A new survey of 523 UK buy to let landlords has been carried out by leading buy to let mortgage broker The Money Centre and reveals their attitudes to the UK property market and investment over the next few years.

In what is probably the first independent survey of landlords on Sale and Rent Backs as an investment option, it appears that this is not a widely used - or even known - tactic.

The Results

1. Currently what is more important to you - the rental yield or capital growth?
50% said rental yield, 50% said capital growth

2. In the future which do you expect will be more important to you?
58% said capital growth, 42% rental yield

3. How easy have you found finding appropriate tenants?
63% said very easy / fairly easy, only 37% stated either difficult or neither easy or difficult

4. Are you currently selling any of your existing buy-to-let property?
82% said no, 13% said yes, 5% said don't know

5. Are you currently buying any further buy-to-let property?
16% said yes (it is worth noting that people with 5-19 properties was 32% and 20 plus properties was 40% to yes currently buying)

6. How interested would you be in purchasing repossessions?
58% said very interested/interested - 10% said had already done so

7. For how much longer do you expect to stay involved in buy-to-let?
46% said between 5 and 20 years, 21% said indefinitely

8. Before this survey had you heard of or participated in SARB (Sale and rent back)?
5% said yes, 46% said yes but no SARBS in their portfolio and 49% said not familiar with SARBs

9. How many SARB's do you have in your portfolio?
26% said 1, 22% said 3, 15% said between 5 and 9, 11% said between 10 and 19 and 7% said 20 plus properties

10. I worry that SARBS might be used by unscrupulous landlords?
37% said agreed, 21% said strongly agree, 14% said disagree or strongly disagree

11. SARBS perform a useful function for both home owners and landlords?
46% said strongly agree or agree, 25% said disagree or strongly disagree

12. SARBS will need careful regulation to prevent misuse?
64% said strongly agree or agree, 11% said strongly disagree or disagree

13. I am clear on best practice for landlords in the area of SARBS?
24% said strongly agree or agree, 44% said disagree or strongly disagree

14. I plan to increase the number of SARBS in my portfolio?
19% said strongly agree or agree, 37% said strongly disagree or disagree

15. SARBS have been the subject of too much negative publicity?
34% said strongly agree or agree, 29% said strongly disagree or disagree

16. I would not consider entering the SARB sector, it's too risky for me?
47% strongly agreed or agreed, 22% strongly disagreed or disagreed

17. I need further guidance around the SARB sector before considering it?
59% strongly agreed or agreed, 14% strongly disagreed or disagreed

The Money Centre are one of the UK's leading buy to let mortgage brokers, the ideal provider for investors looking to start or expand their property portfolio.

To obtain a FREE quote for your next mortgage, click here.

We've decided to revive an old tradition here at Property Secrets - the award for the week's most misleading headline!

We started the contest a few years back - way back, actually - when there seemed to be a never ending flurry of headlines basically predicting the end of the world.

And yet, often, if you were one of the few people who actually read the text, you'd find that the doomsday headline presided over copy that said something rather different.

No one's denying that there are serious economic problems out there: plenty, in fact, from credit squeezes, to rising inflation, probably followed by many of the major economies facing rapid growth slowdown and recession.

And property markets in developed economies look, well, a little sickly right now. Never has our advice to consider property investment as a long term venture been so apposite.

But there is nothing like some ugly numbers to bring out those two ultra-enthusiastic writers, Messers Doomsday and Armageddon.

When things are bad, they like to make out they're catastrophic and, more scarily, that there will be no end, no upturn. It's into the abyss time.

We've been in this territory before, of course. Who can forget that award winning splash in the London Standard in 1999, quoting 'experts' advising everyone in London to sell up and rent NOW!

The Economist, no less, did it, too, in 2003. They used the p/e ratio as used to value equities, applied it to property (misguidedly), and advised everyone to sell and rent too.

Nice one! Great advice! How to lose out on around 100% growth with one lousy decision.

Of course, UK property prices are falling, and fast - no one's denying that. But they are falling on very low volumes because as employment is (so far) still high, people in large numbers are not being forced to sell.

Anyway, that's old news.

Now, media attention will increasingly turn to markets other than the obvious ones of the US, UK, Spain and Ireland, where we know there's a steep slide.

In fact, it already has turned. We spotted a great piece in MoneyWeek. As the headline was, 'Worst is Yet to Come for Eastern Europe', you can imagine it aroused our interest.

Well, it's one way of attracting attention - write a headline that bears no relation to the story.

'After years of strong growth and stronger spending in the ex-communist countries, life is about to get tough for consumers,' said the strap line.

But actually, no. What the article said was that Latvia, Estonia and Lithuania were in for a tough time because of their ultra inflationary wage rises and consumer spending binges. We agree with that.

But these are small states in Eastern Europe. What about the bigger economies - Poland, Czech, Slovakia, Romania and the smaller Bulgaria?

Despite the dire headline, the article surprised us. It agreed with us entirely!

Admittedly, you had to scan to the latter part of the piece to find the commentary on these bigger and far more significant markets, but it was there.

Czech, Poland and Slovakia - "....suffer least from the imbalances and deficits that threaten most of the region, and their growth has largely come from productive investment, rather than overheated, debt-fuelled consumer-spending binge or an asset-price bubble. Growth will slow, but overall effects will be fairly mild."

The worst is yet to come, eh.

What about Romania and Bulgaria? Dire straits? Er, not really...

"The consensus on Bulgaria and Romania sees them slowing from their current 6% growth, but remaining fairly strong."

Which is exactly what we've been saying for months!

The small and clearly over-leveraged economies of Latvia, Lithuania and Estonia, as well as CEE's sick man economy, Hungary, are exceptions.They have a rough time ahead.

