Strong house prices in the first quarter of 2018 indicate a global upturn in real estate. Gains in the U.S. Europe and Asia show signs of moderating from their 2017 boom increases. Values are still appreciating.
Investment in real estate as part of a well-rounded portfolio is a smart plan. However, don’t limit yourself to your home country. Limit your risk and maximize your reward by diversifying your holdings.
Global real estate markets have largely recovered from the 2008 economic downturn. Larger markets are tipping towards stability, while some are still making up lost time. Read on to learn more.
Capital Markets Connection
In the U.S., there is some pause in the market. The uncertainty in Washington and possible trade wars are limiting investment. This triggers market stagnation.
Canadian markets show a sharp showdown as economic measures to limit boom excesses begin work. Chile and Mexico show strength, while economic crisis in Venuezela limits opportunity.
U.K. capital markets are showing similar caution due to uncertainty about Brexit. Other European markets, such as Spain and the Netherlands, for example, are seeing record growth. Several years of economic austerity are driving optimism in those markets.
The Middle Eastern market of Egypt shows promise as money enters the market. Countries like Qatar and UAE continue to struggle to attract money.
In China, years of real estate speculation continue to drag on the market. However, Macau and Hong Kong are strong.
Middle Eastern Housing Market
Weak performance in the Middle East indicates that the ongoing political and diplomatic crisis is not over. Qatar’s sharp economic downturn is a result of low oil prices and a weak housing market. UAE is also seeing housing price declines.
Israel enjoyed a decade long price boom and is now seeing government stabilization efforts reduce prices. Exceptions to this downward trend are the tiny island of Cyprus and the nation of Egypt.
Prices and housing starts in Cyprus are rising both in the EU member-state and in the Turkish-occupied portion. The Republic of Cyprus offers certain incentives to real estate investors in addition to modest returns.
The Egyptian real estate market is very different this year in comparison to 2017. As the demand for housing increases so do the prices to purchase these homes. Another change can be seen in the restrictions to foreign ownership of land or property which were removed
The economy is expected to grow by 5.2 percent, according to the IMF.
Asia Real Estate Grows Overall
The most developed markets in Asia, with the exception of China, are seeing housing growth.
Macau, Hong Kong, Thailand, and the Philippines are experiencing rapid growth. Japan, Singapore, South Korea, and Taiwan show upward momentum, although not at the pace of the frontrunners.
The Chinese government clampdown on speculation has strongly affected investment. Chinese investors now choose real estate outside the country for large investments. New Zealand and Indonesia also show reduced housing investment as government mortgage lending legislation takes effect.
European Housing Mixed
Housing prices in Ireland, Iceland, and the Netherlands continue to rise due to strong demand. Macedonia, Romania, Portugal, and Germany also show positive quarterly growth. Several countries show only modest or no growth in first quarter 2018 compared to a year earlier.
This housing market stabilization reflects government and economic pressures to limit the boom and bust cycle. Markets weakening include U.K , Switzerland, Norway, and Ukraine.
U.K. housing prices remain flat line despite falling prices in the highest-priced London homes. Ukraine’s housing market remains depressed, with continuing housing price declines.
Norway’s housing market cooled sharply due to stricter mortgage rules in 2017. The same applies to the Swiss government efforts to limit price increases.
The Americas on the Move
The U.S. remains strong with property development in coastal areas leading. After five years of strong house price growth, the U.S. housing market continues to grow at a slower pace than the previous year.
House prices in Canada decelerated sharply. They continue upward, but not at the double-digit increases of the past years. Quarter over quarter, sales volume also fell.
Mexico saw a strengthened market with modest price increases and strong volume.
The average price in Chile is increasing. Brazil is poised for a recovery from last year’s downturn. Housing starts are up, although sales prices continue to be depressed.
Global Real Estate Investment
Direct investment into real estate can be risky. Managing a single property and collecting rent in a foreign country can be more “hands-on” than you desire. Another way to diversify your portfolio is to use a Real Estate Investment Trust (REIT).
REITs tend to yield better returns than other types of income-producing investments. These are companies that own shares of real estate mortgages, properties, and developments. You buy and sell shares of REITs like you would do with shares of stock.
REITs invest in housing developments, retail and office space, hospitals, schools, and entertainment venues. Their yields were double the dividend yields of the S&P 500. They tend to increase and decrease in value out of correlation with traditional assets like stocks and bonds.
This makes them valuable for the investor who has limited funds and wants to add diversity to their portfolio. REITs offer great possibilities without the risk of direct ownership and management.
Diversify Your Portfolio with Global Real Estate
A portfolio allocation to real estate for income and growth is a smart choice. Allocating your funds globally allows you to take advantage of differing economic conditions. Some parts of the world, like Egypt and Macau, are seeing double-digit year over year growth.
Other parts of the world are resisting the boom and bust cycle. Modest growth and income yields are the rule for much of Europe. Legislation and regulation are taming runaway housing speculation in China and Canada.
Although direct investment in global real estate has certain advantages, most people choose to instead look at REITs. They provide additional diversification and potentially higher expected returns.
Like to learn more about real estate investment strategies? Join the discussion now!
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