move straight away when you receive the offer.

Things you can do include finding a solicitor, for instance. This is to provide you with an address when accepting the mortgage. You need time to shop around and get a good solicitor - Neil only left himself a week to find one, give power of attorney and transfer a euro fee!

Be aware of POA's and apostils - these cost money and you need to budget for these.

When you receive a mortgage offer you will need a bank account already set up and money in the account. Noble Bank did this for Neil, but he advises otheres to check in advance.

Almost one year on from its introduction, 40 per cent of UK landlords are still unaware of the Tenancy Deposit Scheme (TDS) leaving them at risk of committing a civil offence and being forced to pay tenants three times the deposit amount, says leading buy to let mortgage broker The Money Centre.

The Tenancy Deposit Scheme was introduced by the Government on April 6th 2007 to protect tenancy deposits and provide a fairer system for settling disputes about the return of a deposit at the end of a tenancy.

But nearly a year on, independent research commissioned by The Money Centre has found that 40 per cent of landlords questioned are still unaware of the scheme. A further 22 per cent of respondents said they were aware but did not fully understand it, leaving only 38 per cent confirming they were aware of the scheme and understood it.

The results show that awareness levels have plateaued since The Money Centre last reported findings on the TDS scheme in October 2007, leaving a large proportion of landlords still in the dark about the legislation. Awareness of the scheme has actually dipped slightly since October, with a six per cent drop in the number of respondents who said they were aware of the scheme and fully understood it.

Lynsey Sweales, marketing and PR director of The Money Centre commented: "The results of this research are extremely worrying. The scheme has now been in place for nearly a year, yet many landlords are still unaware of the legislation and its implications. The good news is more than half of those surveyed did believe the scheme would benefit both landlords and tenants, as it was designed to do. But until awareness, understanding and participation can be improved the scheme won't be fully effective."

The Tenancy Deposit Scheme was introduced to ensure:

• tenants get all or part of their deposit back, when they are entitled to it,
• any disputes between tenants and landlords are easier to resolve, and
• tenants are encouraged to look after the property they are renting.

Deposits are a big issue for many landlords with half of those surveyed confirming they had withheld all, or part of, a tenant's deposit to cover property damage and other costs (such as cleaning costs and unpaid utility bills) at some stage. Therefore, it may not be long before problems arise due to a lack of participation in the scheme, and if a landlord or agent does not protect a tenant's deposit, they can be ordered by the local county court to pay the tenant three times the amount of the deposit.

While the TDS only covers tenancy agreements made on or after 6th April 2007, as time goes on and tenancy agreements are renewed and changed, all landlords will eventually become affected. It is therefore vital that landlords take the time to understand the TDS now and avoid becoming ignorant of the law.

Lynsey Sweales concluded: "Once again we are urging landlords who are not up to speed with the TDS to do their research immediately and advise them to join their local landlords' association. These organisations provide advice to their members on changes in legislation and can act as a forum to share best practice."

Sources of further information for landlords include:

• The Department for Communities and Local Government: www.direct.gov.uk/tenancydeposit or 0845 609 0696
• Landlords' associations: National Federation of Residential Landlords - www.nfrl.co.uk; National Landlords Association - www.landlords.org.uk; Residential Landlords Association - www.rla.org.uk

The research was undertaken by independent research agency BDRC on behalf of a syndicate of buy-to-let mortgage lenders and brokers. Online interviews among 493 residential property investors were conducted in December 2007.

This blog was supplied by The Money Centre.

On 1 January 2008, the Czech government introduced comprehensive tax reforms as a part of major public finance reform package.

The reforms include corporate, individual, energy, inheritance, gift and VAT tax measures and generally represent a shift from direct taxation by lowering income tax rates to indirect taxes via increasing VAT and excise taxes.

The reforms aim to eliminate the government deficit and increase the stability of public finances.

Changes in income taxation (individual and corporate) are the most important for buy to let property investors as they impact on rental income tax rates.

Personal income tax

The way of calculating income tax and its rates has changed. The 2007 progressive scale of 12-32% has been replaced by the flat rate of 15%, which from 2009 will be reduced to 12.5%.

