It is fair to say that prior to the Brexit vote in 2016 the UK economy was one of the strongest in the European Union. The recovery from the 2008 US led mortgage crash had been slow and often tortuous but the UK has fared better than most in relative terms. In some ways the UK became a kind of “safe haven” for international property investors especially London with its very prominent financial sector. However, the Brexit vote has cast a dark shadow across the UK economy and the UK property market.
The importance of diversification
The beauty and the beast of property investment is the fact that you never know what is around the corner (in the short term at least). In some cases, such as the ongoing Brexit negotiations, this can lead to volatile markets and buying opportunities for those looking to expand their portfolio in the longer term. In local property markets property prices can be impacted by significant infrastructure investment or the emergence (or removal) of a new major employer in the area. While these things do not happen overnight, they can take some time to put in place and rumours often circulate before anything is agreed.
Therefore, this perfectly illustrates the need to diversify your property investments not only on a national level but also on an international level.
The Internet has changed the way that we are able to access data and much of this information, which was often circulating in “closed investment circles” in years gone by, is now available to the masses. There is still a need to do your research, you need to ask the right questions and be able to disseminate the information, but the Internet has levelled not only the national but international property investment playing field.
On the flipside of the coin the Internet has opened the property investment arena to fraudsters and so-called “influencers” who often have such a strong following that they can create self-fulfilling prophecies. The gift of experience and an ability to separate the wheat from the chaff are more valuable today than they ever have been.
Maintaining a balanced portfolio
It is possible to maintain a generally balanced property portfolio, with exposure to different types of property, national and international assets while putting some money aside for more speculative investments. The risk/reward ratio of your portfolio will likely level out as you approach retirement where there will likely be an increased need for capital. That is not to say that you should go gung-ho in the early days and risk a disproportionate amount of your funds in a particular area. However, it does give you at least some leeway to look at more speculative investments which you have researched in great detail.
Many property investors will look towards a more capital growth-based investment strategy in the early days and then gradually switch to a preference of high yielding assets were there is perhaps limited opportunities for capital appreciation. Whatever your situation, whatever your timespan you need to look at diversification because as we have seen with the likes of Brexit, nothing remains constant and easy to predict for too long.