What’s in a economic recession? Macroeconomically, it has great implications on the economic output and later stability in the market. To us, let’s be more pragmatic. If you have a stable job, all the best for you. If not, the issue for you is continuing employment.
Let’s look at it from what you can do, to build up your wealth. A recession to the investor is basically a fall in prices in the market. What it means is….SALE TIME! But it’s also time to take stock of how to best implement your investment strategy
My take is this….Everyone has their own favorite vehicle for investment. That does not mean the person can and must only play in that vehicle. There will be times when the vehicle of choice does not make sense. For me, this is a great time to buy stocks, with the market selldown of 20% over the past 4 weeks. Another couple more percentage and it would be time to enter. At the moment, however, the US property market still offers what I am looking for in my investment, perhaps better than what the stock market can give me for the moment. At this moment in time, I can safely say that there are 3 alternatives for me right now. Equities, Commodities and US/ UK properties. The US property market, at the moment, trumps everything else. If and when it recovers, I’ll probably move away from purchases in the market, into something else on sale. I wonder what that will be.
As the markets stabilized and economies getting back on track (hopefully), a growing trend is happening that’s creating a discrepancy between eastern and western economies, something that’s starting to create an opportunity for people with my investing profile.
The more prominent currencies in the world namely USD, EUR, GBP, JPY, CAD, AUD, NZD, CHF are mainly western economies. These are also economies with more established financial systems. Based on my opinion, as these economies grew in the past, their currencies also grew stronger as their competitiveness increased. That was in the 20th century. In the 21st century, as these economies struggle to re-invent themselves, they are also undergoing pressure to depreciate their currencies to stay competitive. As such, you can see western (developed) countries trying to debase their currencies to stay competitive in the current easternizing trend.
On the other hand, eastern economies (See China, India, South Korea, Indonesia and other developing Asian countries) are also trying to re-invent themselves by moving up the value chain in the global market. As their share of the global markets expand, their way of making higher profit comes from an appreciating currency. However, as the bulk of their economies are still pretty low in the value chain (see low-mid end products), by appreciating their currencies, their competitiveness in the global economies are also declining.
This said, economies are debasing their own currencies against other currencies, with asian economies debasing at a lower pace than western economies. In this chase for the lowest value, the people who are in winning positions are governments and holders of hard assets. While investment in asia can reap hug returns, how big are the returns in real terms? By holding investments in Western economies, what kind of returns can be expected?
Needless to say, this is a changing investment world, and the debasing of currencies can only go on for so long before it becomes unsustainable. When will this be, I don’t know, but one thing is for sure, I will continue investing in cash flow vehicles, and forgo short term profits so that I can grab hold of the winner of the incoming new regime, whatever it is and whenever it comes.
Today, an article published on yahoo was talking on the same issue, showing many instances of Americans who were deeply impacted by the recession, and may never lose their sights on frugality in their lives. This is a sympton that had become predominant in the generation which survived the Great Depression, and was said to be a reason why the economic recovery after that was slow.
Personally, I’ve always been a frugal person. It doesn’t matter to me whether I’m rich or not, I will still live a frugal life, though I do spend more now than I had before, especially in one time expenses like holidays.
I do believe that increase in savings does have an adverse short term impact on global economics, just as saving now will impact your current lifestyle. However, in the long run, the impact is totally opposite of the short run. With proper investment, you would get an increased income and hence potential for expenses in the long run. Similarly, this would allow global economics to build at a sustainable level over the long run, which is why I do believe that this will be a good thing for us, as a global citizen.
Jeannine Aversa and Bernard Condon, AP Business Writers, On Sunday May 2, 2010, 1:42 pm EDT
Even as the economic recovery plods ahead, many American consumers are refusing to come along.
They’re not spending freely — and they have no plans to.
Many of them have steady income. They aren’t saddled by high debts. They don’t fear losing their jobs. Yet despite recent gains, they’ve lost so much household wealth that they’re far more cautious about spending than before the recession.