It sounds like a big change, but the net result may not be so dramatic as the way of calculating the tax base has changed.

Until 2007, the tax base was gross salary minus social security payments.

From 2008, the tax base of an employee includes their gross salary, plus all the health and social contributions payable by the employer (which amounts to another 35%).

The employee's social contributions (12.5%) will no longer reduce the tax base. In the case of self-employment, individuals will not be able to deduct their mandatory social and health insurance contribution from the tax base.

This way a new concept of 'super gross salary' was introduced:

Super gross salary= base salary + 35% of base salary
Once the super gross salary has been determined, the 15% tax rate applies to determinate the amount of income tax to be paid.

Effectively, while the tax rate is lower, it will be paid on a much higher tax base. That means most Czechs will end up paying around the same amount of tax.

Personal tax relief has also changed.

The amount increased from CZK600 to CZK2,070 per month. To claim the personal tax relief on a monthly basis you must be a Czech citizen or tax domicile in the Czech Republic. In other cases, the relief can be claimed at the end of the tax year.

An EU citizen could be considered as a tax domicile in Czech only if he fulfils one of the following criteria:

- has permanent residency
- resides in the Czech Republic more than 183 days in the year
- earns 90% of his annual income in the Czech Republic.

Tax for an individual who meets the criteria of permanent residency of the Czech Republic is calculated on his income earned inside the Republic and abroad.

A foreigner, who does not qualify as a permanent resident in Czech pays income tax only on the income earned in the country.

Paying rental income tax in Czech Republic

Effectively, foreign property investors who own properties in the Czech Republic and generate income only from letting out such properties are taxed according to the income tax rate of 15%.

They must prepay tax that will be offset in an annual tax return. The advances are determined on the basis of the previous year's tax return. In the case of a new business, the prepayments are calculated on the basis of estimates made by the owner of the business.

The advance payments have to be made by the 15th of each month and the number of payments depends on the income:

Between CZK 30,000-150,000 - twice annual payments of 40% liability.
Above CZK 150,000 - Quarterly payments of 25% of liability

An allowance is made for expenses incurred against rental income. The allowance is calculated as either a flat 20% of the gross rental income or the actual expenses and is deductible from the gross rental income.

Additionally, capital gains in the Czech Republic are taxed as ordinary income (this applies if a property sold within five years). After five years, the tax liability is 0%.

The tax year in the Czech Republic is a calendar year and annual tax returns must be submitted by 31 March.

The deadline is extended to 30 June if the tax return is prepared and submitted by a registered in Czech tax advisor under the power of attorney.

Corporate income tax

The Czech government has been gradually reducing the corporate income tax rate (CIT) to make the country more attractive for foreign investors.

In 2008, the CIT rate is 21% and will be further reduced to 20% in 2009 and to 19% in 2010. Those reductions will bring the Czech Republic closer to the rates in CEE region (19% CIT applies in Slovakia in Poland) and make the Czech economy more competitive.

Changes in CIT rates are important for property investors who bought properties in Czech via a company as their rental income will be taxed according to new, lower scale.

Summary

Tax reforms have been welcomed by many tax experts, despite the fact that the tax authorities are usually not keen on frequent changes because they create the impression that the system is complicated and opaque.

However, the latest changes are perceived as changes for the better. The reform of public finances is thought to be a vital factor in promoting economic growth and maintain stable macroeconomic environment.

Jan Žůrek, a partner at KPMG, says that the chances are that the Czech Republic's image will improve and its attractiveness for foreign investors will increase: "The new legislation creates a favourable environment for the creation of holding companies, thereby attracting more financial capital."

We asked two top accountants, Colin Davison of Cranleys Chartered Accountants and principal accountant for Tax Assist, David Rodick to interpret the key points of the Chancellor's Budget as they affect property investors.

What do they both make of this 'steady as she goes' Budget and what opportunities, if any, does it offer up for the shrewd property investor?

To sum up, there were no real surprises in Alistair Darling's first Budget as Chancellor, and for the property investor, it merely confirmed what we already knew with capital gains tax (CGT) being slashed from 40% to 18%.
Good news for most investors but, as with anything, there are winners and losers.

