Is there a safe place to invest in property?
When you invest in a property it’s important to remember that you aren’t simply putting your money in to some bricks and mortar. You are investing in the location that the property resides in. The fortunes of the street, neighbourhood, town, city, region and even country matter. If any of those thrive or decline then so will, by association, your property.
Security and stability are, therefore, important factors for your investment in order to make it a safe bet. As the world becomes increasingly globalised and digital technology and cheaper travel break down the old barriers to trade and investment, overseas property has never been a more realistic proposition but that also means that you need to open your eyes to places that have that all-important security and stability to make your property investment safe.
This is where the world of politics comes in. Countries may well contain spectacular properties with the sort of qualities that would turn your head, in amongst the best on offer on the likes of FT Property Listings but, as we’ve stated, this is not the only factor. Nations under dictatorships, unstable democracies or close to regional conflicts raise a cause for concern.
The exchange rate is crucial for overseas investors
Likewise, currency can be an issue. It means that your asset can rise or fall in value based on the exchange rate between the two respective countries.
As the this article points out, South African properties have risen in value by almost 15% in rand but, due to the exchange rate, the price in US dollars is just 2% higher.
That’s not to say it’s not ‘safe’ to invest in a country with a different currency, but it does add another element of risk to your investment, especially if you pick a country where the currency valuation fluctuates markedly. In that sense investing in mainland Europe or the US are sound for a UK investor – one of the many reasons these destinations top the list for overseas property buyers.
Don’t forget the language and local customs
Language and local customs are also key considerations for overseas buyers – but the risk of getting stumped by local laws or lingo can easily be overcome by calling on the expertise of an expert in the country you are investing in. The US, again, remains attractive given that the language barrier, at least, does not exist. Continental Europe is full of people who speak good English and doesn’t have the time difference of the US. Both, again, eliminate some of the risks you could encounter in far clung corners of the globe.
Time your arrival
It can be hard to know what a stable country looks like, especially from afar. In most forms of investment, taking risks can bring great rewards and that can apply to property too. Take Greece, for example. Many fantastic properties in Greece’s spectacular resorts are up for sale for about half of their peak pre-recession prices. If you are confident that the Greeks are now on the path to stability then you might feel that there are huge bargains to be had. Is that a safe bet though?
The EU and its future might also have a bearing on the UK market. Whatever your opinion, the forthcoming referendum is likely to add a splash of uncertainty into the market and might just cool the otherwise overheated London property scene in particular until a decision is reached.
So, where is safe?
UK investors are, in truth, fairly safe to shop at home. This is a market they know a lot about and contains few social and political barriers. Whatever you think of the Westminster government it’s a far cry from the instability in many countries across the world. The US and Europe are also strong bets.
They have stable political systems like ours, strong currencies (although the future of the Euro is up for debate) and few of the language or time barriers we might face elsewhere. The important thing is to recognise that the location you invest in matters and research it thoroughly – weighing up the politics and economics and how these might impact on your
asset.