Words: Ashley Rigg
Published: 8th October 2008
Industry Millionaire: GPG founder talks to Globaledge
There are few people I’d trust more with a fictional sum of money than Matthew Montagu-Pollock. He not only has a double-barreled surname (which inspires me with confidence for some reason), but he also runs what is arguably the most authoritative and comprehensive investment property website on the internet.
Matthew set up
Global Property Guide at the end of 2006 and it now attracts a loyal audience of international investors, generating 95,000 visits a month and 350,000 page views.
To help our readers come up with ideas for future projects, we offered Matthew £25k, £100k and £1 million of (fictional) Globaledge money to invest anywhere in the world. Surprisingly, he wasn’t keen to invest in property at all.
Ashley Rigg: Hi Matthew, thanks for taking the time to talk to me today. Let’s start the investment pot at £25k. How would you maximize my return over five years?
Matthew Montagu-Pollock: To be totally honest I wouldn’t be investing in property right now. You’d be better off putting your money in the bank!
AR: You’re just talking this up for the benefit of your advertisers!
MMP: No, seriously. Personally, I’m very highly invested in shares and property and I wish I was more liquid, though the income is nice. I think there are relatively few opportunities currently [for investing in property] in most areas of the world. We’re at the end of a cycle, and in two or three years’ time I think there’ll be some wonderful opportunities.
AR: Come on, it’s my money and it’s fictional. There must be somewhere you’d invest now?
MMP: Well the kind of investments, I usually go for tend to be more expensive as I like buying bigger apartments with high yields and renting out to expatriates. For £25k though, I’d look to Lima in Peru or Bogota in Colombia. Both have excellent economic recovery stories. Peru is growing strongly, with 8.5% growth for the past three years. I’ve been very impressed with President Garcia. The country is running the largest fiscal surpluses in its history and its international credit rating has improved dramatically. There’s a big building boom in Lima currently.
AR: Why Colombia? It’s not the first name on every investor’s lips?
MMP: Like Lima, Bogota offers high yields and the potential of growth. Colombia has had well-publicised problems with terrorism and although there are still problems, President Uribe has defeated many of the rebels and improved the security situation dramatically. The government is also investing in heavily in construction.
AR: What are purchase costs and taxes like?
MMP: Purchasing costs are reasonable. Income tax is around 25% in both countries (I have the correct figures on my website) and capital gains are around 30%.
AR: What would you get for your money?
MMP: I don’t know as much about Bogota but in Lima you could get a 30m² to 40m² one-bed flat in a central location for that price. You’d have to pay a little more to live in Miraflores, which is a big expat area. It will be something quite small but I believe the growth prospects are good.
AR: OK, let’s raise the stakes to £100k. Where would you invest it?
MMP: With £100,000, I’d probably choose Cairo,
Egypt. You still have yields of around 12% and there is certainly growth potential. Transaction costs and taxes are also minimal. There’s a lot of spin-off money from the Gulf and the economy is growing rapidly despite extreme government corruption.
AR: I read in the Economist a few weeks back that the corruption represents a significant risk of catalysing an Islamic rising against the government. Sounds risky!
MMP: It is a risk, the President is 80 and a bit paunchy. The son is next in line for the throne but I think it’s more likely the military will choose a successor. I think the risks are acceptable. Foreign investment and tourism are incredibly important to the elite and I don’t think the religious guys have got the spunk to impose their will.
AR: What could you get for your money?
MMP: You could get around 350 square metres, a lovely four- or five-bedroom flat in Maadi, in the centre. It’s an attractive area with great schools. There are some up-and-coming areas on the outskirts, but Maadi is still the centre of expat life. You can rent this out easily to a foreigner.
AR: Thanks Matthew. Let’s make it interesting - here’s a million pounds. How would you choose to invest it?
MMP: I’ve always been keen on diversification and I’d certainly spread the risk by investing in a number of destinations and properties. My investment strategy has always been to go for high-yield, high-growth properties in emerging markets, as I believe that’s where you can make serious money.
AR: Is it possible to get both high yield and high growth? With equities it tends to be one or the other.
MMP: I don’t think that’s as true with property. Until recently, in developed markets, it was common to have high growth and low yields and in developing markets you can get both. For example, in the 1990s in the
Baltics you had 9-10% growth and similar yields. I think the same is true now in many countries in South America and the Middle East although in Latin America the taxes and transaction costs are higher and political risks are also higher than they were in the Baltics. That’s why I’m a little pessimistic about property in general. I think there are very few high-yield, high-growth, minimal-risk opportunities left.
AR: I agree, the golden age is over, at least for now. However, I still have £1 million burning a hole in my back pocket! Any thoughts on how you might spend it?
MMP: To keep it simple, I’d probably split the money into four and invest three-quarters of it in prime city centre property in the capital cities of the countries I’ve just mentioned. My final destination would be Amman, capital of
Jordan. It’s not the most exciting place in the world but yields are good, taxation minimal and there are some very favourable demographic trends. Since the Iraq war, Jordan has treated Iraqi migrants very well and the influx of Iraqis has driven up rents and yields. 10% yields are very achievable in the capital. There’s also no capital gains tax and income tax is zero if you earn under $1,500 (£865) a month.
AR: What would you get for £250k?
MMP: In Amman, you could buy a three- or four-bed apartment right in the centre. Maybe 300 square metres. Thinking about it, of the four destinations I’ve chosen, Amman is probably the most attractive from a pure investment perspective. It doesn’t have a “wow factor” but if I was making a decision purely on numbers, Amman I think has the edge.
AR: Thanks Matthew. Let me know when you’re next over from the
Philippines and I’ll buy you a beer.
MMP: It was a pleasure - and I’ll take you up on the offer next time I’m in London.
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About Global Property Guide
The
Global Property Guide gives a perspective on residential property yields, income and capital gains taxation, landlord and tenant law, and inheritance issues in 131 investible countries. It also provides investment ratings and links to the latest property and economics news. Our readers are mostly profit-driven investors with savings, often buy-to-let investors, who use our analytics to figure out where to buy most profitably. GPG was launched in 2006. It has a 21-person team based in Manila,
Philippines.