With the cut in CGT, came the abolition of taper relief, which has been used as a highly successful tool for 10 years, as a way of reducing the amount of CGT paid when disposing of an asset. Depending on how long an asset has been held, it was possible to reduce CGT as low as 10%.

So, effectively, without the ability to use taper relief, for some, this could mean a hike of 80% in CGT from 10% to the new flat rate of 18%.

As a result there is no longer any incentive to hold onto assets for the long term and the Chancellor has been accused of encouraging short termism. So, good news for the risk taker who wants to buy and sell quickly but not so good for the long term investor.

When he announced the abolition of taper relief in his pre-Budget report last October, there was an outcry from the business world. In order to try and counteract this, Mr Darling announced the introduction of 'Entrepreneurs' Relief' which ushers in CGT of 10% on the first million pounds of assets.

The sixty four thousand dollar question then is whether, as a property investor, you qualify for entrepreneurs' relief and, unfortunately, the answer is as woolly as Alistair Darling's best herringbone jumper.

Basically it is worth taking some expert advice on this one.

Landlords are specifically mentioned as NOT being eligible for Entrepreneurs' Relief but it is all down to how you choose to define yourself, which is where tax planning, and that all-important professional wisdom, comes into play.

Overall, Colin Davison is upbeat, saying that, despite the Budget being dubbed 'safe' and 'dull', in terms of property investment it is anything but.

He explains: "Believe it or not, this is a Budget which encourages investors to take risks. Thanks to the slash in capital gains tax, any property which is bought now can be disposed of in a few years' time without the inherent CGT burden which could have been a prohibitive factor before."

Ultimately, for property investors, it is the changes to CGT which are the headline news from this Budget, but according to David Rodick there are a number of other, less well known issues behind the headlines which are worth knowing about.

"One change in the Budget which many people will not have picked up on is the extension of zero stamp duty on carbon neutral flats,' said David.

'Whilst fulfilling the Government's intention to encourage homes of the future to be environmentally friendly, this also offers a real financial incentive for property developers.

"Another area which may have been overlooked by many is the transfer of properties within partnerships which will now be completely stamp duty free. This is definitely something which could be taken into consideration when tax planning."

This will come as a double helping of good news for husband-and-wife partnerships who were bracing themselves for the introduction of measures to stop them splitting their income to reduce joint tax bills. Despite a threatened clampdown, Mr Darling postponed any action until next year.

And the good news doesn't end there.

David goes on: "For investors who use something called property authorised investment funds or 'Property AIFs', they will now be able to elect to be exempt from one point of taxation.

"Despite being highly lucrative for many investors, Property AIFs were previously liable for two points of taxation but, thanks to the Budget, investors will now be able to make a considerable tax saving."

So all in all, it's good news for property investors then?

Colin seems to think so. "It really is a buyer's market right now - the adage of 'buy in winter, sell in spring' could be adapted to 'buy now, sell later' for the current market - but the principle is the same. With the property market largely stagnant, purchasing power has never been greater and there are some great deals to be done with the advantage of reduced CGT for further down the line."

And David agrees, saying: "Overall there are some very positive messages to be taken from the Budget but the devil is in the detail. Nothing is black and white and this is where getting professional advice comes into its own in order to maximise the benefits and minimise the potential pitfalls."

But what of the view that the cap gains taxation changes will simply encourage many BTL landlords to get out of the market in these uncertain times.

Not so, says survey results from the Money Centre, one of the UK's largest buy-to-let mortgage brokers.

"Our most recent research among buy-to-let landlords shows that the majority regard their investment as a medium to long term strategy." said Lynsey Sweales, marketing and PR director of The Money Centre.

"Twenty two per cent of those interviewed anticipated holding on to their properties for between 11 and 20 years with a further 19 percent intending to stay in the market for anything from six to ten years.

"Only 13 per cent of landlords said they were likely to sell any letting property in this current quarter and so, while the reduced capital gains tax rate will definitely benefit investors eventually, I think a rush to cash in come next month is unlikely given most landlords are committed to a longer term strategy."