But the fact is that no CEE economies will be immune from a general economic slowdown, maybe outright recession, in the more developed countries, especially in Europe. But the key is that the slow down in our key markets - Czech, Slovakia, Poland and Romania - is from a very rapid pace of growth, so the effects will be milder.

They are safe havens for investors then.

But 'CEE offers investment safe haven' doesn't have the drama of "The Worst is Yet to Come' , now, does it?

Feel free to add any of Headlines of the Week you may spot. We may even give a prize for the best one. Free Spanish villa on the costas, anyone?

The impact of the crisis that started in the US sub-prime mortgage market has subsequently rippled through financial markets and institutions around the world.

Few people now doubt that the negative effects will leave any location's economy completely untouched. For some it may mean recession - even, perhaps, a depression. The pundits are almost as divided as ever, although more now seem to be in the Bear camp than ever before.

Probably a result between extremes is still the most likely outcome. Some economies will be harder hit than others and the length of the slowdown will be indeterminate.

But what is (almost) certain - judging by events in the past - is that when recovery comes, it will come rapidly and very probably as unevenly as the slowdown.

Key then for property investors is to be well-placed to take advantage of that recovery and to be invested in those markets that are most likely to emerge the strongest.

That's why a new report on European attractiveness to business investors makes extremely interesting reading and throws into sharp focus some insights into which economies will be winners in the future - and where property markets are therefore most likely to perform the best.

And, as interesting as the headline results are - which markets business investors favour - the reasons they select those they do is equally relevant when we try to spot those key FDI magnets of the future ourselves.

Future property buyers

And this is important because this is where the jobs will be created and the new middle classes (future property buyers) will be most active.

Ernst & Young's 2008 European attractiveness Survey questioned 834 decision-makers about how competitive Europe is on a global scale in terms of FDI, and which countries within Europe are doing well, how they see the attractions of alternative business locations, and the criteria that drive their perceptions.

What is perhaps most striking about the report is that despite the received wisdom, and the undoubtedly large investments going into India and China, "Europe's multinationals still rely on proximity and take advantage of competitive, modern locations in Eastern Europe's renovated cities such as Prague, Budapest, Warsaw, Bucharest or Lodz."

As oil reaches record price levels and shows no sign of falling significantly without a huge fall off in economic activity globally, that proximity factor carries an even larger premium than ever.

And, as the report notes: "India, often thought of as a direct competitor, or even a threat to the future viability of back-office operations in developed economies, is struggling to gain ground, falling back to third place in our 2008 ranking.

"Aside from China, Central and Eastern Europe are frequently cited as manufacturing location favorites (17%), and Western Europe wins a surprising third place.

"Europe's dynamism comes from its Eastern borders...and beyond. Central and Eastern Europe, including Russia and its satellites, attracts 28% of the projects and a heavyweight 58% of FDI job creation."


The new near markets

Interestingly, new near markets appear to coming onto business investors' radar screens.

"Patterns are changing fast. The main growth is going to Russia, whilst Turkey and the Ukraine are proving increasingly successful in attracting investment, In a slow year, last year's stars - Poland and Romania - are catching fewer labour intensive investments.''

The significance of this is threefold. While it's interesting that new markets are coming on stream, the fact that investment into them is primarily labour intensive investment indicates they are being chosen for reasons of cheap labour. That tends to be the initial investment phase.

And while it opens up a market, through cheap manufacturing, nowhere (not even China) can maintain its attractiveness based entirely on cheap labour indefinitely.

Eventually, any country in this category is a victim of its own success - as wages grow, they erode this labour cost edge.

So, it's no bad thing that labour intensive investment is moving away from Romania and Poland - both of which are focusing more and more on knowledge-based activities.

In Romania the huge success in the IT industry is a marker of this; similarly, high-end aviation and associated manufacturing is taking place in Poland.

Investment benefits take time

Even so, once that manufacturing investment goes in, whether it's labour intensive or not, it is not uncommon that the full economic benefits to the recipient country aren't seen for several years.

Plants take time to build, production processes gear up to capacity over many months. Jobs are added slowly.

The effects of car manufacturing investment in Slovakia - firmly in the high value manufacturing category - have only really been felt in the last year or two, and this is a good example of this investment effect delay.

In turn, the Slovakian economy is now one of the great CEE success stories, its current star performer, and the property market in Bratislava one of the most attractive right now.

"The results show a remarkable shift. ....... The most important driving force for foreign direct investors is to access new markets. And as Europe's economy slows, they are increasingly looking to thriving economies and competitiveness elsewhere.

"Today, business leaders see the investment world as multi-polar, with destinations such as China, India, Russia, and the Middle East, which enters the top ten ranking for the first time, now strong rivals to the traditional dominance of Europe and the US."

Even so, the top five countries for attracting FDI projects in 2007 remained the same - but Central and Eastern Europe countries rose quickly.

Who attracted what?

Countries and their total share of global FDI

US 12.5% (falling)
UK 11.1% (up)
France 8% (up)
Netherlands 6.8% (up)
China 4.4% (down)
Hong Kong 3.5% (up)
Russia 3.2% (up)
Germany 2.9% (down)
Brazil 2.4% (up)
Singapore 2.4% (up)
India 1.0% (down)

Continental Europe - 42% (down 1%)

The UK topped the job-creation ranking.

Europe is quite clearly still an active player, but less a dominant power.

"For the first time, Europe loses its historical, exclusive attractiveness leadership in our 2008 survey. Traditional FDI heavyweights (Europe and the US account for 58% of global GDP) now share the field with fast-growing global challengers."

But, much more significantly, the economic landscape of Old Europe, the survey shows, is rapidly changing, with the transformation undoubtedly more advanced in the UK.

What is being seen is a huge shift of manufacturing, a great deal of it high end manufacturing, from western Europe, eastwards.

The survey describes this as the two faces of Europe.

