As demand for homes around the world continues to grow, with the ongoing adjustment in interest rates seen by many as a short-term blip, are there any viable alternatives to property investment in the short to medium term? When we hear of London, Sydney, Dubai and Hong Kong property prices struggling, what are the possible alternative homes for investment funds?
Whether investors like it or not, or more to the point governments and regulators like it or not, cryptocurrencies are here to stay. For those with a more speculative investment strategy it is not difficult to see the pull towards this type of investment. Like so many different types of investment markets over the years, we will see just a handful of cryptocurrencies with any type of longevity. They are risky, they do not offer a yield and with governments around the world looking to press for regulation of cryptocurrencies markets, this is not really a viable alternative for property investors. Well not at the moment!
There has always been a very strong correlation between stock markets and property markets and while some property investors may have banked an element of profit in recent times, do stock markets offer a viable alternative? At this moment in time it is fair to say that stock markets are going through a period of “consolidation” to put it kindly. The technology sector, once the darling of the stock market, has been shattered with a number of recent scandals which have yet to be put to bed. Interest rates have certainly trended upwards in the likes of the US, UK and the European Union and it will take some time for stock-market valuations to adjust. There is probably more risk in stock markets at this moment in time than there is in long-term property investment.
Sitting on the sidelines
There is an argument for banking some profits from property investments and simply sitting on the sidelines waiting for the next deal to come along. Interest rates, although they have turned upwards, are still minimal to say the least but is this really a sensible option?
It is fair to say that property investors chasing capital gains need to be selective, more so in the current environment with premium property markets such as London, Sydney, Dubai and Hong Kong struggling. Historically there has been a tendency to chase the next big capital gain, the next big push in property prices but just lately there seems to have been a big change in investor targets. In London we have seen many investors taking advantage of the “London premium” to sell up and buy larger properties for less money in other areas of the UK. There has also been renewed interest in relatively high yielding rental properties in the North of England, a market which was for many years left for dead.
Rather than sitting on the sidelines, earning minimal interest on funds, there seems to be a move towards relatively safe high yielding properties. These properties may offer limited capital growth in the short to medium term but with potential double-digit rental yields on offer there is limited downside and strong income streams are always useful. True, once markets “return to normal” we will likely see some of these high yielding properties jettisoned in favour of “the next hot property market”. However, whether you could call it a return to common sense or simply a safe haven in choppy waters, there is a definite increase in appetite for high yielding rental properties even though they have limited potential for capital growth.
You could say that property investment markets have turned full circle over the last 12 months?