Their behavior suggests that the Great Recession may have bred a new frugality that will endure well into the recovery. And because consumers fuel about 70 percent of the economy, their tightfisted habits means the rebound could stay unusually sluggish.
That’s the picture that emerges from an Associated Press survey of leading economists and interviews with more than two dozen ordinary Americans. The new AP Economy Survey asked 44 leading economists whether the recession created a “new frugality” among consumers that will outlive the recession. Two-thirds said yes.
They had in mind people like Marjorie Feldman of suburban St. Louis, who retired three years ago as a systems analyst for a utility company. The stock investments in her retirement account have sunk 15 percent from 2007. The value of her home is down 20 percent.
“I had retired assuming I’d make money” off the investments, said Feldman, who’s in her early 60′s. “I just don’t feel as confident in the economy, and I never will again. I won’t spend money the way I used to.”
Feldman’s husband works full time in academia. She has a part time job preparing tax returns at H&R Block. But her prime earning years are behind her.
“I don’t think it will ever get back to where it was before,” she said of her nest egg. “I won’t spend money the way I used to.”
Scott Hoyt, senior director of consumer economics at Moody’s Economy.com, notes that baby boomers, in particular, enjoyed spending sprees for most of their adult lives as their assets steadily grow.
“But the recession changed that,” Hoyt said. “Many have retirement and children’s education looming. All of a sudden, they see their balance sheets decline in a way they’ve never seen before.”
To be sure, many shoppers, especially the wealthy, are buying into the recovery. Partly on the strength of consumer spending, the economy emerged from recession last year and has been growing steadily, if moderately, since. Major retailers logged solid sales in March. Employers have begun to add jobs, including a net increase of 162,000 in March. The stock market has risen 70 percent from its low in March 2009.
Yet many who became penny-pinchers during the recession are in no mood to start shopping again with abandon for clothes, cars and home additions. They’ve discovered the peace of mind that comes with rebuilding savings, shopping more prudently and learning to live with less.
At their nerve-racked peak last year, Americans socked away 6.4 percent of their disposable income. That compared with less than 1 percent hit at one point during the pre-recession boom. The savings rate has since dropped to 3.1 percent. Yet few expect it to approach the near-zero savings rate that would signal high-octane spending has roared back.
Susan Wilson, 55, a freelance PR specialist in Scottsdale, Ariz., says her business is picking up. But her spending isn’t. Wilson still feels burned by the recession, when she lost her home to foreclosure.
“Shame on me,” she said. “I wasn’t paying enough attention to my financial health. That will never happen again.”
Wilson is renting now. She traded in her leased car for a used car she could buy outright. She’s started growing her own vegetables and air-drying her laundry to save money and stay out of debt. She’s looking to buy a home, but not one with an outsize mortgage.
“I’m looking for pretty much the smallest house I can live in,” she said.
Interviews with ordinary Americans suggest a new frugality endures even though consumer spending has risen for five straight months and retail sales for three.
In the AP’s new quarterly survey, a majority of economists agreed that a new frugality will persist even as the recovery gains firmer footing.
“I would call it a ‘mini age of austerity,’” said Sean Snaith, an economics professor at the University of Central Florida.
“Consumers will not run up multiple credit cards to their limits, and when buying a house the objective will not be to get the maximum square footage for which they can afford the payment. A higher savings rate will be in place for several years.”
Jeff Thredgold, an economist at Thredgold Economic Associates, predicts “less impress-my-neighbor-type spending” in coming years.
Count Keith Flowers of Manassas, Va., in that category. He’s decided that the hit he took in the housing slump requires him to continue to rein in spending. He’s cut off his landline phone and has become a regular at discount retailer Costco.
He isn’t worried about losing his job in business development at an information technology company. What’s led him to cut back spending is the sunken value of his condominium. He bought it in 2005 for about $270,000.
“I doubt right now it’s cracking $100,000,” Flowers said.
Rajeev Dhawan, director of Georgia State University’s Economic Forecasting Center, says: “I think the chances of us being big spenders in the next 10 years are pretty low.”