"....is showing two faces to global investors, and this makes it resilient. While Western Europe's potential attractiveness declines, Central European countries including new European Union members, and frontier countries, such as Russia and the Ukraine, continue to gain interest.

"Europe retains a considerable power of attraction and is ranked among the top three business locations by 75% of respondents.

"But investors seem also to be sending a strong message that their main interest lies in younger, more dynamic and competitive markets. This eastward transition, while evident in our attractiveness surveys since 2004, has become particularly marked over the past two years."

Where is the decline taking place in Western Europe?

Traditional industries.

In 2007, 30,527 industrial job creations were 'missing.' Four sectors are responsible for 60% of them: logistics, automotive, pharmaceuticals and industrial equipment.

"Together, these four sectors provided 31% of total FDI job creation in Western Europe in 2006. Their share dropped to 23% in 2007.

"New jobs in the logistics sector, the top industrial job contributor in Western Europe in 2006, fell by 84%, from 11,292 jobs to just 1,792 in 2007. The automotive sector, which used to rank second in industrial job creation, provided 2,865 fewer jobs, a 35% fall.

"Industrial equipment jobs were down 60% (2,730 fewer jobs), while pharmaceuticals industry hires decreased by 66% (3,413 fewer jobs)."

Job migration

So, where are these jobs migrating to?

The answer is clear.

"Central and Eastern Europe attracts 28% of the projects and captures 58% of all jobs created. In 2007, investment projects into Central and Eastern Europe grew by 15%, despite a 7% fall in job creation (against 29% fewer jobs in Western Europe and 18% fewer across the continent).

"While Western Europe continues to attract new FDI projects (72% of total European inward investment projects), more new jobs were created in Central and Eastern Europe.

"Indeed, 58% of jobs created in Europe were directed to Central and Eastern Europe."

The Czech Republic maintained its place, despite attracting 27% fewer projects. It moved from fourth to third place in the job creation table despite creating 14% fewer jobs than last year.

Russia leapt to fourth position for jobs created (+85%) and moved from 13th to 8th for number of projects (+60%).

Poland and Romania maintained their position in terms of number of projects. In terms of job creation, Poland fell to second, creating 41% fewer jobs than last year.

Slovenia saw the biggest growth in terms of job creation (multiplied by five) and jumped to 15th position in the ranking.

"How to" invest is becoming more important than "how much" for investors considering sustainable location options.

Survey respondents pay more attention to political and legal stability (54%) and telecoms infrastructure (51%) than labour costs (47%).

This places those countries of CEE that are either in or lining up as serious contenders to join the EU as those countries that will have lasting appeal to business investors.

Future focus

Those CEE countries that focus on infrastructure development, including telecoms, will be the winners in attracting new business. Those countries and regions that fail to see this requirement will have to increasingly rely on cheap labour to make themselves attractive - a far weaker strategy long term.

But the message is clear - the great migration of capital investment into central and Eastern Europe may be interrupted somewhat by the current aversion to investment risk, but the flow looks to be unstoppable longer term.

This then is where the new jobs and a new, growing spending power will continue to emerge - and dynamic property markets in turn.

Short term affordability issues among domestic buyers in some of those property markets may well cause a slow down in accelerated price growth along the way, but to focus on this would be a big mistake.


It would miss the huge potential for future growth that exists as productivity grows and wages rise fast. Just as importantly, we need also to stay focused on the tiny percentage of mortgage lending that still exists in most of these markets - a vital measure of potential growth.

A footnote on the UK

Amid all the gloom about UK Inc and the gloom forecast by some who seem to see the end of any kind of growth in the UK's housing market, it's perhaps worth bearing in mind that the country is still the star performer in terms of FDI. Its track record is really nothing less than outstanding.

The Ernst & Young Survey points out that "The UK is the undisputed leader of the European FDI competition.

"The country tops our 2007 ranking both in number of projects and jobs created. FDI projects into the UK grew by 4%. Although its market share was slightly down, the UK holds the largest-ever lead over its European competitors (19.2% market share in number of projects, ahead of France in second place with 14.6%).

"The country's performance is mainly due to its commanding share of service activities (24% of total service investment into Europe), especially in Greater London (52% of UK service investment). The UK dominates Europe's inward FDI in software (30%), business services (26%), and financial services (28%)."

But, along with this success, comes a rider - a very strong economic linkage with the US. Obviously, it's not necessarily a bad thing to be coupled with the world's dominant economy, but it does mean that the old adage (with a slight variation) applies - when the US sneezes, the UK catches cold.

In addition, the areas in which the UK is strongest at attracting inward investment are the very areas that will be hit first (and perhaps hardest) in a credit crunch induced economic downturn.

But, equally, it can be argued that as the US was first into the big slowdown that started in 2007, it will be the first out of it - including its property market.

That could well bode well for UK inc in the coming months and even - dare we suggest - the UK's housing market.

UniCredit, the Italian banking giant, is one of the most active financial groups across all CEE markets and the standard of its research and access to data is excellent.

So, when it produces an assessment of a market, it's always worth taking note.
It's recent report focusing on the competitiveness of the Czech Republic should be a mandatory read for all property investors as it really highlights just what strengths this market has.

This is from the exec summary of the lengthy report - it sums things up pretty well:

"Thanks to its favourable economic and business environment, the Czech Republic ranks among the best countries in the CEE region in terms of attractiveness for foreign investors.

"The country places among the first 30 to 40 economies in the world in terms of "ease of doing business", level of corruption and global competitiveness. Indeed, after Estonia, it attracted the largest amount of per capita FDI in the CEE region in the last decade.

"The main investors came from Western European countries benefiting also from the Czech Republic's strategic geographic position in the middle of Europe.

"With a well established industrial tradition, the Czech Republic has increasingly specialised in mid-high technology sectors, such as automotive, machinery and equipment manufacturing, electrical and optical equipment and fabricated metal products.

