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Is property the key to nurse the global economy back to health?

October 25, 2013Article by Ray Withers

Almost every day we hear or read stories about the collapse and re-growth of the world’s economies. Within this investors are urged to look at different asset classes, but how do you know where best to place your capital; and who can you trust to help you?

Property has always been an investment mainstay, but since the crash following the market’s last boom in 2006 / 2007, investors have been a little wary. This has been exacerbated by the trend of disreputable ‘agents’ promising the world on property deals, which have only resulted in investors losing money.

The return of the property market

However, the property market can indeed provide great returns if you invest wisely. Some experienced investors prefer to complete all their own due diligence and go it alone, but many individual investors still value the assistance of a reputable agent with a proven track record (such as Property Frontiers). A reputable agent will have their eye on the market trends and will be able to tell the good, from the bad and the ugly.

In the UK, as abroad, markets are beginning their upwards trend from the bottom of the cycle. In simple terms, this means you can still invest at a lower price and watch your profit rise along with the upwards cycle. Within this marketplace, industry advisors and trade press are again reporting a boom in property investment.

What’s happening in the UK today?

The clamour around the Government’s Help to Buy mortgage scheme, rising house prices and the stronger than expected recovery, are both encouraging big City investment in property and also reassuring individual investors. Along with residential buy-to-lets, City experts are now looking towards commercial property, particularly retail outlets in trophy areas and shopping centres.

Incentives such as the Help to Buy 2 phase and the £16 billion Funding for Lending Scheme are part of a package of state initiatives to encourage mortgage lending and focus attention on property stocks as a leading asset class. The Bank of England’s recent indication that interest rates will remain low for some time is also boosting property incentives. The Bank of England also says it is watching the UK’s housing market closely and is “vigilant to potential emerging vulnerabilities.”

Housing market to nurse economy back to health

The Ernst & Young (EY) ITEM Club, the only non-government forecasting group to use the HM Treasury’s model of the UK economy, believes an old-fashioned housing market will assist Britain back to economic health. Describing the Help to Buy scheme as “well-timed and targeted”, the EY ITEM Club believes recovering house prices will boost spending and drive GDP growth.

The ITEM report explains how increasing prices will encourage builders to step up construction, while an expected surge in transactions will boost spending on conveyancing and household goods as families kit out their new homes. ITEM predicts a 3.5% rise in house prices this year, with 6.6% in 2014 and 6.7% in 2015.

RICS confirms a new dawn as Government promotes investment

The Telegraph recently reported: “It’s not merely a false dawn rising over the rooftops. Following years of doom and gloom, UK house prices are finally on the up. According to the Office for National Statistics, values rose by 3.1% in the 12 months to June 2013, compared to 2.9% in the year to May 203. The Royal Institute of Chartered Surveyors (RICS) confirms prices are now at their fastest rising rate since the pre-crash days of 2006.”

Even the Government’s Money Advice Service is promoting property as a strong investment. The website states: “Property – alongside cash, bonds and shares – is one of the four most common types of investments.”

The benefits of property assets in today’s economic climate

In today’s economic climate, whether investing in the UK or internationally, property offers a number of strong benefits.

• Property is one of the few investment vehicles where you can use the bank’s money to leverage your investment. This reduces you own capital requirement, thus increasing your overall return.

• Property can provide you with a far more reliable pension pot than traditional pensions, as you won’t be losing money through shockingly-low annuity returns and fees.

• There are also a number of tax deductions with property. These will be specific to your own personal circumstances, so your financial advisor will be able to explain more about how these could work for you as an individual investor.

How to find win-win investments around the world

Ray Withers, Property Frontiers CEO, comments: “We have been studying both the UK and international property markets over the last 9 years. We predicted the bubbles, booms and crashes and seen our predictions come true. In our hands-on experience, the greatest and safest returns come from investing in both specific property asset classes and also emerging economies.”

He explains further: “We have seen exceptional returns in property assets such as student accommodation and hotels; along with green and alternative investments including bamboo and biomass, agriculture and associated infrastructure. In today’s eco-aware world, more and more investors want to opt for assets which are healthy for both their own portfolios and the causes they support.”

He continues: “Similarly with emerging economies, investors are keen to put their money into a cause which helps the market grow along with their own returns. This is particularly strong where industries, assets and economies merge in a win-win investment scenario. These can include commercial property like retail in an emerging economy; and hotel room investment in a tourism-led economy.”

Get in touch on +44 1865 202 700 to find out more about investing in today’s leading property assets.

Author

Ray Withers

Ray has over 17 years’ experience in the international property market and bought his own first international property investment back in 2002. Aside from running Property Frontiers, Ray has been involved in residential, hotel, student and commercial property investment and development in both the UK and overseas and co-wrote "Where to Buy Property Abroad - An Investor's Guide". As Founder and Trustee of the Frontiers Foundation, Ray is directly involved with many of its projects to ensure they have a direct and tangible impact in individual communities across the globe. He is passionate about property, travelling, scouting out new opportunities and finding time to spend with his young family.
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