As arguments spill over about risk - change of govt in Poland - people on the streets in Hugary - military intervention in Thailand ... it is interesting to see where each is coming from. I believe - that within the EU a democratic process is taking place in Poland, Czech Rep and Slovakia. I also believe that the incredible 'yes we lied' comment by the Hungarian PM, with the result of people of the streets is also part of a democracy that is growing up. The difference between Hungary and Poland, Czech Rep and Slovakia - is that Hungary's economy has a serious debt problem - and that was public knowledge (okay, public to anyone who reads this website or (say) the Economist. What has happened in Thailand is that the democratic process has broken down. This is scary. If I was an investor in Thailand I'd be scared. Equally, what happened in Beriut this summer is a warning to all 'overseas investors' not to stretch too far. Lastly, some of our investors have been critical that we don't source deals from China - and last weekend I read that the major of Shanghai has been forced to changed property law to the detriment (ie loss) of foreign investors. It is easy to tar all non-UK locations with the same brush - but let me give you three categories to help you seperate the wheat from the chaff. 1. Growing Democracies Countries learning to deal with democracy and learning to live with a market economy. In this category I'd put Czech Rep, Slovakia, Poland, Baltics etc... I hope that we can add Romania to this category - although time will tell. We source our deals from these countries. They also have the benefit of a club (EU) that helps to keep them to the rules. 2. Growing Democracies with an economic problem In this group I'd put Hungary and South Africa - they both have debt and economic problems - and both have big risks (currency devaluation type risks) attached. We could go to these countries for deals - but don't feel there is any need to - when the opportunity in category 1 is so good. If that changes, then yes, we could swap greater potential return for greater risk. Category 3 - Non or superficially democratic countries In this group I'd put China and also Thailand. Yes, they are experiencing huge economic growth - but the rule of law (and propety law in particular) is shaky and can be knocked down very easily. It is impossible to evaluate risk in these countries. Therefore, it is impossible to say whether the returns are worth the level of unknowable risk. Hence, we feel v. uncomfortable about sourcing deals from these sorts of countries. Lastly, in praise of the EU, Hungary will solve its problems - and then it will become an attractive property investment opportunity. I see the political changes in the remaining EU new entrants as part of the 'growing up' process. And that it is crucial to distinguish this process from the pulling down of democracy in other countries - or those countries that also have real economic problems.
Do you agree?
ES