"Due to its proximity to or being a part of some important industrial districts in Central Europe, the country still shows increasing growth potential for those higher value added industries despite gradually losing its competitive advantage as a low labour cost production base.

"The Czechs' increasing income and standard of living, as well as the development of mid-high technology industries, drive the expansion of services, such as wholesale and retail trade, financial and consulting services, business, real estate, transportation and logistic services, etc.

"In order to remain competitive at the international level, the Czech Republic has to preserve and somehow enhance its already high attractiveness for foreign investors.

"Thus, leveraging on the education and training of young people as well as encouraging investments in technology and R&D are all activities to be promoted in order to move toward high quality production, improve efficiency and labour productivity in the production process.

"The economic outlook is positive. GDP has been growing by more than or around 6% yoy for the third year in a row and an expansion, to around 4-5% is still expected for the years to come.

"On the production side, the economy is bene fiting from fast expanding capacities in manufacturing. On the demand side, gross capital formation and private consumption have lately replaced net exports as the key driver for GDP growth.

"The extended spell of the GDP fast track, which is deemed to be above potential, has put a strain on the labour market.

"Unemployment has been continuously falling, along with employment increasing by 1% annually through the foreign workforce being absorbed.

"While the growing presence of immigrants managed to curb wage demands in previous years, signs of wage growth acceleration have started to be observed.

"Good economic performance and relatively firm balance of payments data helped maintain average real appreciation of the Czech currency in excess of 2.5% annually over the last ten years.

"A low inflation environment translated into a similar pace of CZK nominal appreciation versus major currencies.

"Looking ahead, we believe in a gradual, albeit milder real appreciation pattern of the Czech Koruna for the next years, on the back of sound economic development.

"With the CZK appreciation maintaining rather tight monetary conditions, nominal interest rates have been kept and continue to be low and only converging toward the ECB level from the downside.

"While the recently approved economic reform may act as a boost for new FDI envisaging among other things, a cut in the corporate income tax from 24% in 2007 to 21%, 20% and 19% respectively in 2008, 2009 and 2010 - no EMU entry data has been set yet."

Anyone looking for a property market can't really expect to find one based on better fundamentals this this - surely!

Polish buyers stopped buying in huge numbers in the autumn 2007, writes Stanislaw Staromlynski of i-PropertyAssets.

There was a period of tension as the developers failed to reduce pries and buyers waited for them to do so.

Buyers stopped waiting at the end of February 2008.

Buying started again and in some locations, such as Warsaw, this was at autumn 2007 prices. This is actually good news as prices are not going down.
It also means the days of large volumes of sold apartments are gone.

For example, a medium sized local agency, which used to sell about 50 apartments per month during the boom (2005 -mid 2007), sold perhaps 3-5 apartments per month between October 2007 and February 2008), and now they sell 10-15 apartments per month.

The change is not only quantitative, it is also a qualitative.

Polish real estate market has turned from a sellers' market into a buyers' market.

If you have a buyer, treat him seriously. Do not put forward new demands or requirements. It is much easier for the buyer to find a new apartment than for you to find a new buyer.

Before buyers make decisions to buy they check all offers available on the market, so they usually have an alternative option to buy.

A lot of enquiries are meant only to test the market, to check if owners are desperate and ready to drastically drop prices.

This is a very difficult market at the moment.

Supply consist of three sources:

(1) Those who want to make money on their investments made in the past and they can very well do so if they purchased apartments in 2006 at the latest.

(2) Developers, who want to sell apartments in the old investments and they expect to get boom period prices.

Developers are also starting new investments to be sold at a profit. And they are struggling with sales at the moment.

There are special offers like: white finish for free; garage for free; some offer cars as a bonus to purchased apartments. They very badly need to keep prices at a high level to preserve profit margins.

However, the definition of high level is changing.

Please note that one sqm of apartment in Warsaw was PLN6000 in 2005, the average monthly salary was about PLN 1700, i.e. 3.5 x salary per sqm. 1 sqm of apartment is PLN 9000 now, but the average monthly salary is PLN 3800, i.e. only 2.3 salaries per sqm.

(3) There is also the secondary market and all owners of panelaks, built in the 70s, and 80s who wanted too high prices for their apartments during the boom period. Now nobody wants to buy these flats even though the owners are extremely flexible with the prices.

These owners used to be one of the forces propelling the boom, as those who sold their old panelaks usually were the buyers of new-builds from developers. The rapid slowdown of the secondary market is one of the reasons of the slowdown in the new-builds market now.

I would also like to stress that there is demand to buy apartments in Poland.
But it will be released gradually as people's purchasing power grows, which is actually happening right now and as financing becomes even easier to obtain.

The market is picking up in the sense that the number of transactions is increasing, not that prices are shooting up. Let me also remind you that 5% average price growth means that there are locations where the growth is 10% and there are others with 0% growth.

Flipping

Flipping used to be one of the most profitable businesses in real estate in Poland.

Between 2005 and mid 2007 there were not enough apartments to satisfy the demand, those who were the first to buy or had good contacts with developer had a chance to make a lot of money.

It was to enough to sign five preliminary purchase contracts, pay five deposits and wait for half a year, (in fact until the development sold out); and then flip (assign the right to buy) three apartments in order to have money to buy the two remaining.

As the procedure to pay taxes was also simplified - i.e. there was a written contract for the deposit only and all the rest of the money was paid in cash - it used to be a very lucrative business.

But flipping makes sense when apartments are in short supply, the demand is high and the prices are growing fast. We no longer have such a situation in Poland.

Certainly, there are cases of flipping taking place. They happen when a buyer accepts flipping as he wants particular apartment for reasons that do not depend only on price.

We have closed several flipping transactions. However, it is not the big business it used to be.

