afrol News, 13 June - European property investment agencies, facing a crisis at home, are aggressively marketing Cape Verde as "the next big opportunity for property investors." The prospects of a property price hike are however mixed, risks being high.
In particular UK-based property agents are increasingly spewing out press releases with titles such as "Cape Verde 'worth considering now'", referring to "experts" claiming that property prices in the archipelago are bound to boom in near future.
British agent Property Showrooms for example this week refers to "expert" Rhiannon Davies of Shelter Offshore, itself a company in the property sector, who was quoted as saying: "Now is a good time to consider investment if you like the thought of entering an emerging market and having access to the potential profits and returns it may offer."
At the same time, another UK-based company, Fly2Let, claims that on Cape Verde, "still sensational property prices" are found. Without making reference, the agency claims Cape Verde is "being tipped as 'the next big opportunity' for property investors." Another "expert" from Experience International - which turns out to be yet another property agency - praises the economic stability and growth of Cape Verde, saying "2008 is going to be a very exciting year."
'Real Estate TV', which indeed is a UK-based property agent, on a show called "Next Big Thing" aired an episode focused on the emergence of the archipelago as a "property investment hotspot." Aired as an "expert" assessment of the archipelago, the show however is a pure marketing campaign for the agent FM Group, which promises "early investors" a possibility to "yield attractive returns."
Also in Spain and Germany, Cape Verde is heavily marketed as a "good buy" when it comes to properties as domestic property markets are showing a downwards trend. Germany's Cabo Verde Tours - which has changed its focus from arranging travels to the lucrative property market - since 2006 has made reference to other "experts" calling Cape Verde a property "hotspot".
Spanish property agent Montaña Roja holds that "Cape Verde offers potential investors a unique possibility to invest early in a relatively virgin territory, regarding properties." The company, which also offers Spaniards "cheap loans" to finance their investments, says "others" compare Cape Verde to "the Canary Islands 25 years ago," indicating prices will boom in a similar way as they did on the nearby Spanish archipelago.
The marketing campaign follows ancient recipes of creating a hype, one insider "expert" praising the product of the other. All available channels are used to promote a steady stream of good news and optimistic outlooks for the Cape Verdean property market. Potential investors are sure to find only positive information when making an Internet search on Cape Verde properties.
However, the Cape Verdean property market is far from a safe bet. While the archipelago is a peaceful and stable democracy and has seen tremendous economic growth - now placing it as a (poor) middle-income country - Cape Verde is still a developing country with all the problems this includes.
The economy is totally open to external shocks. Rising food and fuel prices are hitting the archipelago badly, as a majority of the population still lives in poverty and the semi-desert climate does not provide for sufficient production. Drought is a returning ill, often necessitating foreign food aid.
Infrastructure is still poor, although large investments in airports have been made. The national economy however remains too small to carry these necessary investments, and Cape Verde therefore totally depends on foreign investors and trust in international markets to keep developing. And as tourism keeps growing, new investments in water provision, electricity and other infrastructure become urgent and expensive.
As development of the tourism sector goes on, prices in Cape Verde keep rising. There is therefore a growing risk of alienating the poorer sections of the population, which are not benefiting from economic growth but must pay a higher price for basic products at local markets. While there are no immediate threats of civil unrest, possible food riots could strongly damage investors' trust in Cape Verde. This, in turn, would have immediate negative effects on the economy and property prices.
The UK property agent Shelter Offshore therefore still does not recommend investments in Cape Verde for ordinary people that cannot afford taking a risk with their capital. "The archipelago is just too untried and untested and emerging in our opinion," the agency holds.
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