Gaining financial security is the main reason why most people turn to property, which is no surprise because property has been and continues to be one of the most solid investments around.
Investing in property represents the best reward vs. risk investment you can make for you and your family. It’s commonly known that pensions are giving poor returns, so whilst other investments are failing to deliver, property investment in the UK and overseas continues to grow.
The housing market will face two years of blight stemming from the impact of the global credit squeeze, with prices falling continuously over much of southern England, a report forecasts today.
Spain and Ireland are set for a prolonged slowdown in economic growth, according to Standard & Poor’s, as a drop in construction activity and consumer sentiment hits labour markets and weakens public finances.In a report published on Monday, the credit rating agency says house prices in the two countries – and the UK – are about 20 per cent overvalued and on the verge of a “protracted correction”.The impact of this on the broader economy would be more pronounced in Ireland and Spain, whose “economies are heavily exposed to the direct effects of the housing market slowdown on the construction sector”, says Standard & Poor’s. Construction accounted for 12.6 per cent of the total employment in Spain in 2006, compared with a European Union average of 8.2 per cent, it says.In Spain, unemployment in the construction sector has surged 53 per cent in the past 12 months, helping to fuel a 22 per cent increase in the number of immigrants out of work. Scores of small builders and property agents in coastal areas have gone out of business, and there are concerns about rising bad loan rates at some regional savings banks. House sales in the second quarter this year were 11 per cent lower than in the first three months, according to government figures.While acknowledging the downturn, the Spanish government has consistently played down its implications for the wider economy. Officials say their main worry at the moment is the impact of a broad slowdown in Europe on the country’s export and tourism sectors.More on Warning on building slowdown
Wander around Kuala Lumpur, in the shadow of the mighty Petronas Towers, and it’s clear that Malaysia, which celebrates half a century of independence this year, is going places. You can forget those colonial images of mile after mile of sleepy rubber plantations; five years from now Malaysia will be importing rubber from Thailand. In KL, the capital, in particular, there is a prosperous, fast-growing middle class needing property. But Malaysia also has a Second Home Programme, aimed at people from overseas thinking of retiring to the country.
An unexpectedly sharp correction in house prices resulting from the global credit squeeze poses a significant risk to growth in Europe, according to the European Commission.The European Union’s executive arm forecast a gradual slowdown in growth from 2007 to 2008 but said continuing financial market turmoil meant the risks were “clearly tilted to the downside”.Among the threats it identifies is a worsening of the financial turmoil that could hit housing markets in Europe as well as the US “thereby deepening and prolonging the ongoing corrections”.So far, those European countries that saw the fastest growth in house prices, such as the UK, Spain, Ireland and France, have generally seen an orderly slowdown this year. But the Commission’s latest EU economic forecast hinted at policymakers’ fears of a sharper adjustment. A special section on past house price cycles warned that while other regions were sometimes more volatile, “the historical experience suggests that major housing downturns have also had a substantial macroeconomic impact”.More on House price correction threatens EU growth
The US housing market is in dire straights, no one could argue with that. House prices are down, house sales are down and developers are cutting prices on new developments left, right and center. But where does that leave the homeowner who needs to sell, whether from financial difficulties or some other reason?
Quite apart from the small investors and home owners, it appears that some of the big boys are taking a hit or two in the sub prime crisis as well.
It’s unlikely that the chairman of Citigroup or Morgan Stanley will have their houses foreclosed upon, but, in a sick way, it’s nice to know the banks have been caught with their pants down as it were. According to Mike Mayo of Deutsch Bank, Morgan Stanley will be writing off $3 to $5 billion this coming quarter.
Gazing into our crystal ball, this is a list of likely overseas property investment markets that should do well in 2008, assuming that the current financial disaster in process in the US does not spread like a disease across the world – which does look like a strong possibility.