Property in the sun

I read with interest your article last week regarding property investments in the UK. I am more interested in investing in Euro-denominated investment funds as opposed to sterling as I am taking the view that Malta will be adopting the euro in approximately four years time and I wish to invest in our new currency. What opportunities are there to invest in property funds in Spain, where there seems to have been tremendous growth also?

The social housing and student accommodation funds referred to in last week's article often have more than one share class, i.e. they are available in more than one currency. As the funds invest in the UK, the funds' main currency will be sterling.

To attract foreign interest, you can expect funds to have a euro and US dollar share class also. In doing so, you will be reducing your currency risk.

Regarding investment possibilities in Spain, the South East Coast in particular is undergoing an incredible transition, evolving into the retirement home capital of Europe!

It is estimated that more than one million foreign home buyers now live, partly or full time, in Spain. The EU has identified the Costa del Sol as the fastest growing area in Europe, estimating that the population will increase from 2.5 million to 6.5 million by 2011. Property values along Spain's southeastern coast - Costa del Sol, Brava and Blanca have increased in the region of 40-50% since 2000.

All of this is very positive but buying directly into residential property developments such as in Spain always carries the risk of a high capital outlay with reward only realised when the property is sold.

For this reason, funds should be considered as an alternative and there are a growing number of property funds that invest in the region. Such funds are typically based in the Isle of Man or Channel Islands for added security.

Just like in the UK, commercial property in Spain is a very viable alternative to residential property. This is because the property is leased to quality business tenants, for longer periods of time than residential leases and you are also less prone to vacancies.

Such commercial properties also often house multiple tenants, resulting in more efficient management.

Spain is responding to the prolonged growth with a very aggressive programme of infrastructure development. Malaga airport is undergoing major development that will double its annual passenger capacity by 2010. A new international airport is also planned near Costa Blanca.

Numerous multi-lane motorways are being built to connect once remote areas and high speed train services are being expanded to connect more than 160 km of the most populated coastal region.

The combination of population growth and infrastructure development results in a high demand for a variety of commercial property projects. When looking for property opportunities in Spain, one should certainly not overlook the opportunities that good commercial property fund managers offer.

Returns are of course not correlated in any way to stock market returns or bonds. This diversification also gives the potential for strong returns but without the risk of buying direct.

Mark Hollingsworth is the director of Hollingsworth International Financial Services - licensed by the MFSA to provide investment services under the Investment Services Act 1994 (IS/32457). Address any financial questions to: Mark Hollingsworth, c/o The Sunday Times, PO Box 328, Valletta CMR 01. Alternatively, he can be contacted on 2131-6298/9984-2614 (office hours) or e-mail mh@hollingsworth-int.com.

Past performance is no guide to the future and, except where amounts are guaranteed, the price of your investments (and the currency in which it is denominated) may fall as well as rise. Your personal tax situation will depend on residence. Always consult a professional adviser. This article does not intend to give investment advice and its contents should not be construed as such. Readers are encouraged to seek professional advice on their personal financial situation.