So much household wealth was inflated by the housing boom, Dhawan said, that the real estate bust spooked consumers. States hardest hit by the bust — California, Nevada, Florida and Arizona — together account for about 30 percent of national economic activity, he noted.
Household net worth — the value of assets like homes, checking accounts and investments minus debts like mortgages and credit cards — has risen for three straight quarters. But economists say consumers would need a stronger and prolonged increase in wealth to lead them to ratchet up spending. Net worth would have to rise an additional 21 percent just to get back to its pre-recession peak of $65.9 trillion.
Some economists put their hopes for the economy in the rich, who are spending more freely than the rest of the population. They hold out hope that this will encourage more hiring and stimulate spending by the less wealthy. More spending could increase companies’ revenue, which allow them to boost hiring and pay. And that would lead their employees to spend more.
Royal Caribbean Cruises Ltd. returned to a first-quarter profit as more travelers vacationed on its ships and spent more money on board. And makers of luxury goods are benefiting from a release of pent-up demand for jewelry, watches and high-end furnishings.
High-end retailers have reported blowout results. Nordstrom’s revenue in stores open at least one year jumped 16.8 percent last month. Saks’ surged 12.7 percent.
McClaren Automotive has announced it will debut a $200,000 sports car in the U.S. next year. And business is picking up faster at high-end hotels than at mid-priced and budget hotels.
Whether spending by the wealthy will cause the less-well-off to spend freely, too, remains unclear. For now, though, many people have embraced a more frugal approach to spending.
Or maybe they’ve just learned to go without.
Jan Iris Smith, 57, and her husband of Cabin John, Md., put off furniture and clothing purchases after the stock market’s collapse in early 2009.
“We were counting on our income from our investments,” said Smith, a psychotherapist whose husband is retired. “We just stopped pretending everything was going to be OK anytime soon.”
Aversa reported from Washington, Condon from New York. AP Business Writers Christopher S. Rugaber in Washington and Christopher Leonard in St. Louis contributed to this report.
This period of economic downturn and possible recovery had given an important lesson to many people, especially those aspiring to be rich. One of the most important use of wealth is to be able to survive extended periods without working income, and this comes from having good cash flow investments using your savings.
The first thing to do, hence is to have savings. In fact, in my personal point of view, having a good cash flow will allow you to live your life the way you want, with or without your job. With a job, you can fill up your time doing things you love. Without a job, you can still fill up your time doing things you love.
However, the lesson learnt from this economic upheaval will probably be something that will be carried by those heavily impacted by this situation, and will be a source of experience to them.
Lets hope that this will be a valuable lesson that will help in their remaining lives!
The following article from The Straits Times shows some examples of people recovering from the economic turmoil, and is taken from this site
Importance of saving hits home
The economy is looking up, but how has life been for Singaporeans who were retrenched during the downturn last year? In February last year, in the midst of the recession following the worldwide financial meltdown, The Sunday Times launched a Need A Job column. We featured 42 people who were looking for full-time employment over the course of 21 weeks. One year on, we revisit three of them to see how they are faring. Jamie Ee Wen Wei reports.
Laid off in 2008, Ms Ophelia Lim now works as a merchandiser for a shoe chain. She lost $20,000 in a business venture with a friend.
It has been a rocky time for Ms Ophelia Lim. She got a job, then was told to go on no-pay leave. So she went into business with a friend, but lost $20,000 when that venture failed. Then, she got ano- ther job but quit after three weeks.
In late 2008, she was laid off from her job as a fashion merchandiser when her company shrank its operations. She had been there for three years and was earning about $3,000 a month.
When she was featured in The Sunday Times in February last year, she had been jobless for three months. Within a month, she was hired as a merchandiser by a fashion house. The job sounded promising. She would help the company develop its business at its factory in China while based in Singapore, and could try her hand at fashion design. Her pay was about $2,500.
But barely one month into the job, her employer told her to go on no-pay leave for six months. She took it as a cue to leave.
‘I think it ran into some financial problems but I didn’t call them to ask. There was no point because I had been working for only a few weeks,’ said Ms Lim, 38.