Renting

The rental market is getting stronger in Warsaw and in cities like Poznan, Wroclaw and Krakow.

There are more tenants and prices are going up.

iPropertyAssets have rented many apartments at good prices within the last two months.

However, tenants are very careful before they take final decisions on renting.
They are sure to make all and every effort to spot the best offer. They even make offers to rent several apartments in the same building and then they wait to see which owner offers them the best conditions (lower rent, better fit out, equipment or furniture).

There are definitely more tenants than there used to be as apartments are so expensive to buy and many people just cannot afford them.

And some potential buyers simply do not want be associated with a mortgage debt for life.

The mortgage lenders have also tightened up their criteria for granting loans, which increases the number of potential tenants.

Currently, there is PLN 6.2 billion (£1.45 billion) of overdue mortgage payments in the market.

Those who were refused mortgages just have no other choice but to rent.

Exchange rate boost

Let me show you a real example of what the rate of exchange can do to your profit.

Purchase price PLN479000; rate of exchange £1= PLN 5.6; Purchase price £85,536

Sale price PLN590,000; rate of exchange £1= PLN 4.3; Sale price £137,209.
Profit in PLN, 24%.
Profit in £s 60%

There are investors who calculate their daily increases in profits due to the changing rate of exchange. They purchased in 2005 and 2006.

There are also those who purchased in the first half of 2007 when the prices were already high and they stopped increasing.

Unfortunately, in the short term, their profits are not going up in Polish zloty. Their profits result only from the rate of exchange, which is very often unnoticed by investors.

I have travelled to a lot of countries in my life and I've lived in quite a few as well - but this was my first trip to Romania.

So what do I make of this country? What is its future? What can investors expect from this place? And, perhaps most importantly, is this the correct market and the correct moment to invest?

I'd like to be able to go a little way to answer these questions.

The aim of this trip for me and my colleague Oliver was to find some local partner companies that will help us to manage let and rent our future units in Romania.

So, what are the criteria that we will use?

Here's what we'll be thinking about:

1) The type of client - bearing min mind most of our clients are British or Spanish
2) The type of portfolio an investor is trying to achieve.
We need to select a company with a really good managing and post sales background that will satisfy the British buyers who are very used to the best standards and we need to combine this the slightly more personalised service that Spanish people expect from us according to Spanish standards!

This is the challenge for our group.

Meanwhile, back to Romania.

This country is undoubtedly fast growing. Let me capture some examples that explain perfectly what I mean.

Waiting at the traffic lights: on my left there is a Lamborghini. On my right I see a passing a horse towing a caravan. These kind of contrasts, that are common here, encapsulate the heady speed of change.

I also saw a MV Augusta shop in the centre of the city. Italian fashion. The most expensive motorbikes in the world - with a minimum price tag of €15,000. And I read that Ferrari is opening its first showroom in Romania next month. Romania will be the third central and Eastern European country to have such a shop after Hungary and the Czech Republic.

There is also talk of a Formula One Race in the next 5 years to be organized in Bucharest.

I am an Italian. Such things - super desirable cars, high-end fashion, luxury goods and the fact that F1 may come to town, they all speak volumes to me about this place.

Ryan Air launched their first flight to the country on April 1 (no joke!) after realizing that Romania's flag carrying airline, Tarom moved one million passengers over the last year.

Real Hypermarket, part of the German group Metro, is planning to invest €150 million in seven new hypermarkets in Romania this year, and planning to establish a chain of 21 units by the end of 2008.

These are examples that sum up just how rapidly things are changing in this country.

Many locals have lived in Italy and Spain over the last few years and they are now starting to move back.

One estimate talks of more than half a million people that will return in the next three years.

All of them, of course, will need to rent. Or they will buy apartments, especially in the capital city.

The average salary in Rumania is of €450 - but in Bucharest this is vastly exceeded. I personally spoke with a painter who was earning around €1000 a month.

And this was the same wage as he was on in Italy, were he had worked for the past five years.

Now he is leaving in an apartment with his wife and they pay €600 rent, while in Italy he was staying in a smaller - 80 sqm apartment, and had to share with 4 more people, all for the same money!

The couple are both working and their income is €1700 combined. This makes it clear to me that there will be a huge demand for medium class apartments that can be rented from €400 to €600 per month.

The governor of the National Bank of Romania said recently: "Romania must not focus too much on speeding up the economic growth (...) if there is a problem that this country has this is the increasing of the inflation rate, pushed by the severe drought last year and the rise in energy prices, which has already been announced, adding to which are salary pressures."

Petrol costs €1,30 per litre and in the capital there is still a serious traffic problem.

You need around 35 minutes during the peak hours of the day to travel 3 to 5 kms. So people who rent apartments near a metro station or other public transport will have huge benefits in the future.

The successive rises of the key interest rates will not have a significant impact on this year's economic growth rate, in my view.

Also the goal of the currency exchange rate should be to encourage exports rather imports while not affecting the inflation rate.

In terms of real estate, the central bank is demanding transparent transactions, simply because Romania has no official statistics of the actual value of its real estate assets.

And since public notaries are the only ones who have such data, the governor of the National Bank is determined to "hold them accountable" .

The first official information on the genuine value of property assets is expected to be produced in 2009.

One important feature I noticed about life here, while talking with locals, is the way that the citizens lack any shred of confidence in the public authorities. Can't blame them. Anyone can see that the public institutions and their leaders live for themselves and not for the citizens.

There is no doubt that urgent reform is needed to tackle this lack of confidence.

To draw up a contract for the supply of electricity with local companies can take you more than four hours on the phone and the paper work is extremely complicated for any West European and especially the British.

So, that's why IpropertyAssets needs to find a way to make our investors' lives easier.

I will conclude saying that at present I am writing this article flying back to Spain, and I find it difficult to put all my ideas and opinions in order.

