The sky’s the limit
Low cost airlines undoubtedly increase tourism, and in turn tourism improves property markets. But have budget flight routes become so important that they now have a direct impact on foreign property? Kate Hamilton, deputy editor of Homes Overseas, explains...

When talking to property experts across Europe two events seem to have benefitted the industry more than any other—the abolition of the Dollar Premium in 1979 and, of course, the advent of cheap flights. When easyJet launched 10 years ago the overseas property industry changed forever. No longer a luxury for the rich and famous, second homes were now an achievable dream—simply because they had become accessible. After all, there’s no point having the ultimate place in the sun if you can’t afford to go.

Nowadays, flights to Spain can cost as little as £27 return— the same price in fact as a return flight cost in 1965. To put things into perspective, when planning a week’s holiday today it’s highly likely that the airport car parking will cost you more than your actual flight. While the real cost of air travel has gone down, the cost of Spanish property has rocketed, and while you now don’t need to re-mortgage simply to have a weekend away, you might need to in order to snap up that weekend bolt hole.

Jo and Geoff Gould from Buckinghamshire first bought an apartment on the Costa del Sol in 1987. The reason they chose Spain is simple—it was easily accessible. Having considered a property in the Balearics they finally decided on the mainland because it meant that they could drive. “We wanted to use our apartment for around six to eight weeks at a time,” says Geoff, “and it was reassuring to know that if anything went wrong with the airline industry then we wouldn’t be stranded.” When they did fly the costs mounted up. “In the early nineties we used to pay about £244 for a return flight to Malaga. That’s each,” explains Geoff. “The last time we flew out here we paid £200 return—for both of us.”

So does such a cost saving mean that they travel to the sunshine coast more frequently? “Not really, we’ve since retired out here!” Geoff exclaims. “When it became time for us to retire, the Costa del Sol was an obvious choice as we had made so many friends out here by then—and the infrastructure was improving radically.”

So, taking advantage of southern Spain’s remarkable capital growth, the Goulds sold their Los Flamingos apartment and upgraded to a villa in Hacienda Guadalupe five years ago. “It’s a great place to retire, since the family are so close,” adds Geoff. “Our son recently visited for just five days. He flew easyJet and was at our front door from Malaga airport in just 45 minutes— when we first bought here that journey took two and a half hours!

“Our location also makes it easy for us to go back to the UK—we recently popped over for a friend’s golden wedding. The ability to book on-line and, in effect, issue your own tickets makes organising a trip so much easier. It’s great to be so flexible in terms of choosing both dates, times and prices. We keep a look out for offers, which influence when we decide to travel.”

Such flexibility is just one of the reasons budget flights have been such a success. However, it’s not just established property markets that are benefitting from this revolution. Darren Goodson has been a property investor for the past 10 years in the UK. “With the British market slowing down I thought the time had come for me to venture into foreign property investment, and having visited Estonia—and been mightily impressed with it—it seemed like the natural choice.”

Darren started researching the Estonian property market before the country joined the European Union and, as a result, saw the potential for capital growth. “It seemed obvious to me that once EU accession had been achieved the low-cost airlines would start flying to the capital cities of the Baltic nations,” explains Darren. “The combination of EU membership and budget flight routes was bound to push up the property prices in Tallinn.”

With this in mind, Darren bought his first apartment in 2003. But the question is, was he right in his presumptions? “Well, prices have gone up 20% this year alone,” says Darren. “That’s not a pie-in-the-sky figure either—it’s a fact.”

Darren Goodson started researching the Estonian property market before the country joined the EUIt’s a good job that this smart investor has since added seven new properties to his portfolio then. “Six of these are yet to be completed,” Darren adds, “but I now have two apartments that are up and running which I rent out to tourists.” And with the tourism market having increased by 35% in 2004, this is probably a rather good move too.

Another advantage of short-term lets is that it frees up one of the flats for a few days each month when Darren comes to stay. “You need to visit at least once a month otherwise you lose touch with the local market,” concludes Darren. And in touch he is. In fact, Darren’s investments have been so successful that he has even written a book on the subject: How to profit from one of the biggest property booms in Eastern Europe (see www.tallinnproperty.com).

The book is a success thanks to the recent interest Estonia has received from investors like Darren. Churchill Properties (www.churchilloverseas.com) has been marketing in Estonia for two years—and in that time property prices have risen by no less than 50%. “Many people have come here to invest since EU membership was announced,” states Churchill’s Andrew Goldthorpe. “The combination of low cost property and cheap flights have created a boom town.”

The average cost of a two-bedroom apartment in Tallinn is now £65,000 according to Goldthorpe—a figure that is attracting investment not only from Brits but from the Irish, Portuguese and Spanish. “We especially sell a lot of homes to Scandinavians,” he continues, “simply due to the convenient location. But we have had buyers from as far a field as Japan.”

'THE COMBINATION OF EU MEMBERSHIP AND BUDGET FLIGHT ROUTES WAS BOUND TO PUSH UP THE PROPERTY PRICES
IN TALLINN’ EXPLAINS DARREN GOODSON

While these buyers are located too far away to benefit from the low-cost flights themselves, they are a prime example of how budget airlines have actually helped to create new property markets. Investing in property, especially abroad, can be a risky business; it’s always reassuring to see profitable firms such as easyJet are willing to put their money where their mouth is.

But perhaps the best advantage of this growth industry is the increased knowledge it has provided. It’s one thing owning an overseas property—it’s another owning one somewhere you hadn’t even heard of five years ago.