Property Investment Is All Time Hit Globally

Following the global financial crisis that struck the US market around five years ago, real estate has started flourishing slowly.

The real estate market is considered to be an investors’ haven owing to its relatively high returns, compared to other investment options. Since some investments like the equities are at record high while some offer too little returns, investors are showing increasing interest in property market.

Safe investment

Though on a long-term, realty market offers safe and potential returns, owing to which it has become a global hit. However, short-term investors have various other investment options like stock market, government bonds, mutual funds, etc. Investing in real estate and gold are being considered as safe investment options and are becoming quite popular among many developed as well as developing countries.

Promises high returns

While many equity markets demand huge investments, some investment options like government bonds, bank deposits, etc. offer limited returns. But real estate does not necessarily demand very high investments.

If you cannot find a real estate property or project within your investment limit in one particular micro-market, then you can look at other micro-markets where he/she could find an appropriate option. Moreover, the market promises good returns on your investments, which makes it much more attractive.

Real estate as an alternative

Many smart investors usually prefer to invest in more than one option invest in more than one option at a time. There are many investors who regularly deal with investments like stocks and bonds, but keep one portion of their investments in real estate. Such investors need not have to hurry to resell the property when the market is low. They also tend to avoid many risk factors that are generally associated with other investors and remain successful on a long run as it helps in protecting against inflation.

Alternative investment option is a good method to follow for start-up investors. They can be stable and at the same time, they can get a feel of different markets. Do not get carried away merely by a hot trend or friendly suggestions of traders, but carefully monitor the potential of the market.

In some emerging markets, the legal rules and property rights are so efficiently set that they make it a secure place to invest in brick and mortar business. A private equity (PE) investor said that the last two quarters have recorded a big hike in the volume of US capital and Asian sovereign wealth funds. The PE firm has been getting rising number of enquiries showing interest by investors. The firm hopes that it will double the investments in around four years or so.

Property prices rising high

Real estate prices are soaring in several places, which also include non-traditional markets like Germany. In London, the month of October alone witnessed a 10 percent hike in property prices. Property prices in China are increasing at a rate which is the fastest in the last three years. As per the German Central Bank, many apartments in large cities may be over-priced by about 20 percent. Market experts warn that if regulators will not cool the overheating markets, then it is likely that a property bubble may get burst.

Falling wages due to economic slowdown are also likely to reflect on the sector’s growth.

Bond backed by rents

PE giant Blackstone came up with a $300 million asset-backed security which is the first bond backed by home-rental cash flows. The bond has been given a triple-A credit rating, which means it is deemed as safe or safer an investment than bonds issued by the United States itself.

Chris Taylor, chief investment officer at Hermes Real Estate

, said that though the demand will rise with the increase in profit, a property’s long-run fundamentals actually depend upon how the economy affects occupiers.

Rising fund flows

A mounting number of investments is being sinked in global property funds despite knowing the risks associated with it. As per Lipper’s global data, the property funds have increased by $29.8 billion to $452.6 billion, during the Jan-Sept period of 2013, marking a 7 percent rise. While Japan has recorded the biggest rise with $6.53 billion (22 percent hike), Europe that got $5.15 billion stands in the second place, followed by the United States ($4.87 billion) and Britain ($3.41 billion).

Although London property market looks overheated, it has to be noted that residential properties in its prime markets have been attracting rising interest from investors in Asia, the Middle East and Europe. This trend is likely to continue for some more time in the near future, say experts. While foreign investors are interested in investing in Britain, UK-based investors are looking at other nations to invest craving for better yields. Many investors have set a long-term strategy of investing a significant portion of their funds overseas, mainly in developed markets such as Australia, Europe, the United States, etc.