Where will the hot and cold overseas property investment spots be in 2006? Stuart Law, managing director of property investment specialist Assetz says investors will be looking closer to home this year, with European destinations looking particularly strong.

Here is Stuart’s view of the overseas investment scene for 2006:

Bulgaria

Bulgaria is now securing its position as a mainstream investment destination. The ski resorts thrive through the summer months with activities such as hiking, fishing and mountain biking, resulting in yields of up to 12%, as much as double those in the coastal resorts.

The low cost of living (a pint of beer for example, costs 50 pence), new cheap flight routes and world-class ski facilities mean Bulgaria is now providing healthy competition to the French and Austrian ski markets.

The number of UK visitors to Bulgaria increased by 36% in 2005, demonstrating the high level of growth taking place in the tourism industry.

Turkey

"I predict 2006 will see a change in Turkish legislation allowing mortgages for foreign investors," says Stuart, "which will have a dramatic effect on the housing market. Investors would be able to purchase properties for just £35,000 with gearing, pre-empting a rise in Turkish property prices in key areas of as much as 50% in the first year."

Southern Cyprus

Southern Cyprus is set to become the overseas investment hotspot of 2006, with deposit levels falling to just 15% in many areas for higher income clients and with Swiss Franc mortgages now available with rates of just 3.25%, making borrowing even more affordable.

The complete redevelopment of Paphos airport, due for completion in 2008, will bring increased levels of tourism to the country and additional investment opportunities, prompting an increase in house prices.

Entry to the Euro is beckoning in 2007/8, which will pre-empt further price growth. Rental yields remain at a confident 8 - 9% with a year round rental market in some parts of the island.

France

Growth levels in France were 10.9% for the 12 months to the end of November, which is slower than the previous year. But despite the rate of growth being in a downward trend it is likely to level out at 10% in 2006, which is still high.

Stuart expects to see significant growth in the Languedoc region where prices are considerably lower than in the surrounding area and which is becoming even more accessible with cheap flight routes. The French leaseback scheme will remain popular with French investors, now new interest only mortgage deals are available.

Greece

The market in Greece has seen 0% growth in 2005, but investors can expect to see a move away from the starting block in 2006 as reports on the ground suggest house price growth is beginning again.

Spain

Spain however, saw growth of 17.2% up to the end of June 2005, according to government figures, which is almost certainly unsustainable. An oversupply situation has developed and valuations for remortgaging purposes have been over-optimistic in many cases, contributing towards the suspiciously high growth levels. In addition, European mortgage rates are rising and Spain is losing some potential investment to newcomers such as Bulgaria, occasionally referred to as ‘the new Spain’.

Valuations on Spanish property have overshot the mark and investors may come down to earth with a bump in 2006 as prices fall back into line.

Florida

Florida remains one of the riskiest investment zones, with interest rates rising fast and a widely forecast faltering in property price growth.

The property boom was based on extremely low interest rates, which are now rising in an effort to turn the heat down on the housing market. Buyers are realising a period of instability is pending, which will trickle down to affect the resale market in the USA fairly rapidly.

Another important consideration is that property on the gulf can be very difficult to insure at present due to recent natural disasters, so thorough research is vital.

South Africa

Trouble is also looming in South Africa, with an oversupply of high-density apartments combined with a decrease in demand for rental space over the last few months. Rental yields in South Africa have fallen from 10% to as low as 4.5 - 5% in 2005, as a result of house prices doubling.

Now, with high mortgage rates of 9%, rental income will fail to even make a profit for many investors in South Africa, leaving mortgage and management costs to be covered from the investor's own pocket.