Then came her lowest point – in September last year. She went into business with a friend and lost $20,000. They had set up a shop selling potato salad and sushi in Bishan. But within three months, the business folded when her partner pulled out suddenly.
‘I was having so many sleepless nights. I didn’t have a job at that time and all the money was just going down the drain.’
She resumed her job search, but did not hear from most of the companies she sent her resume to.
In February this year, she was hired by a firm to sell electronic components. But she quit after three weeks as ‘it was too manly and too technical for me. I couldn’t see myself doing it for long’.
The financial instability meant that her family had to cut back on extras. The divorcee lives with her three sons – aged 16, 11 and 10 – and her mother in a four-room flat in Toh Guan.
They cooked and stayed home during weekends. They also had to forgo celebrating special occasions like birthdays. ‘There’s no extra to buy presents, just a cake,’ she said.
But things are looking up. Last month, she found a job as a merchandiser at shoe chain Chocolate Schu Bar through a newspaper advertisement.
She has taken a 20per cent pay cut from her original fashion merchandising job, but she is not complaining. She says she is in a better state than many of her former colleagues in the fashion merchandising business, who are still jobless or taking low salaries.
‘I’m lucky because the difference is just a few hundred dollars,’ she said of her salary now.
Having survived the recession, Ms Lim, who has A-level qualifications, said the biggest lesson she has learnt is the importance of saving for a rainy day.
‘It really hit me hard,’ she said. ‘My savings ran out within a few months. So now, even though I’m earning less, I make sure I save at least $50 a month.’
I’ve been listening to doom and gloom experts for years, and as such had been heavily putting money when times are fearful, and been more conservative during the heights of booms. It had helped me significantly outpace most of my peers in net worth and earnings thus far, and I really hope, will continue for the foreseeable future.
Some of the most bearish experts I’ve been listening to lately are Jim Rogers, Robert Kiyosaki and Mike Maloney, who are incidentally also great bulls in the commodities market, especially in precious metals.
Its easy for me to subscribe to their thinking, as I employ value investment strategies in my investments, be it in stock markets, currencies or properties. This video by Mike is something I happened to see in another blog, and is taken in Singapore. The situation is slightly different from what he said, but in general it rings true. I’ve been a bear on the Singapore property market since its previous peak in 2008 when I exited the market, and ever since, did not bulge from my position, so in my opinion, his views hold true to a certain extent.
This is dedicated to Martin Luther King’s speech “I have a dream”, something I have first heard last month, which I hope to share with you. King is famous for his passion and his drive in pushing for equality rights for all Americans, and I believe his passion and drive comes from his dream, a dream of a world where all Americans live together with equal rights, something which may have already come true with Obama being President of the Unites States.
King is definitely an auditory person, which I gathered from the tonal way he gives his speech, and the passion that you can feel with this famous video. Before I start, I would like you to rediscover – what is your dream that you can derive such passion from? Something to think about over the next few days I hope.
I am happy to join with you today in what will go down in history as the greatest demonstration for freedom in the history of our nation.
Five score years ago, a great American, in whose symbolic shadow we stand today, signed the Emancipation Proclamation. This momentous decree came as a great beacon light of hope to millions of Negro slaves who had been seared in the flames of withering injustice. It came as a joyous daybreak to end the long night of their captivity.
But one hundred years later, the Negro still is not free. One hundred years later, the life of the Negro is still sadly crippled by the manacles of segregation and the chains of discrimination. One hundred years later, the Negro lives on a lonely island of poverty in the midst of a vast ocean of material prosperity. One hundred years later, the Negro is still languished in the corners of American society and finds himself an exile in his own land. And so we’ve come here today to dramatize a shameful condition.
In a sense we’ve come to our nation’s capital to cash a check. When the architects of our republic wrote the magnificent words of the Constitution and the Declaration of Independence, they were signing a promissory note to which every American was to fall heir. This note was a promise that all men, yes, black men as well as white men, would be guaranteed the “unalienable Rights” of “Life, Liberty and the pursuit of Happiness.” It is obvious today that America has defaulted on this promissory note, insofar as her citizens of color are concerned. Instead of honoring this sacred obligation, America has given the Negro people a bad check, a check which has come back marked “insufficient funds.”
