As the Irish property market nears its peak and investors find themselves squeezed by measures introduced after the Bacon report, many are seeking opportunities to buy property overseas. The prices involved can be lower, the selection wider and the rents higher.

Britain, Spain and Florida remain the most popular overseas options for Irish investors. The cost of property in these areas bears little relation to the prices demanded in Dublin or, indeed, other Irish cities.

For example a four-bedroom unfurnished house with private pool outside Orlando is available this week from Dublin-based company, Florida Villas Direct, for $144,740 (£98,342).

Prices in Britain are not as competitive, but there is certainly a significant price differential in comparison with many parts of the Republic. For example, a twobedroom apartment of about 700-square feet in south London will cost about £80,000 and could supply a rental income of £700 a month.

There are few two-bedroom apartments in Dublin, Cork, Waterford or Galway for this price.

Even the upmarket Kensington area of London appears undervalued when compared with Dublin property prices.

According to Mr Marcus Magnier, who sells property in London for Jackson Stops, a twobedroom apartment can be bought in some parts of Kensington for £225,000 - with a potential annual rental income of £16,000.

In the case of Spain most Irish property investors have confined themselves to popular holiday resorts like Marbella, Tenerife and the Costa del Sol where prices are often half the Irish equivalent.

For example, IPC Property Consultants offers three-bedroom bungalows in Playas de Orihuela for £41,156 and in Tenerife has onebedroom apartments in the Los Cristianos area for £52,245. Marbella is normally more expensive, according to IPC's Mr Diarmaid Condon.

He is currently offering two-bedroom apartments in the El Mirador de Santa Maria golf complex in Marbella for £95,000, with threebedroom units going for £118,000. He adds that these prices are low for Marbella.

So prices are a lot cheaper; but what investors need is decent capital appreciation and strong rental returns. This is where the markets differ and investors have to ask themselves which they regard as more important: rent or capital growth?

In Florida for instance, most properties in the Orlando area are rentable for about 35 weeks a year, mainly supported by the buoyant local tourist industry.

However, the 5 per cent annual appreciation for most properties may not be enough for some investors.

In London rental periods tend to be all-year round and residential property prices rise faster than Florida, with some central areas in the city recording increases of up to 30 per cent last year. In addition, property consultants are not phased by the prospect of a recession in Britain.

Mr Roderick Downer, a director of Colliers Jackson Stops, which handles commercial investments for Irish clients in Britain, says the expected fall in British interest rates offsets any risks likely in a recession.

"At the end of the day, British interest rates have to fall as they approach EMU and this will significantly increase the return on both commercial and residential investments," he says.

Mr Liam Lenehan, investment director with Hamilton Osborne King, says the shortage of adequate properties in Dublin is one of the reasons for the flight to London and other British cities. "In terms of commercial property there are better yields and better growth opportunities in London than Dublin," he adds.

He says investors can dispose of properties in Britain and pay their capital gains tax (CGT) in the Republic at 20 per cent, which compares favourably with the CGT rate in Britain which is normally levied at 40 per cent.

He says those looking for commercial property in London are "high net worth individuals" and many are first-time investors.

"At the end of the day the bottom line is financial and with yields in the UK at 7.5 per cent and 5.5 per cent in Ireland, there is a substantial difference."

He maintains the strength of sterling against the pound is not a problem. Most of the borrowing for property deals is done in sterling and Irish banks are quite happy with this arrangement in most cases.

Mr Downer points out that in London many builders will guarantee an investor at least a 10 per cent return on their property for the first two years. He adds that because demand is not at Irish levels, the risk of being gazumped when purchasing a property is not as great.

Mr Condon points out that in Spain a deposit is regarded as a form of legal contract so the builder cannot increase the price after it has been paid.

He says choosing a property in Spain should be done slowly and it is wiser to "spend a few thousand more on a well-positioned residence rather than save on the short-term outlay".

"Properties with pools located close to desirable beach fronts, good quality golf courses and well equipped and maintained marinas will return a premium when rental is good and still profit even in lean spells," he adds.

"When looking for investment property it is very wise to ask for the net return on investment for rented property in the area, make sure this is net of all taxes (local and national), maintenance and management fees," he states.

He says some areas are good for renting, while others are good for overall value. Tenerife, for instance, does not always achieve the highest overall increase in value, but tends to rent for longer periods than other areas, he says.

He cites a one-bedroom apartment in the Castle Harbour development in Tenerife where total rent over an 11-month period would be £10,259, which after fees, electricity, rates and sundries should leave £8,843. However, the year-on-year increase in value may be small.

In Florida, commercial investment by people is at a very low level, but the residential sector is popular, according to Mr Gary Kenny, of Florida Villas Direct. He says rents are strong at present and should rise as the amount of development in the northern half of Florida increases and more tourist attractions come on stream.

He says a four-bedroom house with pool will provide rent of $700 (£475) a week, which if rented over 35 weeks means income of $24,500 (£16,646) or over 40 weeks $28,000 (£19,024).

However, monthly expenses like electricity and water have to be paid and a house of this size will incur an annual property tax of $1,920 (£1,304). He says property regulations in the US are extremely watertight and this makes the market favourable compared to Spain for instance.

The question of pitfalls and scams haunts the mind of every overseas property investor. "The thought of your property being hundreds or even thousands of miles away scares a lot of people," says Mr Kenny.

Overseas property investors should not rush into anything, Mr Kenny warns. He says unlike Spain where staged payments are paid to building firms, in Florida the purchase price is held in an escrow account which means the builder is not paid until all the work is finished.

Mr Condon says half-finished properties throughout southern Spain illustrate why buyers should be cautious.

"This is where a good overseas property agent really pays. All reputable agents will ensure that any developers with whom they deal carry a bank guarantee on each development undertaken," he says.

"This means that if the development does not materialise for any reason the bank in question guarantees that it will refund all monies paid by the client.

"It is a form of bonding but is not legally required in many countries and therefore often conveniently overlooked," he adds.

The main problem with the British market is its sheer scale, Mr Lenehan says. Britain has several cities which match Dublin in size which means good research on a property before purchase is extremely important.

"There are so many micro markets that within a few miles there can be a major difference in standards," he says.

In Florida, the precise location of the property is important, according to Mr Kenny. Some parts of Florida are not licensed for short-term letting. He also advises potential purchasers not to be preoccupied with the number of bedrooms but to look at the square footage involved.