But I think that the potential growth of this nation is huge and at the same time very scary.

There is a lot of work to do to try to educate people that they need to start working with different standards and a different outlook. They cannot any more use excuses such as, "Yes, but this is Romania."

All services in general need to be seriously improved and their conception of timing and organisation needs to be upgraded asap.

Corruption is also another negative aspect in this country. An example is the recent news about the chamber of deputies that has assigned a contract for around $160,000 to the firm whose shareholder is the labour minister.

This helps an appreciation of the big contrasts within this country. I would cite a famous phrase of Arisotele's to end my Romanian experience:
“ It is not always the same thing to be a good man and a good citizen."

Panos Tsigaras is Head of i-PropertyAssets España

King Sturge's March report "European Property Investors & Bankers Survey 2008' paints an interesting view of the credit crunch, its consequences and, most interestingly, where banking and commercial property investors' money is and will be going.

OK, it's commercial property investment, but, as we've always said - where the big money goes, so follows residential property demand.

The key is that this survey and those like it, tracks where the capital flows are heading, which means the same as where the growth will be in this region.

The survey, carried out in January and February of this year, was of 54 property investors and bankers, who control funds worth €130billion and €265billion respectively.

The separates the views of bankers and investors, which show some variance.
What is clear, though, is that there is a fairly optimistic consensus on interest rates this year and on a recovery in commercial property markets.

Projected change in short term bank interest rates in 2008 compared to 2007
About 90% of investors think the current collapse in capital values (of commercial property) will have ended by early 2009, and 70% of bankers agree.

This would seem to be pretty much this the same as forecasting the end of the credit crunch, or at least its bottom.

On interest rates -

A cut by 25 basis points or more

42% of bankers think Euro zone interest rates will fall by 25 basis points or more this year and 30% of investors. If the majority are righ, that means a strong euro throughout 2008.

64% of bankers think the Bank of England will cut by 25 points or more, but only 35% of investors.

On the US, 67% of bankers and 50% of investors believe rates will fall by another 25 basis points or more.

So, a disparity of views there.

Less so on where the best opportunities will be in Europe.

So where will be the best opportunities in Europe?

The study finds that investoirs and bankers think the UK and Germany offer the best returns (in the UK's case, also potentiall the worst) .

So, as the survey poses the question - have some parts of the UK already reached a value floor from which growth will develop? And, by extension, will residential follow suit?

One other feature that stands out - new central and eastern EU countries are where bankers and investors have the highest confidence about economic growth in 2008 - by far!

And, as the survey says - 'It is well known that property returns correlate well with economic growth.'

Italian banking giant UniCredit carries out some of the best and most in-depth research into CEE markets in the business.

And it's not surprising - 22% of the bank's €13 billion of revenue now comes from CEE markets.

So it's always worth listening to the bank's analyst briefings, one of which they gave in London the other day.

The main thrust of its report was that while its investment bank wing was being hurt by the US subprime fallout the rising shining star was still central and Eastern Europe where the Italian bank plans to open 502 new branches this year.

Chief Executive Officer Alessandro Profumo said growth had been ``healthy growth'' at its central and eastern European businesses.

Loan growth would probably rise 28% this year, he said and the region offered 'exceptional opportunities.'

Interesting in itself, but even more so are some of the numbers from the bank's recent report into the financial wealth of CEE households 2007 - 2009.

This provides a great insight into the real investment potential of this region unobscured by the credit crunch fallout that seems to overshadow everything right now.

And, to be clear, when it refers to CEE countries, it's talking about Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia and Turkey.

Financial wealth of CEE households topped €718 billion in 2007 'thanks to strong economic growth and improved labour market conditions and given limited impact so far from the US sub-prime crisis.

'In the years to come, good economic prospects will continue to support the accumulation of financial wealth, although with some lowering in its dynamic.

'The growth of financial wealth will continue to greatly exceed that of the real economy averaging 14% a year in 2008-2009 to reach 64% of GDP by 2009.'

What is significant here is not so much the amount or the pace, but both of these relative to Western Europe. The gap is still big and the pace of growth very rapid indeed.

At the end of 2006 CEE household financial wealth reached almost €600 billionn (up by 15 % year on year), and posting double-digit growth for the third year in a row.

Although CEE wealth and euro area wealth are converging very quickly, there is still a significant gap.

In 2006, household financial wealth over GDP equalled 56 % in CEE, versus 205 % in the euro area (in CEE, the same ratio was 54 % in 2005 and 43 % in 2000).

This then is a measure of huge potential and also very fast growth of CEE spending (and investing) power.

And what of the credit crunch? We've heard a lot about how CEE banks are relatively immune as they lend based on deposits, but the fact is that in a modern banking system no bank can isolate itself in this way - especially when so much debt in CEE is foreign denominated, making it vulnerable to external interest rates and currency volatility.

Here's what UniCredit says on the matter: 'The recent "credit crunch" has raised fears that house- hold debt might be overstretched in some countries and that the future growth of household wealth may be unsustainable.

'While financial markets are typically subject to cyclical swings and excesses, we believe there is a good basis for continued sustainable growth in the medium term.'

Here's a summary:

• Strong economic growth and quickly developing financial markets are driving the accumulation of financial wealth
• High levels of consumption and high demand for new houses and renovation continue to spur the growth of the level of household debt at a higher level than that of financial assets, resulting in the stabilisation of net financial wealth relative to GDP
• Households are however continuing to save, increasingly shifting towards the real estate market

'Household debt still appears to be relatively low compared to GDP, reaching 18 % in 2006 compared to 55 % observed in the euro area, although these levels are converging at a fast pace.

The credit boom was connected to the household sector's desire to acquire durable goods and housing and to the improved access to the credit market. Quickly developing real estate markets also contributed to an increase in the household sector's willingness to borrow.'