But we refuse to believe that the bank of justice is bankrupt. We refuse to believe that there are insufficient funds in the great vaults of opportunity of this nation. And so, we’ve come to cash this check, a check that will give us upon demand the riches of freedom and the security of justice.
We have also come to this hallowed spot to remind America of the fierce urgency of Now. This is no time to engage in the luxury of cooling off or to take the tranquilizing drug of gradualism. Now is the time to make real the promises of democracy. Now is the time to rise from the dark and desolate valley of segregation to the sunlit path of racial justice. Now is the time to lift our nation from the quicksands of racial injustice to the solid rock of brotherhood. Now is the time to make justice a reality for all of God’s children.
It would be fatal for the nation to overlook the urgency of the moment. This sweltering summer of the Negro’s legitimate discontent will not pass until there is an invigorating autumn of freedom and equality. Nineteen sixty-three is not an end, but a beginning. And those who hope that the Negro needed to blow off steam and will now be content will have a rude awakening if the nation returns to business as usual. And there will be neither rest nor tranquility in America until the Negro is granted his citizenship rights. The whirlwinds of revolt will continue to shake the foundations of our nation until the bright day of justice emerges.
But there is something that I must say to my people, who stand on the warm threshold which leads into the palace of justice: In the process of gaining our rightful place, we must not be guilty of wrongful deeds. Let us not seek to satisfy our thirst for freedom by drinking from the cup of bitterness and hatred. We must forever conduct our struggle on the high plane of dignity and discipline. We must not allow our creative protest to degenerate into physical violence. Again and again, we must rise to the majestic heights of meeting physical force with soul force.
The marvelous new militancy which has engulfed the Negro community must not lead us to a distrust of all white people, for many of our white brothers, as evidenced by their presence here today, have come to realize that their destiny is tied up with our destiny. And they have come to realize that their freedom is inextricably bound to our freedom.
We cannot walk alone.
And as we walk, we must make the pledge that we shall always march ahead.
We cannot turn back.
There are those who are asking the devotees of civil rights, “When will you be satisfied?” We can never be satisfied as long as the Negro is the victim of the unspeakable horrors of police brutality. We can never be satisfied as long as our bodies, heavy with the fatigue of travel, cannot gain lodging in the motels of the highways and the hotels of the cities. We cannot be satisfied as long as the negro’s basic mobility is from a smaller ghetto to a larger one. We can never be satisfied as long as our children are stripped of their self-hood and robbed of their dignity by signs stating: “For Whites Only.” We cannot be satisfied as long as a Negro in Mississippi cannot vote and a Negro in New York believes he has nothing for which to vote. No, no, we are not satisfied, and we will not be satisfied until “justice rolls down like waters, and righteousness like a mighty stream.”¹
I am not unmindful that some of you have come here out of great trials and tribulations. Some of you have come fresh from narrow jail cells. And some of you have come from areas where your quest — quest for freedom left you battered by the storms of persecution and staggered by the winds of police brutality. You have been the veterans of creative suffering. Continue to work with the faith that unearned suffering is redemptive. Go back to Mississippi, go back to Alabama, go back to South Carolina, go back to Georgia, go back to Louisiana, go back to the slums and ghettos of our northern cities, knowing that somehow this situation can and will be changed.
Let us not wallow in the valley of despair, I say to you today, my friends.
And so even though we face the difficulties of today and tomorrow, I still have a dream. It is a dream deeply rooted in the American dream.
I have a dream that one day this nation will rise up and live out the true meaning of its creed: “We hold these truths to be self-evident, that all men are created equal.”
I have a dream that one day on the red hills of Georgia, the sons of former slaves and the sons of former slave owners will be able to sit down together at the table of brotherhood.
I have a dream that one day even the state of Mississippi, a state sweltering with the heat of injustice, sweltering with the heat of oppression, will be transformed into an oasis of freedom and justice.
I have a dream that my four little children will one day live in a nation where they will not be judged by the color of their skin but by the content of their character.
