Low-cost airlines boost property prices

When a budget airline opens a new route, jump on the first flight

One of the surest routes to successful property investment is to buy in an area that is about to go up in the world, and wait for the herd to arrive, waving cheque books and pushing up prices. But it is a difficult trick to pull off, even in familiar territory – when investors go abroad, where do they look for future hotspots?

In recent years, one of the best ways to predict this has been to keep an eye on the low-cost airlines. Not only are they extremely sensitive to changes in demand from the travelling public, they also fuel property demand significantly when they open new routes.

The rewards from following easyJet, Ryanair and the rest of the no-frills operators can be substantial. Recent research by Savills and Holiday-Rentals.co.uk indicated that property prices within 10 miles of an airport served by a low-cost airline are nearly 40 per cent higher than those of properties a similar distance from airports with scheduled services only, and that the rents were about 30 per cent higher. It seems that holidaymakers want to save on the air fare but are willing to spend extra on the accommodation.

Low-cost airlines provided early warning of the eastern Europe boom, according to Justin Figgins of the Rightmove Overseas property website.

"I've always said the low-cost airlines are the leading indicator to where hotspots will be in the next few years. We have seen it in Bulgaria and the Baltic states," he says.

Figgins believes that a substantial increase recenlty in the number of low-cost routes from the UK to Morocco will create the next hotspot.

"In Morocco, 20 new routes are going in over the next five years," he says. "We have seen searches on Morocco increase 300 per cent this year."

Rightmove Overseas subsidiary Holidaylettings. co.uk surveyed 6,000 owners recently and discovered that availability of low-cost flights is one of the top reasons for choosing a particular location, which dovetails with another strong motivation for buying abroad – to get cheap holidays.

However, the arrival of cheap flights is not in itself enough to transform a developing economy into a major tourist destination, as the sudden slowdown in Bulgarian property prices has demonstrated.

"Low-cost flights are one of the main indicators, but you must also look at tourism growth and infrastructure investment," Figgins says. "In Bulgaria, the infrastructure is still poor, but tourism is growing in Morocco and lots of infrastructure is going in. To me, that makes it more likely to be profitable as an investment location."

On the other hand, some destinations that have been highly regarded by British holidaymakers and expats are not served well by low-cost airlines, which leaves Figgins mystified: "What is puzzling to me is why the low-cost airlines have not flocked to Cyprus, where the weather is good, people speak English and English law prevails. If they did, it would really open up.".

One reason for this may be that low-cost airlines factor-in airport charges, taxes and other costs before starting a new route, so the decision is not entirely based on demand.

And airlines can get it wrong – easyJet launched a service from Luton to Bratislava three years ago, when the Slovak capital was being touted as a cheap place to live for people working in Vienna. But the commuting revolution never happened, demand was poor and the route was cancelled last year.

Low-cost airlines are also fickle, as Lee Dribben, chairman of the Residential Landlords Association, warns: "Low-cost airlines can pull out of routes with only a few weeks' warning, leaving second-home owners and investors in the lurch."