The global financial markets are in turmoil with China and the United States faltering, leaving investors at a loss as to where to put their next big investment. Blue-chip shareholders are suffering large scale losses and investment safe havens are becoming difficult to find. But could real estate in the emerging markets hold the answer?
Statistics released by the Global Property Guide point to significant increases in house prices in Asia, Latin America, and the Middle East. Leading the charge are countries such as Qatar with a 16 percent rise during the year to Q3 2015. Close on the heels of the star performer of the Middle East was Mexico with 5.45 percent, and the Philippines, with 5.41 percent, represented the best in class on the Asian continent.
The Hunt for the Perfect Investment
As Kian Moini, Co-Founder of a global property portal, point out the movement of investors to the emerging markets is a natural response to the global economic crisis. “Now more than ever investors are looking at opportunities in less saturated locations,” he said.
“With so much uncertainty in the stock market, buyers are turning to real estate as an alternative. Real estate assets are much less volatile and can withstand the negative effects of the global economic downturn.”
In high growth markets like Bangladesh, you can purchase two-bedroom apartments for around US$52,192. Compare that with the staggering $1,799,605 stated by Foxton.co.uk for a similar two-bedroom flat in central London. In the Philippines, a country that has displayed impressive growth across the board, especially in real estate, a two-bedroom demands an asking price of $100,837. But are there risks involved?
Arguably the biggest deterrent to investment in the emerging market is the unpredictability of the political landscape. However, this is something that many of these countries are urgently seeking to remedy. Take the case of Myanmar, where nationwide, multiparty elections were held last year; the first since the country’s first parliament. Currently, a two-bedroom flat can be purchased for $134,966, and significant rental returns are possible in this fast-developing nation.
President Joko Widodo in Indonesia has made a significant impact since coming to power. Changes to foreign ownership laws in the country have resulted in a large increase in demand. The average price of a two-bed flat in the world’s biggest archipelago sits at about $62,864. Across many emerging markets, governments are stabilizing and are opening up to foreign investment.
2015 marked the year where global stock markets devalued in proportions unseen in recent years. Everything from US game makers to Chinese electrical appliance makers have fallen by an average of 11 percent in 2016, according to a Bloomberg Business report. The problem is that when investors become risk averse as they are at the moment, solidly performing stocks get dumped in the same way that poor performing ones do.
Losses have spanned the globe and risk hedging consumers are looking to real estate to bolster their portfolio. Countries like Sri Lanka, where a two bed can be acquired for $160,981 on average, can be deemed a preferential alternative for cash-rich investors looking to diversify.
It would be wrong to suggest that investing in the emerging markets is the perfect alternative to the stock market, but with extensive research and the help of a real estate professional, property can form a key component in a balanced portfolio.