Both Colin Davison and David Rodick offer expert tax advice to property investors. Email colin.davison@cranleys.co.uk or visit

www.taxassist.co.uk/davidrodick for more information

The mortgage market in Bulgaria is still relatively undeveloped - but considerably more mature than the stage of the development of key investment markets would suggest.

For foreign investors, it offers some excellent deals - including self certs, refinancing products and interest only (in the case of one bank).

By key investment markets, we mean NOT coastal property; NOT ski property, but property investment within cities - most obviously, Sofia, the capital.

The key measure of mortgage penetration, the mortgage debt to GDP ratio was only 7% in 2006.

This rate is still very low by European standards, even by CEE standards - Bulgaria ranks third after Romania (2.3%) and Slovenia (6.6%). If compared to the EU-12 average of 53% in 2006 - Bulgarian indicator is a measure of great potential for further development.

The mortgage market in Bulgaria is small but is growing rapidly on a yearly basis - clear evidence of a growing demand for mortgages - and it is mortgage credit that, ultimately, drives any market.

The growth is caused by local and foreign buyers. But, here it is worth making a clear distinction - the holiday home market in Bulgaria is dominated and driven by overseas investors, while main city markets are driven by domestic buyers.

In 2005, the mortgage market growth was 97% - on a par with Latvia - while in 2006 it was 73.5% - the second highest, after Latvia, in the EU.

In 2007 the growth rate slowed to 67% - the slowdown largely accounted for by the credit crunch that occurred in the second half of the year.

Most, if not all of that slowdown occurred in the holiday market - as has been reported in the Financial Times - Brits, especially, have simply stopped buying holiday homes on the coast.

Some banks have now started refusing to lend to buy properties located in the resorts.

The situation, however, is very different in the booming capital.

Interest rate rises in 2008 probably can't be avoided as inflation increased to 12% (from 4% a year ago).

Mortgage lending in Bulgaria is dominated by UniCredit Bank (Bulbank), DSK Bank, Raiffeisen, United Bulgarian Bank (UBB), First Investment Bank (FIBank) and Economic and Investment Bank (EIB). All these banks offer mortgages for locals and foreigners.

Mortgage Products for Locals

Typical LTVs range from 70% to 80%. In the case of off-plan properties, the LTV also depends on the construction stage of the building - closer to completion, the higher the LTV that can be achieved.

The location of the property can also be a deciding factor - if buying property located in one of the main cities, it is much easier to get a higher LTV. This also applies to foreign applicants.

Some banks even offer 100% for domestic borrowers (120% in FIBank) - however the offer is available only to very high-income Bulgarian resident clients.

Typical interest rates are currently around 4-5% for CHF, from 6.5% for Euro and 7-8% in BGN and US$ with maximum terms of around 30 years available.

Most of the mortgages in Bulgaria are taken out in Euro over 25 year period.
Banks in Bulgaria usually charge between 1% and 2% for granting a loan and most of them apply age limit of 21-70 years. As a rule monthly mortgage repayment should not exceed 50-70% of net monthly income, subject to the bank.

Mortgage Products for Foreigners

What you need to know before you apply:

The choice of mortgage products for foreigners in Bulgaria is good - and, along with repayment and self-certification mortgages, re-mortgaging is also available.

Interest-only mortgage is currently offered only by Piraeus Bank for up to 10 years. The LTV is a max of 75%, and the current rate is 7.25% for Euro loans only.

With FIBank you can apply for a three year interest-only period, while with DSK Bank the period is one year.

The mortgage processing time usually takes 12 weeks on average, once all the required documentation is received by a bank, but may vary from six weeks to six months.

The necessary documents, when applying for mortgage are:

1. For all applicants

- ID/ passport
- Marriage certificate (if applicable) - with some banks married couples must apply together
- Preliminary purchase contract
- Credit report from Equifax or Experian

2. For those employed

- P60 and payslips for the last 3-6 months (or bank statements)
- Letter from employer confirming the role, income, start date

3. For self-employed

- 3-6 months bank statements
- Tax returns for the last 2-3 years
Some banks require that the documents are translated and/ or certified by the issuer.

Affordability is based on the fact that monthly repayments can't exceed 50-60% of net income.

A bank's fee for granting a loan is typically 1-1.5% and a mortgage broker commission on completion is around 0.5% (minimum £200), plus the application fee of around £600.

