Investing with a home bias

  • Written by 
Add to my collection

Just over three-quarters of the investors questioned for the survey invest primarily in their domestic market. But asked about the overseas country where they saw the greatest potential for returns, two interesting themes emerged. The first of these is that the market regarded as the most promising, by some margin, is the US. There is clearly a view that recent price falls, a weaker currency and the long-term prospects for the US economy offer significant opportunities. Similar reasons are likely to influence the selection of the UK as the third most promising market.

Opportunities abound but credit is still crunched 6 of 15 Upping the ante 4 of 15

Residents of the United States, please read this important information before proceeding

Please read this important information before proceeding.

Liam Bailey, Director of Research at Knight Frank, a property agent, notes that the London prime property market has begun to see strong buying interest. “We have seen an increase in registered interest for prime and super-prime property, which is usually an indication of coming price increases,” he says.

Some interviewees caution, however, that there may be more turbulence to come in the US market. “Housing markets in the US currently enjoy the support of direct policy intervention,” says Sam Chandan, President and Chief Economist of the Faculty of Real Estate at The Wharton School of the University of Pennsylvania. “As these interventions taper off, the dynamics of the housing market could be upset.”

In which country, other than the one in which you are personally based, do you expect ROI to perform most strongly over the next two years?

The second interesting theme is related to the growing appeal of emerging markets as property investment destinations, with China and India second and fourth respectively on the priority list. Compared with the UK and US, these are non-traditional property markets for the wealthy, but investors are clearly attracted by the solid economic growth currently being seen in both countries, and the emergence of a huge middle class that, for the first time, will have disposable income to purchase property.

Santosh Rungta, President of the Confederation of Real Estate Developers Associations in India, suggests that the Indian market is one that shows promise. “Demand for residential property is slowly growing, particularly in the affordable category,” he says. “Projects have re-aligned their prices and this has led to strong demand.”

Concerns persist in these markets, however. For example, a huge injection of lending by the Chinese government has fuelled property speculation and prompted concerns that the current rises in property values will be unsustainable over the longer term. And in India there continues to be a highly fragmented and inconsistent legislative environment, although in September 2009 the government announced proposals for a new regulatory authority to oversee the property industry.