And here are the summaries of some key CEE countries' prospects:

Bulgaria

Despite a rapid surge in debt in H1 2007, the household sector reconfirmed its position as a net saver.

Deceleration in the pace of household debt accumulation will keep net wealth as a share of GDP on an upward trend in the next few years to reach 30 % of GDP in 2009.

The continued rapid development in mortgage financing and the high propensity to invest in real estate assets will continue to support a further increase in corrected net wealth, expected to reach 44 % of GDP in 2009 from 37 % in 2007.


Czech Republic

The financial assets of Czech households grew by over 13% yoy in the first six months of 2007. The trends within the sector changed a bit, with investment now more evenly distributed in relative terms between bank deposits and other forms of savings.

Household liabilities drastically increased by about 30% yoy in the first six months of 2007. The lion's share of growth was again due to mortgages.

Overall, we still anticipate double-digit growth rates in both mortgages and consumer loans in the next few years, despite some slight easing in the overall pace of expansion in total liabilities compared to the recent past.

Driven by rapidly expanding financial liabilities, the net wealth to GDP ratio of Czech households is expected to decrease further accompanied by a stable trend in the corrected net wealth to GDP ratio due to the high demand for housing investment.

Poland

Remarkable acceleration in the accumulation of wealth in 2006 and 2007 was driven by rebounding economic activity and a rapid increase in household income.

Despite vigorous growth in household debt stimulated by relatively low interest rates, net financial wealth as a share of GDP increased significantly, reaching 44 % in 2006, and will exceed 47 % in 2007.

Although the rate of growth is decelerating overall, the fast convergence of income levels is expected to keep the accumulation of net financial wealth
on an upward trend, reaching 49 % of GDP in 2009.

The recent vitality in household wealth has been positively influenced by a rapid increase in asset prices. So far, prices have been only marginally impacted by the recent turbulence on the international markets.

Downward adjustments in equity prices next year and a high level of consumption
are expected to limit financial asset growth to around 15 % in the forthcoming period.

Sustained growth is expected to continue in household debt, mainly driven by the continuing strong demand for housing investments.

Improving financial conditions for low-income households will provide further stimulus, especially in the personal loan segment.

Romania

The accumulation of household financial wealth further accelerated in 2007, reaching 26 % of GDP, driven by a strong upsurge in household bank deposits.

This increase has been stimulated by improving real returns and the very dynamic performance of the stock market.

The stock market has been only marginally impacted by the recent turmoil on the international markets.

Despite the sustained accumulation of financial wealth, the high demand for both consumer and mortgage loans will cause a further decrease in net wealth over GDP from 11 % in 2006 to 10 % in 2007, while corrected
net wealth is expected to stabilize around 13 % of GDP.

Overall, these developments confirm that Romanian households are generally reluctant to save, despite some slight improvements anticipated in the years to come.

Slovakia

In the first half of 2007, the accumulation of financial assets remained on a stable upward trend driven by strong economic performance and increasing real wages.

Fast increase of household debt driven by falling interest rates that increased the household sector's access to the credit market and its demand for loans for both consumer goods and real estate investments.

In the forthcoming period, the ratio of net wealth to GDP is expected to remain fairly stable around 36 %, given the willingness of households to maintain a high consumption level and to direct their savings towards the real estate market.

Low interest rates will probably gradually slow down the growth of bank deposits. On the liabilities side, mortgages and consumer loans will remain the main driving forces.

Here perhaps is some real perspective on the current state of the property market in the US and - if you follow one logical line of argument - also by extension the UK property market.

The Wall Street Journal is currently featuring a piece about how bargain hunters in the States are starting to circle in some of the areas most badly hit by foreclosures.

Deals are there to be done and some are spectacular - 40% and more off asking prices.

And, while some buyers are hanging back in anticipation of even more mouth-watering deals, it seems many buyers simply can't resist the kind of prices on offer. There is evidence of bidding wars over distressed properties and one agent describes how the showings they conducted tripled in February over the same time last year.

Near the bottom?

So, does this indicate that we are near or are nearing the bottom in the US, simply because the bottom fishers are becoming active? Could be.

Now there's no doubt that the US property market has been hit far worse than the UK's - so far.

Not so, in Spain's case, however, where the property market is currently being hammered on a US scale. The Spanish press is talking of falls in home purchases on the secondary market of about 35%. Total lending to home-buyers fell almost 28 per cent to €13.4bn. Anyone looking at the costas is going to find a lot of choice. No evidence of bargain hunters gathering there yet. But they surely will at some point?

In terms of the UK market, we've seen lots of evidence of some minor price falls, mortgage lending falling and even the BoE's Mr King has said he will be 'surprised' if real UK property prices are much higher in a few years' time than they are now.

Putting aside our faith in Mr King, few would disagree with that, surely. He added that such an adjustment in real prices would be a good thing - surely few would disgree with that either. There is no suggestion though that the medium to long term outlook is anything but positive.

So, if we believe the UK market will go where first the US and now Spain are going (two markets like the UK that have seen huge property price growth fuelled by cheap credit), then we may, in the US at least, see some glimmer of perspective about the so-called 'meltdown' we keep hearing about.

Why?

Because what really leaps out of the WSJ piece are the numbers.

Meltdown

It's often the case that the extreme pockets of the market are where the focus ends up - the huge price falls. These are what lead to talk of a 'meltdown'.

But when you look behind the rhetoric, things are a little less dramatic. The most distressed state is Florida - home to THE most distressed area in the US in terms of property price falls - the Cape Coral-Fort Myers metro area in southwest Florida, according to RealtyTrac of Irvine, California.

This is THE worst place in the whole, vast US property market, with a record 3,739 properties in some stage of foreclosure, or one in 84 households - that's nearly seven times the national average.