Early repayment penalties vary from 3% to 2%.

What's available

The current products for foreigners described below are based on Bulgarian Home Loans offers.

LTVs for foreigners are typically of 60-80%, subject to the bank, location of the property and in the case of off-plan - the stage of construction.

For example, Raiffeisen's rule is clear: up to 80% is available for completed apartments, up to 70% for roof level stage and 60% for regulated land stage.

As a rule, LTV is calculated on the purchase contract price, however when applying for a repayment mortgage with Raiffeisen, the LTV is based on the bank's valuation, not the purchase price.

The mortgage is disbursed usually in one payment. In the case of off-plan properties with stage payments, most of banks will agree to make them only when the building is at the roof-level stage of construction.

The repayment period is typically 20-25 years. Mortgages can be issued in Euro, BGN and US$ and interest rates are typically around 7% for Euro and 7-8% for BGN and UDS$.

Raiffeisen offer self-certification mortgages only for properties located in major Bulgarian cities (or as part of golf course developments). Tellingly, properties in holiday resorts do not qualify for self-cert mortgages.

Apart from Raiffeisen, Invest Bank and FIBank also offer self-cert mortgages for foreigners. LTVs vary from 60% to 80% over a max of 20 years, but the interest rates will be higher than normal.

Re-mortgaging products to foreigners are offered by three banks: Piraeus, DSK Bank and EIB. LTV is no more than 60-75% over 5-15 years. This product is available in Euro only and interest rates start from 7.5%.

Conclusion

Mortgage lending in Bulgaria is still a small sector with huge for potential to grow in the future. On a yearly basis, the market is already growing extremely rapidly.

There is a relative lack of competition among lenders and mortgage brokers, which is mirrored by the fact that brokers' fees and commissions are quite high.

The greatest choice of products is for repayment mortgages, while several banks also offer refinancing and self-cert options.

Interest-only mortgages are possible to obtain - but as yet only one bank offers such a product.

Buy-to-let mortgages are not available.

Banks in Bulgaria are still relatively conservative in their lending and LTVs don't exceed 80%, while the repayment period is usually no longer than 20-25 years.

In calculating LTVs bank are also cautious.

The application process is lengthy and fairly bureaucratic if compared to UK standards, but not especially so relative to other CEE markets.

It is very likely that in the next year Bulgarian banks will liberalise application procedures and improve lending terms and conditions considerably, as the market rapidly develops...... AND, as far as foreigners are concerned, the focus moves away from the high risk coastal developments to the greatest potential investment returns - in Sofia.

Volksbank has launched a new mortgage product for foreign investors in Romania that is being widely seen as a giant leap forward in the loans for foreign investors market.

We see this product as having real potential to open up the market to far greater competition in the near future. In fact it's almost inevitable that it will.

The offer is at a rate of just 3.99% for Swiss francs - against the usual mortgage rate of around 7%. The product offers an LTV of 85%, over a 25 year term, and is available until June 14, 2008.

Simon Blakeborough, Property Secrets' investment director, said: " This mortgage offer from Volksbank is exceptional - we've never seen anything like it before offered to property investors in Romania.

"We predicted it would only be a question of time before new products came to the market.

"The fact that a leading international bank such as Volksbank has gone to the market first, with such a good rate, means other banks will inevitably follow. This will create competition amongst the banks, fighting to get accounts from foreign investors.

"There has been so much misundertsanding among investors about the Romanian mortgage market. I've even seen some people talking about the need to own a company to buy in the country, which is nonsense. That's only for land.

"The fact is this market is changing and developing at an incredible rate, as we said it would - and this new product is a clear demonstration of this.

"This is a great time to invest in Romanian as we will see the mortgage market open up even more with increased competition, leading to even better offers for foreign investors."

All lending criteria for foreign buyers in Romania is increasingly becoming more flexible and there is evidence that some banks are willing to look at self-employed borrowers. It all depends on individual circumstances.

We are even seeing cases in which clients have had assets, such as property, taken into consideration along with regular income, after direct negotiation with Volksbank.


