Real estate investment becomes an increasingly global game
Investing in real estate is nothing new – it has long been one of the most popular alternative investment vehicles for decades. However, a prominent trend being witnessed around the world at the moment is the level of foreign investment in real estate around the world.
Fifty years ago, if one were looking to build a property portfolio they would have typically focused on buying up residential or commercial buildings close to home. Today, however, the barriers to global investments have shrunk to such an extent that geographical boundaries no longer dictate the real estate that someone invests in.
Foreign investors fuelling markets
A quick glance at topical news stories about different booming real estate markets immediately drives this point home.
For example, in the second quarter of 2015 the average sale price of a Manhattan apartment reached record highs of $1.87 million, up 11 per cent on the same period the year before. Pamela Liebman, chief executive of the Corcoran Group, commented on the data: “We saw continuous demand across all price points, buoyed by some exciting new developments that have come on the market and a continued influx of buyers from China.”
Head to the other side of the world and you will see a similar pattern. According to Australian figures, Sydney’s property values were up 16.2 per cent in the year to 30 June. Again, investors from the Far East are helping to fuel the market growth, with economist Dr Andrew Wilson stating that there is “no sign of investors slowing down”.
In Europe, the Wall Street Journal has reported that the US, Asia and other parts of the world are flocking to invest in Polish real estate. In fact American investors alone have purportedly bought $1.4 billion of commercial property in Poland in the year to 30 June 2015.
Another emerging property market is in the Czech Republic, where the number of dedicated real estate investment firms has trebled in recent years on the back of steady and sustained growth as well as increasing interest from overseas investors, CBRE Group has said.
The list goes on. London, Hong Kong, Miami, Toronto and more; there are cities across the world that are attracting investors with large amounts of capital. And it is not simply luxury penthouses that individuals are keen to get their hands on – commercial properties such as retail stores and office blocks are also in high demand.
A trusted investment vehicle
The reason for this trend is self-evident in the information above: real estate in many major cities is increasing in value at a remarkable rate, meaning it is an attractive proposition for those able to invest now.
Moreover, as stated, the barriers to making such investments are shrinking all the time. Real estate firms are increasingly looking to work with foreign investors while cheaper air travel and greater amounts of information being hosted online is making it easier for investors to build knowledge of a particular real estate market. This is why investors in the Middle East or West Africa, for example, are buying up property in every corner of the globe.
The other reason for this trend, of course, is that real estate remains an absolute go-to alternative investment option for those looking for a linear path to increase their net worth. Although not without risk, the markets are traditionally not as difficult to predict as some investment areas.
Furthermore, the investor can gain both rental income and then sell (hopefully) for a profit when the time is right, giving them both short and long term returns. And ultimately, the need for properties – whether residential or commercial – is as constant as society’s need for any other essential amenity, such as clothing or food, which will always make real estate an attractive option.
Investing funds in farmland
And that brings us to another increasingly popular type of real estate investment: farmland.
Jeff Rubin, the former chief economist at CIBC World Markets, recently said in an interview that farmland was North America’s “hottest asset”. The evidence backs him up too; at the end of 2014 Forbes produced an article within which it stated that Iowa farmland quadrupled in value over the past 10 years.
But this is not only true of the US and Canada. The world’s growing population has place huge demand on global food resources, in turn placing farms and food producers in control of a premium product. Those looking for an alternative investment option have realised this and are starting to seek rural farmland as much as they are urban real estate as a place to put their money.
Investors can purchase the farmland and lease it to farmers who produce the food to satisfy the intensifying worldwide demand. Meanwhile, the investor enjoys a healthy yield on the land and holds an asset they can sell at a later date.
It might not be as glamorous as an apartment in a Manhattan skyscraper, but with the current global situation investors are realising it makes just as much financial sense.