Average sale prices for family homes in Lee County, which encompasses Fort Myers and Cape, are down 17%.

That's bad, but remember this is THE worst. So, is this the meltdown we've been hearing about?

And the rate of price fall across the nation, in which the property market is regularly described as being in freefall? An 8% fall.

When you factor in all those huge discounted deals of 40% and 50% and suchlike are wrapped up in that figure of 8% overall, this starts to put matters in perspective, surely?

If this is a meltdown, it's not as we know it!

What is also very significant is that once the lending blockage starts to ease - as it will at some point this year - we are going to see a huge amount of hoarded money (hoarded by banks) aimed at investment through credit lines, and a lot of this is almost certainly going to head into property markets that look like they offer real bargains.

Where to invest?

Where else will it go? 8% down - even 17% - compared to what equities have done in the last few years is reassuring.

Now, while it may not be time to dip a toe back in the water of the UK market yet, because things will almost certainly get worse before they start to get better, maybe, that worse isn't really going to be so bad after all - even if it is still likely we won't see much growth in the UK for the next two to three years.

So maybe now - while sentiment is depressed and yet fundamentals are basically the same as previously - is the time to look at those markets that will really benefit from the pick up in confidence?

Those economies with huge potential for growth and which have previously attracted huge amounts of FDI. Which for any smart property investor brings us back to selected markets in central and Eastern Europe...surely!

Last week has been one the most eventful weeks of the year for the global economy. The credit crunch is now firmly a credit crisis leading George Bush to declare "we're in challenging times". Meanwhile gold hit a record $1,000 dollar a troy ounce.

It was no coincidence that the US dollar, already plummeting in value against the euro has plunged to a 12 year low against the Yen. One thing we can always be sure of in these uncertain times is a falling dollar means the price of gold rises.

The sub-prime crisis now reaching fever pitch in the US following the news that the fifth largest bank in the US, Bear Stearns has collapsed . This again, was due to the bank's exposure to the risks of sub-prime lending. Conditions are perfect for the biggest surge in gold prices in more than a decade as investors lose their heads and chaos rules.

Investors are understandably nervous about putting their money anywhere else right now, other than perhaps oil, which has also risen in value to $110 a barrel this week.

So why is gold widely regarded as a safe haven for investors?

Primarily because gold is regarded as a hedge against inflation, a currency of last resort when the US dollar is weak.

The price of gold has risen 55% in the past year on the way to hitting the $1000 a troy ounce milestone. It is also widely anticipated that we could see further increases in the coming year, particularly with successive cuts in US base rates, which weaken the dollar's appeal and boost the attraction of the precious metal.

Right now, with panic spreading fast in global stock markets and a media frenzy, many investors have lost sight of long term investment performance.

South Africa, one of the world's major gold producing countries, is suffering from power shortages. This has resulted in a scaling back of mining activities and the country is optimistic that planned job cuts the industry will be avoided now that the price of the metal is rising. This however could well be misplaced optimism.

Demand for gold is expected to increase in India and China, the world's biggest consumers, as their economies continue to perform strongly.

Investors are now flocking to what they see as the safe haven of gold when all other investment options look shaky.

The primary reason why there is a bull run on gold is the weakness of the US dollar -and the currency just keeps getting weaker as financial turmoil grips the American economy, and threatens to spread around the world.

There is little sign of an end to this situation, with each prediction that the crisis is coming to an end there is another that the worst extent of the crisis has yet to be fully realised. The media are even making increasing references to the Great Depression.

All good news for gold then? Well no, not really...

Yes, if you take a short term view and follow the herd.

But and this is a big BUT...

If you believe in buying low and selling high, the warning signs appear to be already there. The price of gold according to analysts is at a "mature phase" - therefore the opportunity for real profits has already passed.

A famous John Kennedy quip prior to the Wall Street crash of 1929 was "you know it's time to sell stocks when even the shoe shine boy tries to give you stock tips".

One of the major signs of an overly inflated market is when it is widely reported that it has reached "new highs" - and that is exactly what is happening with gold. We also have the majority of investors talking optimistically about further rises - so investors are still flocking to the perceived safety of gold in large numbers.

Look more closely at the reporting and you will notice a growing sense of underlying negativity.

We read that the "underlying physical demand has been struggling". While gold may still be in demand in countries like India, demand globally remains constant and in a global recession we can reasonably expect demand for jewellery to fall.

The current increase is driven by nothing more than speculation with nothing to underpin prices.

This rather shaky foundation is a big danger signal - who will buy the gold when confidence returns?

In 1980, just ten days after hitting a record $850 a troy ounce, the price of gold fell to $700.

And, you know what - Once we factor in inflation, today's $1000 dollar an ounce is not that significant compared to the price in 1980.

That is because, historically, gold underperforms virtually every other asset class.

Let's look at the long term trend in gold prices since 1970 below:

There has been only two major peaks in the last 40 years, the one in 1980 and the one this year.

Otherwise the price has remained fairly constant if we take inflation into account.

Prices would need to top $2,000 a troy ounce to repeat the same spectacular rise last seen in 1980.

Take the short term snapshot over the previous five years and gold looks a pretty good bet. But look at those steep declines in the eighties and this paints a very different picture.

It is also true that the price of gold could well rise further depending on how long the economic uncertainty continues and fear stalks the stock markets.

However, apocalyptic talk of past economic meltdowns and the next major casualty in the banking industry are normally signs that the crisis is near the bottom, which could mean the current window of opportunity will close at any time.

Of course, any prediction of the future is uncertain, and especially so now with such a volatile global economic situation. But what is a safe bet is that this crisis, like all others, will pass.

Gold is not an asset with the qualities to do well in positive investment climates.

When the market rallies the price of gold can fall just as rapidly as it has risen. The latest spike is little more than a flash in the pan.