Volksbank's mortgage offer - House Acquisition Loans for Foreigners - also reduces the need for proof of income from 12 months, which is the usual period in the Romanian mortgage market, to just three months. This is a big plus for borrowers.


Volksbank is also offerering a Euro product, at a 5.95% interest rate with an LTV of 85% over a 30 year term.

Again, proof of income is required for just three months, instead of the usual 12.

Download Volksbank Mortgage Offer - Swiss Francs »
Download Volksbank Mortgage Offer - Euro »

One PS investor who secured a 100% LTV Slovakia is Ravi Sawhney who recently invested in Bratislava in Slovakia.

Ravi purchased an apartment in Nove Mesto (new town) in Bratislava. The price was about SK56,000 psm and the property was an apartment on the secondary market.

His mortgage terms make his investment cashflow neutral - the rent covers the loan.

This is his first investment in central and Eastern Europe. He actually looked into buying in Slovakia about two years ago but at the time he ended up buying in London.

This tied up his capital, but he kept a close eye on the markets of Bratislava and other secondary cities such as Trnava.

His reasons for sticking with the Slovak market are that he believes the country and Bratislava in particular offers one of the best risk/reward profiles in Europe for property investment.

He believes the market offers great potential for growth yet a stable economy.

Great finance and rental potentials lessen the risks involved in investing in the market.

Ravi's girlfriend is from the Slovak Republic, so he is familiar with the market having visited the country over a dozen times in the last four years, each time becoming more familiar with the people, economy and areas of the country.

Having settled on the Slovak Republic as his investment location, he decided on his investment strategy.

Ravi's view is that there is value to be had in buying properties on the secondary market and refurbishing them.

The problem he encountered was finding the right property and being able to move quickly on it. He admits it took some time and effort before he eventually found something in Nove Mesto, very close to the transport links and the Old Town.

He completed the property purchase last October 2007 and began applying for a mortgage in November.

He started off by approaching a few brokers and intermediaries but soon found out that some of them were charging unreasonable fees.

One broker was charging him a 3% bank arrangement, fee but he believes you should walk away from anything more than a 0.5% fee, which is typically capped at €500.

In the end he went direct to the bank and avoided the fee all together. This was possible because he had his girlfriend on-site to manage the relationship with the bank manager.

The bank he went with in the end was OTP bank and he arranged a mortgage with 100% LTV, and valued Ravi's unit at 3% below market value, which he says in normal in Slovakia. Total charges, including translations and notary stamps, were around £1,500.

The interest rate is fixed for five years is 4.9%. Slovakia is expected to join the euro next year, there is an argument that rates might fall as a result. But he is bullish on the eurozone over a five year period and values predictability over the five year period more than the any potential small drop in lending rates.

He believes the expected rentals will also cover the repayments.

Would he recommend fellow investors to go down the road he did?

Buying on the secondary market was very complicated and he came across a number of obstacles when dealing with the purchase on his own.

He ended up paying for the seller's estate agent to handle a lot of the paper work but this worked out well for him as he felt they could be trusted.

Naturally it was a huge advantage that his girlfriend is from the Slovak Republic and in a position to negotiate with agents and banks in their native language.

A way around this would be to hire a translator however this adds to the purchase cost.

What advice would Ravi give to people setting out to apply for a mortgage in the Slovak Republic?

Do not pay more than 0.5% of the loan amount to any broker.

Ravi recommends you try going direct to the banks if you have the time but having a Slovak speaker definitely helped a lot in doing this.

Be prepared for things to move slowly.

Having a regular income also seems to be banks' number one concern. "It was the first question they asked when you walk through the door, " said Ravi.

Ravi admits he was applying for the mortgage over the Christmas period which didn't help however he advises not to be afraid to keep applying pressure on the bank manager and if you have a good relationship with the seller's agent, ask them for help also.

Another point to keep in mind is that because the markets are moving so fast, the valuation of your property may be less than the sale price by more than you would expect. In Ravi's case it was just 3%.

This, he explains, is down to the fact that the government body updates average valuations once a year in March.

The whole application process took two months, which was a little excessive as it was over the Christmas period. But Ravi describes the paperwork as 'Simple and straightforward' because the seller's agent did a lot of the work. "Otherwise it would have been a complete headache, especially on a re-sale since all the documents are in Slovak."

