Emerging markets are a safe bet in turbulent times

Hello and welcome to the Someplace Else Blog

A topsy turvy week
Goodness me, what a week we’ve had. Stockbrokers and bankers across the western world must be going grey and losing their hair at unprecedented rates. With Wall St having one of its most tumultuous weeks ever, one could be forgiven for thinking we’re in the middle of a perfect storm where everybody will be negatively affected and that a “baton down the hatches” approach would be the best bet all round.

Cui bono - who is benefitting from the credit crunch?
Thankfully the Someplace Else team are a little bit more upbeat than most commentators and doomsayers out there and we try to spot opportunities in every situation. Firstly, let’s bear in mind that a crisis produces winners and well as losers. The people benefiting most from USA, UK and Irish economic downturns seem to be the low cost supermarkets (stealing market share from pricier rivals), sovereign wealth funds (snapping up valuable assets at bargain basement prices) and the super rich (whose wealth is actually increasing quite dramatically, especially the newly wealthy from emerging markets).

Much of the blame for this mess can be pinned on a banking system that permitted risky mortgage lending practices and so it stands to reason that countries that have a low percentage (less than 10%) of mortgage debt as a percentage of their GDP (China, India, Romania, Panama, Brazil, Germany) will suffer nowhere near the after affects that debt heavy (40-50%+) countries like UK, Ireland, USA, France etc.).

What other trends can we spot?
One of the big trends that stands out over the last decade are that world growth is nowhere near as dependent on a strong west as it used to be. Emerging market investors should be particularly pleased to learn that these countries have now gotten so big and powerful that they no longer need a strong United States to grow their economies. Domestic consumption in emerging economies is now rising three times faster than consumption in the developed world. Investment is even better according to HSBC, with capital spending up a massive 17% in emerging markets compared to 1.2% in rich countries.

Additionally - the four biggest emerging economies, which accounted for about 40% of global GDP growth last year, are the least dependent on the USA. Exports to America account for just 8% of China’s GDP, 4% of India’s, 3% of Brazils and 1% of Russia’s. Struggling global bankers should also be particularly grateful that liquid investors throughout Asia and the Middle East are on hand lend them money to help repair their balance sheets.

A safe bet in turbulent times
The point I’m trying to make is that emerging markets are a safe bet in turbulent times. Whatever angle you look at them from, they are in a fundamentally stronger position than the traditional “safe” property markets and will be for quite a few years. Why tie up your hard earned cash in struggling low interest banks, volatile stock markets and falling housing markets with low rental yields when it can be diversified and put to much better use elsewhere?

Someplace Else will be launching a series of very interesting and innovative new developments in over the coming weeks, and we are only too happy to discuss them with you in advance if you’d like to get in touch. There’s also great value to be had in current projects on the books, such as the Buenos Aires and Berlin.

As always, feedback (both good and bad) on this blog or our weekly newsletters is most welcome.

Regards
Colin Murphy

Where is the safest place to invest?

Greetings,

I was in sunny Berlin recently meeting with our local partners and discussing various plans for the future. Their offices have amazing panoramic views of the city, and judging by the number of cranes everywhere, I was struck by Berlin's suitability as the ideal place for a safe and secure property investment in uncertain times.

As discussed in Issue 23, I'm a big believer in hunting for exciting high growth opportunities abroad no matter what the conditions are at home.

Balancing a Portfolio
However, I'd also like to emphasise that it's just as important to create a balanced portfolio, where your money is spread between properties in a diverse range of economies and regions, some of which is spent on short-medium term opportunities (3-7 years) and others on long term opportunities (more than 7 years).

There are also a huge number of people out there whose overseas portfolio solely consists of properties in holiday investment destinations such as Portugal, Spain, Turkey, Morocco, Egypt etc.

In my opinion, (and please feel free to argue if you disagree) this type of portfolio is very unbalanced as it will always have an unreliable rental income and is quite vulnerable to changes in fickle tourist markets.

Capital growth could be strong if you bought in a special location (i.e. without thousands of similar properties next door) and sold at the right time, but to be on the safe side, it should ideally be balanced by something in an urban area, where the legal process is rock solid, where rental income is year round, where locals dominate the rental markets and where the economy (and wages) are strong enough to provide you with a local buyer when you choose to sell.

Where is the safest place to invest?
There is an economy in Europe which dwarfs all others, where 85% of locals rent property providing guaranteed income, and best of all, where high quality property can be bought for even less than the equivalent standard in Romania or Panama and at a mere fraction of the current prices in Ireland, UK, Spain or Portugal.

Of course, I'm talking about Germany, where one bed properties in the capital city with guaranteed income can be purchased for less than €75,000 (financing also available).

Someplace Else are in the process of completely revamping the German Section of our website, and we will soon be making new product announcements. I'm convinced that this is a market all of our clients should very seriously consider investing in over the next couple of months, particularly those who wish to put their earnings into a steady and secure long term investment.

Regards

Colin

Investment Holiday Homes

During the boom years, many of us had the luxury of treating ourselves to an investment holiday home. For me, that term always seemed like a cleverly disguised contradiction, as a property you use for your holidays will rarely, if ever, provide a rental income that covers your mortgage or a sound exit strategy when you've grown tired of using it.

There may be a couple of exceptions, but my view has always been that if you want to make money, you would be better off investing in urban locations, with strong local demand, year round rental income and a clear exit strategy. Use the rental income and profits to rent an amazing holiday home every year - there's no shortage of rental websites advertising empty properties out there.

Our property market is changing incredibly fast at the moment, and we understand that the combination of the global credit crunch and our struggling domestic property markets have changed the way many of our clients approach new investments. In order for us to better tailor our future product offers to your changing needs, please feel free to tell us which factors are most important for you when considering an overseas property purchase.

You'll find a list of these factors by clicking on the link below.
Preview Future Project Launches

Best Regards

Colin Murphy
Director
Someplace Else Ireland