If you are a frequent reader of my blog posts here, you might (quite rightly) have assumed I am not much of a Christmas type. Imagine my joy at having been asked to write something about the property markets with respect to the "festive season"
We all appreciate a few days off, even if it is due to some mythical fat bloke in a red romper suit delivering hideous, knitted artifacts from the in-laws (that we have no need for and will never wear) through the medium of breaking and entering down our non-existent chimneys.
Granted it does give us all a rest from the day-to-day grind, instead filling our day watching the perpetual repeats of Bond films and The Sound of Music whilst getting increasingly more drunk at far earlier an hour than usual and wondering why dinner is over-cooked instead of worrying about the latest news, how badly the World's economies are doing and how much money everyone hasn't got. Christmas has the wonderful purpose of creating that "pause" on the general "rat-race" we all call life.
Despite prolonged attempts of thinking about articles involving Santa, 3 wise men and various other Christmassy-type themes the only things I can think of to write about are the fact I'm jolly glad I am not one of the 3 wise men lumbered with gold on the Xmas present list this year given the it's rocketing price, and how does Santa park his sleigh on your roof if you have solar panels?
So, with humbugs at the ready - what do we have to look forward to for 2011?
To be honest, to try and predict what the entire global property market is going to get up to for a 12 month period is a bit of tall task to say the least. The main players in the industry have made some comments which we have summarised in our Property Investment Possibilities for 2011. Being involved on a day-to-day basis in the industry, I too will make a few predictions of my own.
The Euro as a currency will continue - as much as there is suggestion of a collapse and restructure by many - I think that whilst there are still a few more bail-outs required (probably Spain and likely Portugal) the Euro as a currency and a financial structure will remain in place (even though it will be a tough time).
UK Property Prices
Given that there are really only average sale and asking prices to go on, this is a bit of a tough one. The press love to hype average stats because it makes for easy (but not necessarily accurate) reading. The likely outcome of UK property prices is that most of the country will become very niche as far as house prices are concerned. Pricing gaps will become wider across smaller regions as the public begin to see clearly that the averages continually published by the press don’t add up. London on the other hand will continue to come into its own, and probably quite significantly so across almost all sectors. London has long seen consistently rising demand and absorption rates which are set only to increase further, primarily due to the upcoming Olympics in 2012, but also the sheer volume of coverage and attention the Royal Wedding and other events are likely to focus there.
China has continually been touted as having an enormous bubble that is way overdue for popping. Personally I disagree. There will be some correction in the region, no question there, but the fact remains that the West hasn't really grasped (in my opinion) how and why the Chinese invest, and what investment vehicles they use as income generators or stores of wealth.
I think we will also begin to hear talk of some Asian countries opening up a little more to foreign investment, Thailand and Vietnam for example both looking for more funds to come into their respective countries to improve relations and trade.
Brazil will continue to grow and expand - it is my belief that it only has a few years left as an "emerging market". Its natural resources are extensive, and international trade regulations are about right to stimulate export yet further and increase the status of this up-and-coming powerhouse nation.
On the whole, in mainstream Europe I think the commercial and retail property market should continue to do well, although on the fringes of Euroland we will still see some struggling going on with the likes of Greece, Turkey and former communist block regions.
Depending which way you look at it, the USA is a blessing or a nightmare. For those outside the US, there is some serious money to be made off the back of this former financial behemoth. In my opinion, the US has no real way of creating its own recovery at any kind of speed for the simple reason it has a dwindling output. Unless it comes up with some kind of magical export other than printing more cash it is simply time that will cure this ailing beast of an economy. On the lighter side - those outside the US can look forward to some of the best value-for-money investing ever seen in the next 12 months.
Stock Markets and Gold
We are currently in strange times as I write this; gold is at a phenomenal high, and the FTSE is closing in on 6000. Whilst the initial reaction for the everyday investor is probably "wahey!" there is much to be concerned about. The stock markets and gold have always maintained a negative correlation over the years, yet both are at substantial highs at the moment. This cannot continue for long. As much as I might thrash the mainstream press from time to time for being harbingers of doom, the fact is that something has to give in one of these two investment areas.
Gold is high because tradition states it is a good hedge against inflation, and the only "true store of wealth". 10 years ago I would have agreed whole-heartedly with this premise. The difference now though is overhyping by the press at large, and the ease of investment. The market place has changed for gold. It's much easier to invest into and far more accessible to the everyday investor. Although not a bad thing to start with, this is causing more leveraging in the markets (borrowing to increase investment levels) and thus creating a vastly inflated, unsustainable "paper market".
Stocks have seen a rush in activity and subsequent rises in value most likely due to lack of confidence in other sectors, and being seen as far more liquid than most other investments - few company stocks really represent sustainable value for money over the longer term as cuts are applied and inflation kicks in.
Either stock or gold has to give, and to be honest it's almost a case of "flip a coin" as to which it will be. Personally, I think gold is more likely to take the hit, because it is more open to manipulation from very large players that decide it's time to short the market. Whichever ultimately takes the hit - expect tears all round. I'm not saying get out now, but certainly consider reducing holdings in both and diversify your portfolio a bit further.
On that note - it leaves me to bid you a pleasant few days off, whether you are an avid Father Christmas follower, or lining up your humbugs and snowballs to hurl at passers-by. Happy investing.
- Wednesday 22 December 2010