Property Investment Strategies

Is it easier to find value in foreign real estate markets?

by Nick Wallwork on February 26, 2015

Is it easier to find value in foreign real estate markets? In years gone by investors tended to stick to their own local real estate markets when looking for investment ideas. However, the introduction of the Internet has changed everything and it is now possible to not only find information on any real estate market in the world but also to speak to people operating in those marketplaces.

As a consequence this begs the question, is it easier to find value in foreign real estate markets as opposed to your local property sector?

New eyes and new valuations

Perhaps one of the more positive aspects when looking at foreign real estate markets is the fact that very often you are looking at them through very different eyes to those “on the ground”. True, those on the ground will have a better understanding of what is happening but will they be able to take an unbiased approach to the sector?

One good example where perhaps foreign investors have seen better value than their local counterparts is the London property market. This is a market which continues to go from strength to strength despite the fact that for almost a decade many experts have been suggesting the market is well overvalued. If you were a local investor of the opinion that London property was overvalued then you could potentially have missed out on a significant increase in property prices in recent times. This is just one example, there are many more around the world although there are obviously great benefits to having an ear on the ground.

Know your market

It would be wrong to suggest that foreign investors can basically take over local property markets and in some instances rewrite the way in which they are valued however, there is no doubt that foreign investors are having a greater impact. There is also no doubt that those with great local knowledge will be able to root out potential long-term investment opportunities and even take advantage of short-term situations. There will always be a great advantage to “knowing your market” but there will also be some advantage when looking at these markets through new eyes.

In a perfect world any investor would prefer to look at a foreign investment market in cold hard facts while taking into account opinions on the ground. The opportunity to intertwine these two potentially very different investment strategies could for many people lead to the holy grail of property investment.

Does history hold us back?

Sometimes it is very difficult to escape the past of any investment market, or indeed many elements of everyday life, and those who are able to appreciate the past but look to the future have potential to make significant investment returns. The truth is that local property markets rise and fall on a regular basis and the majority of real estate investment is basically moved around the world to take account of the “best value” available. Often it is the introduction of experts into specific property markets which can prove to be turning points in what many see as a self-fulfilling prophecy.

It is worth bearing in mind that some experts don’t necessarily advertise their change in investment opinion before they have “filled their own boots”. Once they have a position there are ways and means of advertising their change in policy which can lead to the sheep effect where everybody follows the leader. You have been warned!

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