The fallout out from Britain Leaving the E.U may stimulate interest in real estate in the emerging markets. Nobody actually thought the United Kingdom would vote to leave the E.U. It was like a child dangling his toys out of the pram, most analysts thought it was economic saber-rattling; an idle threat by misguided nationalists but the unthinkable happened— so what next?
In the immediate aftermath of Britain’s decision to leave the E.U Sterling took a nosedive plummeting to a two-month low against the dollar. With that came a £100bn slice from Britain’s biggest companies. It was clear to all that their decision to leave would have major consequences for the global economy. The devaluation of the pound could lead to inflation and a rise in interest rates, which would depress the housing market; and that is enough to scare international investors away.
With America coming up to a presidential election—given the uncertainty surrounding the nominees—and now Britain is in turmoil, the emerging markets are looking like the best investment in 2016. Real estate is an asset where investors are almost always bullish.
“While you can read nothing but negativity in the media following Brexit we see it quite differently,” said Kian Moini, managing director of a global property platform. “With investors scared away from Britain, and the United States still in a downturn, high-growth countries such as Myanmar, the Philippines, and Pakistan offer a good alternative investment opportunities, and going forward will be fundamental in a balanced portfolio,” said Moini.
Emerging economies hold strong domestic demand
The countries in the emerging markets trade predominantly with each other and the United States. Of course, the E.U is not an insignificant trading partner but they do not dominate trade or growth figures. The impact on countries such as Mexico will be much less given their biggest trade partners are the United States, Canada, China, and Spain. In Asian countries their trade to Britain is insignificant; for example the Philippines’ top trading partners are the United States, Singapore, and Hong Kong.
Real estate in the emerging markets
Investors will look increasingly to the emerging markets as an alternative with the downturn in Western developed nations. The opportunities are enticing: higher-potential returns, lower entry prices, and favorable long-term growth indicators. According to a report by EY, the middle class will expand by three billion over the next two decades, with the vast majority of that growth in the emerging world. This equates to long-term demand for real estate. As more people rise into the middle class their expectation for modern residential housing will increase. Emerging market real estate investment exist in stocks, REITs, foreign direct investment, and ETFs.