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Venturing outside your investment comfort zone

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We all have a type of investment comfort zone where we feel at ease, we know the markets and we know what moves them. While there is nothing wrong in maintaining a property investment strategy taking in your “investment comfort zone” it does help to look outside into the wider world. We’re not necessarily suggesting that you look to invest in the short to medium term but if you know what makes other markets around the world tick, this can give you a wider knowledge of property investment.

Different factors move different markets

While some property markets around the world are similar, in reality no two markets are the same. Property prices in different regions will move for different reasons such as:

• Tourism
• Specific employment markets
• Infrastructure changes
• Tax breaks
• Growing business environment

While this list is by no means inclusive it does give you an idea why property prices can move in different areas of the world and in different areas of any one country. If we take a popular example in London, which is the financial capital of the UK and a major financial market of the world, the inflow of serious wealth into London has pushed property prices above and beyond the rest of the UK. This was perfectly illustrated after the Brexit vote which caused concern and confusion in the financial markets, with some companies looking to move to Ireland to maintain their EU presence. This has obviously had an impact on London property prices although there are also other factors to take into consideration such as the general UK economy.

Spain

There is an ongoing recovery in the Spanish economy which suffered more than most and now has a significant youth unemployment problem. Property prices in some of the more popular coastal resort collapsed after the 2008 US mortgage crisis and the more recent UK Brexit vote. Even though we have started to see a recovery in Spanish inland city property markets this has not been replicated in some of the more well-known coastal resorts. Is this because expats are currently holding off on new property investments? Perhaps expats who already have exposure to this area are looking to realign their investments in light of Brexit?

Australia

The Australian property market has been one of the strongest for many years and is simply a reflection of long-term growth in the Australian economy. However, the larger cities such as Sydney, Canberra, Melbourne, etc host the majority of Australia’s more prominent employment markets. As a consequence, you will regularly read articles suggesting Australian property prices in the larger cities are “overvalued”. However, the fact that the main employer markets are located in and around these areas ensures there is always constant demand for property. So, in practice how can we compare and contrast these house prices using traditional investment criteria?

Education, education, education

As we touched on above, even if you do not actually invest in markets outside of your investment comfort zone there is nothing wrong in widening your experience and knowledge. The Internet has brought a vast information library to the fingertips of experienced and would-be property investors. You can gather information, statistics and research on any property market around the world and compare and contrast what elements dictate their direction. It is also worth noting that even in your investment comfort zone, trends will change, new factors will come into play and no one property market can ever remain untouched.


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