The world's property markets are on the road to recovery, but investors will have to be careful about which markets they select. In a new report, the Global Property Guide makes recommendations for residential property investment during 2010 (download the full Global Property Guide Mid-2010 Property Recommendations report).

The world is no longer moving in one direction, as it did during the crash and the bull market of 2006-2007. Some countries' real estate markets are moving down (most notably Bulgaria, Ireland, Iceland, Slovakia, Spain, the Philippines, Greece, the Netherlands and, for political reasons, Thailand). Others are moving up (Hong Kong, Singapore, Taiwan, Australia, Israel, Finland, Norway, Sweden, and the UK) (see The World's Housing Markets at Q1 2010).

However, the general trend is up, due to lower interest rates and higher government spending.

Things are back to normal.

Well, not quite. The world's housing markets will surely be affected by a major long-term trend, the adjustment - deep and powerful - of economic forces which is now impacting everything we do.

• The leading developing countries are growing rapidly and are assuming much greater importance.
• Relatively speaking, the developed world is losing ground.

For 15 years the loss of momentum of the developed world was disguised by the housing pseudo-boom, but now the issues have become very apparent.
Inevitably property markets will in future reflect these facts. Some ripples on the surface of the waters:

In Latin America:

• Interest rates are in long-term decline, due to better Central Bank policies
• Economies are booming
• Tourism is rising
• The residential property boom that began 3 years ago continues
• Rental yields - critical indicators of the health of property markets - are still high
• Latin currencies are rising

Our selections for investors: Peru, Panama, Brazil, and Chile
Possible: Colombia

In the US:

• The economy is recovering
• The dollar is rising
• Residential property valuations are attractive in some states, and are already attracting investors

Our selections for investors: states whose property markets fell dramatically during the crisis, beginning with Florida

In Europe:

• Property markets have not sufficiently adjusted from their 15-year rise. Residential property yields are poor throughout Europe.
• The panic over the Greek and other deficits shows no side of abating
• The Euro is falling. Currency depreciation should somewhat offset increased fiscal stringency - a positive.
• There are buying opportunities for opportunities for non-Euro buyers, but of themselves residential properties are not an appetizing investment in most of Europe.

Our selections for investors: Turkey, Hungary
Turkey, because of its young population, the opening to the East, and its competent government.
Possible: Hungary, because its incompetent government may provoke a crisis which would make its low prices and excellent yields even more attractive.

In the Middle East and North Africa:

The Middle East is in a cycle, led by the Gulf. Recovery may take a while, but the underlying dynamic of petro-dollars, pegged currencies, and high domestic inflation, which tends to push property values up. As yield-oriented investors, we are more interested in the marginal markets, but we expect investors to begin to be interested again in the Gulf soon.

Our selections for investors: Egypt, Jordan
Possible: Morocco
Egypt and Jordan's property markets have been hard-hit by the crisis. But in both countries' capitals, there are generous yields.
Morocco has less attractive yields, but a long term tourism trend.

In Asia:

Property is over-valued in most countries in Asia, with two exceptions

Our selection for investors: Malaysia
Possible: Thailand
Malaysia is very stable, and has reasonable returns
Thailand has excellent yields. Prices have been falling, because of the political uncertainty. Developers want to reduce risk by unloading stock. Opportunity knocks.

In the Pacific:

Avoid. Australian residential property is quite overvalued, and interest rates are rising. In New Zealand there is less overvaluation, but we do not see a strong investment case.

Download the full report here.