UK Employment Data Turning Positive will Spark Rise in British Appetite for Overseas Property

Today the Office for National Statistics revealed the latest data on the UK labour market, and while it is a lot more positive than previous reports, overall it is still negative, as we can see from Sterling losing some ground to the Euro and the Dollar.

Positivity comes in the fact that 86,000 more people were in part-time employment in Q3 than in Q2. Unfortunately that is tempered by an 80,000 fall in the number of people in full time employment. The combination of the two gives a positive 6000 more people in employment in the July-September quarter than in the previous quarter. However, the number of unemployed people climbed 30,000 to 2.46 million.

While I said that the report was negative overall, which as you can see it is in terms of raw data, however, in terms of interpretation this can only be called a positive report. This is because the rise in unemployed people is a lot smaller than previous quarters, and it contains the words "increase" and "in the number of people in employment", in the same sentence. All previous reports this year have been a solid wall of negative data.

The fact that the number of people in part-time employment rose could be said to show that employers are beginning to test the waters of expansion by hiring part-time staff, although the report says it is simply people taking part-time jobs because they can't find full time ones.

Either way, like I said, this is the first labour market review to contain any positive data, and it confirms that the UK economy is passed its lowest point and on the road to recovery. How this relates to overseas property investment is simple.

Since the first UK economic indicators turned positive in April, demand for overseas property has been increasing as British buyers returned to their favourite foreign hotspots. This has primarily been well-off Brits, who weren't left in financial difficulty by the recession, but who were fearful of just how bad it could get; that they might become affected eventually. Now that the full effect can be measured more easily their confidence has returned.

However, many more potential buyers have been waiting for unemployment to run out of rocket fuel before they felt confident in the recovery. Now that the ONS has revealed clear data that suggests that point is upon us. It will likely mark further increases in demand for overseas property among British buyers.

This will be hindered by the fact that finance is still very restricted for property purchases abroad, just as it is in the UK. This is because, unlike the first group of returning buyers, those returning because fear for their job is subsiding are more likely to be looking for finance to make their purchase.

That said, while finance is hard to come by, it is not impossible, so there will be a rise in demand for overseas property from British buyers. This demand will continue to rise as unemployment falls, as mortgages get easier to obtain and as Sterling regains its former glory.

Exchange Rates Erratic, Watch the Lira for Instant Equity on Turkish Property Buys

I have just listened to a podcasted interview with Moneycorp. In the interview, David Kerns, a senior trader with the outfit spoke about the exchange rates between Sterling and the Euro, and Sterling and the Turkish Lira.

What he said on the Euro was hardly surprising. The Pound is weak against the Euro, because of the depressed UK economy that is printing money, and because the Bank of England want a weak Pound so ur companies can get a foothold overseas -- in other words they are quite happy to take advantage of the situation.

However, he did say that the Pound was going to go down to 1.05 Euros in the next month, but it has since rallied and is currently back up at 1.097. Kerns said that a fair price for a Pound is 1.15 Euros, so if the Pound does overshoot this when the UK economy recovers then it is definitely worth making then the time to buy a property in the Eurozone; to capitalise on instant equity.

It is the performance of the Turkish Lira that is the biggest surprise however. Kerns said that the Lira was going to stay strong, because its high yielding potential makes it a favourite for investment among the brave. Since then however, the Pound has climbed to be worth 2.393 Turkish Lira, up from 2.29 as Kerns spoke.

When the Lira strengthens it tends to go as far as 2.30 against the Pound, this is a kind of imaginary floor if you like, and 2.35 - 2.40 is the long term average. With that in mind anytime the Pound is worth more than 2.40, British buyers get instant equity in Turkish property purchases, and it could very well go higher than that in the coming weeks.

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Turkey and Egypt Property Markets Benefit from Strong Euro

The property markets of Egypt and Turkey are benefiting massively from the current strength of the Euro against Sterling, which is forcing Brits outside the Eurozone for their -- practically mandatory -- two weeks in the sun each year.

The main benefit that the strong Euro is having is to increase tourism growth to Egypt and Turkey, which were growing rapidly already. But this is also putting them into the spotlight as second home destinations.

The question that many overseas property investors will be asking is: what are the chances of the Euro dropping its value anytime soon. The truth is: it doesn't matter, according to the Association of British Travel Agents tourism to Egypt and Turkey from Britain has been growing at an average of 20% for the past few years. All the Euro strengthening did was accelerating this to a forecasted growth of 25% this year.

Over the long term, the Pound will never get you as much in Euros as it will in Turkish Lira or Egyptian Pound, so of all the people currently choosing Turkey or Egypt, who would normally have holidays in the Eurozone, there is more chance that they will become their destination of choice even if Sterling does regain the ground it has lost against the Euro.

Another benefit of the increased tourism from people who would normally have holidayed in the Eurozone, is that property is a lot more affordable in Turkey and Egypt than it is in Spain or the other Eurozone hotspots. So, if 10% of holidaymakers to Spain could afford a second hokme and bought there, then maybe 60% can afford to buy in Egypt and 35% can afford to buy in Turkey, and maybe 20% will buy.

At any rate the increased tourism is always going to be good for rental yields in the countries and for the economies. As economies grow property values increase automatically; the two go hand in hand. All in all the numbers of Brits buying property in Egypt and Turkey is set to increase massively in the coming months and years.

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