The tangled web of worldwide property markets

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Have you ever wondered what impact foreign investors have on the markets around the world? We hear of Chinese investors with growing interests in Australia, the UK and America. We hear of US investors gaining an appetite for the UK property market. Then we have UK investors very keen on Spanish property, despite the economic situation, with the expat community starting to return. So, do you ever wonder about the tangled web of worldwide property markets?

Investing overseas

You can look at the worldwide property market as one market or a number of individual country markets whichever way you cast your eye, there are some monumental differences. Property in the UK is deemed to be valued higher than that in many other parts of Europe, Chinese property looks good value on a long-term basis and the US market offers a mixture of everything you can ever think of. However, if you dig a little deeper into individual country markets you will also see a range of niche markets, non-more so than when comparing London to the rest of the UK!

If we then take a step back and look at the situation from a distance, why do investors look overseas when perhaps their own domestic property market may have all of the niche property markets they require?

Changing economics

The last 10 years have seen a massive swing in the worldwide economy as well as individual country economies. The US is recovering, the UK is holding its own, Australia has never fall into recession but Europe is struggling. If we then look towards China, the official economic data would suggest there is still significant underlying growth. However, intervention by the government and the state of the property market perhaps suggests something different. So, while there may be a range of different property investments available in your domestic markets when you also take into account the economic situation, it can be useful to look overseas.

If you are switching from a country which is riding high on an economic boom, which cannot last forever, there is the potential to switch from potentially overvalued markets to those which are undervalued in the shape of countries with a struggling economy. When you also take into account the currency situation, there are also some interesting plays to be had when currency swings assist buyers.

Spreading your risk

There are many different ways to spread your risk which take into account underlying property markets, individual country economies, currency markets and the worldwide economy. This is before you even begin to dig deeper into the various types of property available across the world. As a consequence, there are factors associated with overseas investment which cannot be replicated in your domestic market hence the growing appetite for worldwide exposure.

The greater you spread your risk the less chance of a significant one-off shock severely impacting your property portfolio and your future income. However, where there is greater diversification there may well be challenges with regards to monitoring your investments, underline economies, property markets and opportunities to buy or sell. Balancing all of these factors together successfully will give you the best chance of a long-term return on your property investment and hopefully limit the risk of a one-off shock wiping out your investment portfolio.

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