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Time to look beyond the norm – where next?
August 24, 2017Article by Ray Withers
The World is Not Flat
You may have seen reports over the past couple of weeks proclaiming the UK housing market ‘flat’. Sentiment has certainly soured somewhat since the tax changes and EU referendum last year, but these reports are overblown: the UK market is far from uniformly flat; it is actually rather curvy. That said, as we begin to look more critically at the UK market, it might be a good time to think about the extent of the opportunity for property investors beyond our shores.
The Contours of the UK Market
New RICS data released last week shows a net balance of 1% of surveyors noted price increases rather than decreases in July, an admittedly uninspiring outlook. Yet while seven in ten surveyors said that £1m+ homes were sold below asking price, for homes marketed below £500k, only three in ten did. The top end of the market is flatter, but the bottom is fatter.
The government’s House Price Index for June, published yesterday, shows an annual nationwide increase of 4.9% – less bullish than the 8.7% recorded at the same time last year, though not too shabby overall. Similarly to the RICS data, this belies a wide internal variation: detached homes in London appreciated by just 1.4% in the last twelve months, while flats in Wales appreciated by 6.1%, and homes across the East Midlands by 7.1%. Homes in Yorkshire and the Humber saw prices increase by 2.2% in the month of June alone.
Such fluctuations have been more notable lately, if only because places used to rollicking growth have been caught unawares, while dark horses are catching up. But they do little to dent the UK’s longstanding aura of stability: no region of the country is even close to decline (chronic undersupply has seen to that).
If you are looking for a dependable place to watch your money grow, this is still the island for you. But what if your investment portfolio already boasts a host of eminently stable assets, your strategy demands a little more adrenaline from the market trackers, or you are sensibly looking to diversify?
As we collectively reassess the performance of UK property, now is an opportune time to think outside the box. The word is a big place, and it is anything but flat.
More Distant Horizons
Property Frontiers was founded in 2004 to bring to market secure, high-yielding and innovative investment opportunities from interesting places around the world, in addition to our UK picks. Along with our investors, we have had first-hand success with investments in international markets near and far, and we believe in the strength of this still largely untapped opportunity more than ever.
The challenge is actually one of near-infinite choice and detailed analysis. You don’t have to look hard to find stonking capital growth rates or double-digit yields, but finding those things to be sustainable, supported by watertight land rights, dependable legal frameworks, and stable politics, is a different matter. However, organisations like ours are constantly and very carefully searching. All it takes for investors to benefit is an open mind.
Where is Hot?
To give a sample of the range of investment-grade locations on offer, Knight Frank’s Global Cities 2017 report lists some of the most lucrative, and least well-known cities for residential capital growth: Nanjing, China (17.8%) and Lucknow, Indonesia (16.1%) sit alongside Vancouver, Canada (17.3%) and Auckland, New Zealand (16.9%). Office yields in Mumbai and Moscow (both 10%) outperform the European capitals (ranging from 3-5%), while Bengaluru, Bogotá and Kuala Lumpur are profiled alongside Berlin, London and San Francisco.
Likewise, in The Telegraph’s April profile of frontier markets, Jamaica gets a nod for the highest stock market returns of last year (50%), Morocco is praised for its stability, Myanmar’s opening is compared to the fall of the Berlin wall, and Iran is tipped for an economic leap forward. These are the kinds of markets where institutional investors are already well-established, and many of them offer higher levels of security than you might expect, as well as affordable enough investments for individuals to get in early.
Timing is crucial: the right balance between market momentum and the stabilising factors that often lag behind economic development is key to a profitable and lower risk investment. One of our most successful recent ventures was a project in Mongolia, where investors entered right at the start of the commodities boom and exited with astounding capital appreciation after four years of yields above 20%.
More recently, we launched a project in Sri Lanka to enable investors to take advantage of new rules permitting foreign ownership and a booming tourist industry. The latest region on our radar is Africa, which has always been a source of excitement and led to successful projects in Ghana and Uganda, but is really becoming much more secure and buzzing of late.
We strongly believe in the UK market, but are also truly passionate about the benefits of exploring further afield and expanding the range of our portfolio. We are always analysing current global trends and looking for the next international opportunities, so if you share our interest in global markets – or simply prefer to stick with what you know – we’d love to hear from you.