Even during these difficult economic times there have been some very impressive performances in property markets around the world. London continues to go from strength to strength, New York is attracting ever greater attention and recently we saw a 35% increase in less than a month across the Shanghai market. While there is no doubt that investors are looking towards the stronger property market around the world, is it now time to look at some of the bombed out property sectors?
With the exception the UK property market, which has been extremely resilient in recent times, there are many examples of depressed property sectors across Europe. The likes of Spain and Portugal have shown tentative signs of recovery but their economies do not currently support any upward shift in property prices. Indeed there is a significant cloud over these particular markets with many banks looking to jettison unwanted repossessed properties as soon as possible.
The USA offers perhaps the largest variation in property price performance of any market around the world. While seen as “one market” the variation between the top and the bottom performers literally puts them on a different planet. The US government is doing all it can at the moment to support the economy but the recent reduction in the oil price has hit many states hard.
There are some property gems in the Far East which have held up extremely well in light of regional economic challenges. However, while Shanghai has attracted headlines of late due to “panic buying” the same cannot be said across the rest of the country. A glut of property from the last property boom has left many areas of the China suffering from major property price falls.
Don’t be blinded by the falls
Sometimes in the investment market it is very easy to become obsessed with falls in asset prices and automatically assume they are cheap. The situation regarding property is fairly complicated and is directly related to the strength of economies in the region. While the likes of London, Shanghai and New York for example continue to boom they are not a reflection of the overall worldwide property market. In many ways we automatically assume that property markets which have fallen in recent times will bounce back but this is not always the case.
Today is day one
Past performance is not always an indication of future performance although this is a factor which some investors fail to realise. If you treat today as day one when reviewing a particular property sector your conclusion will not be impacted by the past and should instead look at the price today and the future potential going forward.
There are some very depressed property markets around the world which have been oversold while some will never reach their highs again. if looking at Europe, as an example, when the economic recovery finally arrives this should drag the whole area higher and possibly oversold sectors such as Spain and Portugal could look very interesting. However, when planning your future investments by all means take a look at the past performance but do not automatically assume they will reach their historic highs any time soon and consider each market and each economy on its own merits.