So, plan for the fact that you will need to get some translation work done and for this you will need a state recognised translator. Prices can also vary for this so it's a good idea to seek several quotes.

Ravi's final piece of advice is tread carefully and always do your homework!
Judging by the success Ravi had in securing a 100% LTV mortgage at interest rates where his rentals will cover the mortgage, it certainly seems that Ravi has done well in this Slovak Investment.

The world of currency exchange is fraught with pitfalls. We asked Nigel Hodges of Currency Solutions to offer some sound advice to investors. Nigel came up with this five-pronged guide to finding the best deals...

For investors in overseas property, making the wrong currency exchange choices could add as much as £7,000 to your costs.

Avoid the high street bank sting

Perhaps the biggest potential pitfall, and by no means is currency exchange alone here, is approaching the high street bank.

Typically banks offer only excessive rates of exchange, characterised by large margins and even larger spreads.

On top of that, bloated commission and transfer charges can really drive up costs, while processing payment can be infuriatingly slow.

Look for a specialist instead. Their rates will be far more competitive because profit is made by trading in large volumes rather than via excessive commission charges or fees.

So, where a bank may offer €1.31 per £1, a specialist will offer around €1.35 - a considerable difference.

In addition, a specialist is also likely be far more knowledgeable on currency exchange procedures than their high street bank counterpart and will be better placed to save you money.

Remember the foreign rule

Sidestepping UK banks is only half the job - some foreign banks charge a premium to receive funds, which can prove an expensive and very unwelcome surprise.

For many EU countries - those that accept euros - this can be avoided by sending payment in installments of less than €50,000, but another option is to ask your sending (UK) bank to take on the charges (the term to use here is 'our').

Although this won't eliminate the charge entirely, it will be significantly less.
Other options include sending the funds to the account of an overseas solicitor (which most allow free of charge), or seeking the advice of a currency specialist, who should know how to avoid foreign bank charges.

Leave time, save money

Another pitfall is the possible extra charge pending should a receiving bank fail to process payment quickly enough. The key here is to leave plenty of time for a currency transaction to take place.

But how long is 'plenty'?

Well, the amount of time it can take varies according to a number of factors, including type of currency - euros can take up to two days to reach a destination bank while Polish zloty can take anytime between one and three days.

But the reality is it is very difficult to know exactly when a receiving bank will process your funds.

As a guide, you should allow a minimum of three days for euros and five days for exotic currencies.

Also, it can be helpful to get hold of what is known as a SWIFT receipt from the bank or currency specialist that is sending your payment.

Developers will likely be more flexible with funds not arriving on deadline if they have proof they are on their way.

Guard against a market slump

Market fluctuations are a worry for many property investors, but they needn't be.

Take advantage of a bull market by pre-booking your currency exchange anytime up to two years before you'll need the funds.

The transaction will be done at the rate quoted to you at the time you arranged the booking, even if the market has since dropped.

The only downside here is that, should interest rates improve for the investor, they would be locked-in to the original deal. The upside speaks for itself: immunity from a rate drop.

For pre-booking, also known as a forward contract, 10% of the trading amount is required up front with the rest due on the date of the trade.

Clients can put the 90% in a high-interest account safe in the knowledge they have preserved their profit margins for the exchange.

A specialist can offer a fixed forward contract, where you know the exact date you will need the funds, or a flexible forward contract, where the completion date may change.

Note though, the flexible option is only available on major currencies such as the euro and US$.

You've bought, now you want to sell?

Being aware that foreign banks can demand margins bigger even than their UK counterparts when you sell your property can be a huge advantage.

In some countries banks even calculate their charges as a percentage of the whole transfer amount, which can be costly.

Remember as well to make sure that you know how to move your funds once you open an overseas bank account.

You don't want to open an account in Romania and then have to fly there out there each time you want to do a transfer.

A currency specialist will be able to use their in-house knowledge and expertise to help you avoid getting ripped off by foreign banks when sending funds back to the UK.

Nigel Hodges is Senior Currency Executive with Currency Solutions

To find out more about Currency Solutions and how they can help you, click here.