Houses_of_Parliament_(Cape_Town)By Gideon Rachman

The Financial Times writer

Maybe it’s because I’m a Londoner. But, as I travel the world, I can’t stop thinking about property prices. In fact, my interest in property is only stimulated by my day job as the FT’s foreign affairs commentator. As I stare into estate agents’ windows in cities around the world, I find myself wondering how local political conditions are going to affect property prices.

I have even developed a theory of how global property investors should think about geopolitics — call it “the geopolitical play”. The thing to look for is a combination of good fundamentals and bad times. In other words, a place that should be prime real estate, but that has been messed up by politics. The idea is to buy now, when times are bad, and wait for politics and property prices to improve.

Of course, I am both too lazy and too poor actually to do this myself. But it doesn’t stop me thinking about it. And I have discovered that I am not alone in my preoccupation. In a feature last year, John Thornhill, the FT’s deputy editor, recalled: “When I was studying Russian in Saint Petersburg in the early 1990s, my landlady offered me the chance to buy a ramshackle apartment on a canal near the Mariinsky Theatre for the equivalent of £30,000. I’m not sure how I would ever have financed my purchase, but I have regretted my lack of financial imagination ever since. The apartment is now worth, I guess, at least 10 times as much.”

Thornhill’s guess is probably pretty accurate. Research for this article carried out by Savills suggests that the price of a good apartment in Moscow has indeed risen roughly tenfold since the collapse of the Soviet Union in 1991.

Simultaneously inspired and depressed by this tale, I have canvassed colleagues and friends around the world for similar stories — opportunities missed, opportunities seized and, most important of all, tips for opportunities in the future.

As for opportunities missed, many former foreign correspondents regret not buying in South Africa in the late 1980s. At the time, the country was the subject of international sanctions and threatened by political violence, so it did not seem like a natural place to buy a holiday home. And yet, looking further ahead, it should have been obvious that Cape Town remained one of the most attractive cities in the world. If times improved, it was probably a safe bet that the city would attract people from all over the world. And that, indeed, is what happened. Savills’ research suggests that Cape Town, like Moscow, has seen a tenfold increase in prices since 1991, the year following the release of Nelson Mandela from prison.

However, as John Paul Rathbone reports, things are now beginning to move in Havana with the restoration of diplomatic relations between the US and Cuba. It is still a complicated situation, however, not least because it is illegal in most cases for foreigners to buy property. One popular way around this in Cuba and similar markets where foreign buyers are restricted (such as Sri Lanka, Indonesia and Thailand) is for foreigners to buy through a trusted local intermediary. Yet when large sums of money are involved, trust can evaporate alarmingly easily. There has been a rash of cases in Thailand recently where foreign buyers have become involved in bitter property disputes with their Thai wives.

Currency risk is also often a question. The gains in South Africa or Russia would be even more striking had it not been for the collapse of the rand and the rouble against the dollar and the euro. Over the past three years, property prices in South Africa have risen almost 15 per cent in rand terms, but less than 2 per cent in dollar terms. Of course, that also has the effect of making South African property look very cheap to foreign buyers, with one local agent reporting an “acute, exceptional shortage of stock for sale” in Clifton, one of Cape Town’s most attractive beachfront areas.

Currency risk is often related to political risk and both must be considered by anyone thinking of buying in southern Europe. After years of crisis, there are many apparent bargains to be had in Greece, where prime villas on much-loved islands, such as Mykonos or Paros, can now be bought for between €800,000 and €1.2m. Kerin Hope, the FT’s Athens correspondent, notes that “prices across the board are 50 to 60 per cent below pre-crisis — 2008 — levels”. If and when political and economic stability returns to Greece, prices will surely move back up again. Yet what if the opposite happens and Greece is forced to leave the euro — a possibility that was raised at a recent EU summit? The value of your island villa might plummet, as the new Greek currency plunges against the euro. On the other hand, as Hope notes: “Investing in a villa in Mykonos is like buying fancy wine, which you can always drink if the investment doesn’t work out.”

The morality of buying in desperate or despotic countries is often an issue. Not everybody would have felt comfortable buying a house in apartheid South Africa or Castro’s Cuba. Even when political conditions have improved and prices have begun to rise, some people might still feel queasy about the underlying political situation.

The rest of the piece, including a table of the world’s riskiest spots to buy a house, can be found on The Financial Times website.