Having started buying off plan in Slovakia, Czech Rep and Poland around 3 years ago with the intention of holding for at least 5 years following completion I'm now wondering whether this is still the right approach. It seems that as some markets like Warsaw, and Prague become more mature much better short/medium term returns can be had from secondary or third tier locations like Poznan and Brno and/or new countries like Romania. So the question is whether to retain the existing properties and accept decent but slower growth of 10% to 15% per year or to try to lock in the capital gains, sell up and buy into these other areas. Then look at doing the same thing all over again in a couple of years time. I know that PS's strategy was always to hold for the medium term but I sense a change. Obviously the right thing to do will vary on location - for example I will hold my Slovakian properties as I'm convinced it will take off at some stage in the next 3 years. The ideal may be to hold onto everything and build a portfolio including second and third tier locations but currently there aren't the finance options to make this possible. Maybe that will change but by then the "turbo growth" of some of these locations may be in the past. Other factors include the demand for re-sale properties which may not exist in all locations (which itself calls into question the real value of the properties). Anyone have a view? Huw

Hi Huw I am also grappling with this especially since GerMac kindly highlighted the changes in the 5 years 0% CGT rule for Poland. As stated in a previous post my plan was to keep for 5 years on the strength of the 0%CGT then review the position. I planned to sell a unit or two per year maximising joint UK CGT allowances. Now it looks like there is no benefit in waiting and the taxes are the same whenever you sell. Consider this with all the start up costs, mortgage anxiety and effort, increasing cost of money, furnishing costs, weakened rental market and managing costs then the whole picture looks a lot different from the economics presented in the deal packages. As you say diversity is the key if you are fortunate to Hold some and Sell others depending on the market conditions. Have you ( or anyone else ) ran a sensitivity analysis on the numbers on typical PS deals with revised figures and higher void periods and compared to the original investment pack information ? What does everyone else think? By the way thanks for keeping my confidence up in the long term Bratislava market, I am in on Three Towers. Regards Alan

Hi Alan No I haven't done the sensitivity analysis - it would be really interesting. I can't help but feel that PS are still inclined towards the medium term hold as it is "sensible" advice rather than the right advice. Of course everyone will stress that each individual's circumstances are different.... Re Bratislava I can't believe that with the fastest growing economy in E Europe, inflation under control, rapidly reducing unemployment, the lowest number of units of accommodation per capita in Europe (plus a lot of it being crap), on target to join the Euro in 2009 etc etc that it can't take off soon! Fingers crossed! Huw

I looked at Bratislava last year and did run a sensitivity analysis (on generally available deals - not PS)using my view of the rental market (i.e. you would be lucky to get half of the rental the agents said was achievable and even then would probably suffer extended voids) and real figures for everything involved in renting, letting, finance, furniture depreciation, servicing, and accountancy costs. My conclusion was that I would have to subsidise the property at around 5-6%p.a. This was too rich for me and I decided not to buy. Subsequently friends who pressed on are now proving the analysis to be about right; and are now in the position of having to decide whether to hold on, hoping for a big capital increase to offset their running costs, or sell at a considerable overall loss. Regards Alan

Hi Another Alan You're right in what you say but you are funding pretty much any PS investment after rental income (if indeed you can find a tenant) anywhere in the CE. Granted Poland in particular has seen much higher capital gains but looking medium term everything is right for Slovakia to boom. Huw

Huw I still reckon its a medium term hold because the buying and selling costs are so high. I've just sold Majolikova (because the circumstances were right to sell there) at an excellent gross profit. However after all costs the ROI is very modest and was probably not worth the risk. I dont regret Majolikova because it was excellent experience but in hard financial terms you'd have to question it. You certainly couldn't make big money by trading that kind of deal on a regular basis. I want to see the value of my other units double at least before I consider selling and that will be a few years yet. Mine (Czech and Poland) are just about covering their day-to-day costs at the moment although they have not repaid the start up cash I put into their revenue accounts.

Hi Nick Are you willing to share the numbers with us as that would be very interesting? How easily did you find a buyer ta Majolikova and was it via an agent? I think you are spot on with your analysis in that I was assuming at least a doubling before selling which in theory has happened with a few of the Polish deals which have just completed. With growth in some other Polish locations publicised by PS at an annual rate of approaching 75% and with the time taken to build it's not beyond the realms of possibility that prices will also have doubled soon after completion. So I wonder whether it's better now to sell at this point and look for the next high growth location rather than hold for lower returns. Huw

Hello Nick, Huw and the Alans, This is an interesting debate. I like Nick have just sold (well almost sold) my Majolikowa apartment. I paid 251,041 PLN including the car park space for a 56.74 sqm apartment. I have sold for 350,000 PLN which is a 40% increase. Note that this is much less than the PS claimed 108% as their starting figures are inaccurate and it all depends whether you include the car park or not. Now, I could have held on for a higher price but I didn't want to go on paying a mortgage with no occupants and no buyer so I sold a bit under market value. I found a buyer very easily. After buying and selling costs, including the PS fee, lawyers fees, mortgage arrangement fees, mortgage exit fees, POA costs, a site vist, 5 months of mortgage costs etc., I am left with no demonstrable profit. Why am I selling? Well, because it is tying up capital, will be difficult to rent due to the planned bridge being indefinitely delayed and the monthly mortgage repayments. Had I been able to rent, I would have held medium term, even though it would have cost me a bit to cashflow in the early years. So, for properties in Poland that are in better positions than Majolikowa, I would hold as the buying costs are so high in comparison to the value of the property you are buying. Peter

Hi All Peter, Nick, I too have an apartment in Majolikova which I am currently holding with no kitchen or furniture installed. Could you tell me which agent you used to sell your apartments and I am currently awaiting the final ownership transfer to go through which I assume must take place before you can sell - is this correct?

Phil, The forum rules prevent me from giving details of the agent but I am happy to talk off forum if PS will give you my e-mail address and phone number. They have done this before so if you call the customer services and tell them to call me I amsure they will do so again. You can sell on before the signing of the OTA but I would think that you wouldn't have the time to sell in any case before this event. Peter