I have a dream today!
I have a dream that one day, down in Alabama, with its vicious racists, with its governor having his lips dripping with the words of “interposition” and “nullification” — one day right there in Alabama little black boys and black girls will be able to join hands with little white boys and white girls as sisters and brothers.
I have a dream today!
I have a dream that one day every valley shall be exalted, and every hill and mountain shall be made low, the rough places will be made plain, and the crooked places will be made straight; “and the glory of the Lord shall be revealed and all flesh shall see it together.”2
This is our hope, and this is the faith that I go back to the South with.
With this faith, we will be able to hew out of the mountain of despair a stone of hope. With this faith, we will be able to transform the jangling discords of our nation into a beautiful symphony of brotherhood. With this faith, we will be able to work together, to pray together, to struggle together, to go to jail together, to stand up for freedom together, knowing that we will be free one day.
And this will be the day — this will be the day when all of God’s children will be able to sing with new meaning:
My country ’tis of thee, sweet land of liberty, of thee I sing.
Land where my fathers died, land of the Pilgrim’s pride,
From every mountainside, let freedom ring!
And if America is to be a great nation, this must become true.
And so let freedom ring from the prodigious hilltops of New Hampshire.
Let freedom ring from the mighty mountains of New York.
Let freedom ring from the heightening Alleghenies of Pennsylvania.
Let freedom ring from the snow-capped Rockies of Colorado.
Let freedom ring from the curvaceous slopes of California.
But not only that:
Let freedom ring from Stone Mountain of Georgia.
Let freedom ring from Lookout Mountain of Tennessee.
Let freedom ring from every hill and molehill of Mississippi.
From every mountainside, let freedom ring.
And when this happens, when we allow freedom ring, when we let it ring from every village and every hamlet, from every state and every city, we will be able to speed up that day when all of God’s children, black men and white men, Jews and Gentiles, Protestants and Catholics, will be able to join hands and sing in the words of the old Negro spiritual:
I remembered a story from a book once. Once there was a man walking in the desert. Suddenly, a pack of hungry wolves rushed towards him. Seeing that his life is in danger, he started running from the pack of wolves, but how long can he run, before these hungry, relentless wolves caught up with him?
Luckily, he saw a nearby well, and being the only sources of cover within miles, he jumped into the well. Unfortunately, not only was the well totally dry, but was infested with poisonous snakes. Once he saw this, he made a flailing grasp for something, anything that can save his life!
His fingers touched something, and he grasped it, and looking up, saw that it was a overhanging branch. He was safe for the moment, but he also noticed an impending danger. A nest of termites who is attacking the branch, which could break at any moment, and if it breaks, he will fall into the well to be killed by the poisonous snakes. What a terrible scenario to be in!
But nevertheless, he is still safe at the moment. Then he noticed a drop of honey on the branch, and seeing that, he ignored the pack of hungry wolves above him, ignored the poisonous snakes under him, and even the termites eating away at the branch, and stretched out his tongue, just to take a lick of the honey.
This honey is the meaning of life. In every man’s life, there is a past, where the man have safely overcome danger and crisis to reach where he is now, shown as the hungry wolf pack. There is also future crisis that he has to face in the future, which is shown as the poisonous snakes. Currently, he is also facing problems that he needs to solve, as shown by the termites.
However, what gives life it’s meaning is the drop of honey, which is the dream you are currently reaching out and striving for. Life has no meaning if there is no dream. The only way for you to feel fulfilled is by constantly improving, and moving towards your dream. So what is your dream? And what kind of future will your dream bring you to, and what will you face in your strive towards your dream? That does not matter. What’s important is knowing your dream, knowing your meaning in life.
It seems no matter what your occupation is, the common thought is “how do I grow my wealth”. Wealth, not money.
I was re-reading “Cashflow Quadrant” by Robert Kiyosaki, and what an amazing thing! He mentioned that it is in the “I” quadrant that money becomes converted to wealth.
In fact, even though this is the sixth time I’ve read the book, its also the first time this sentence came to my conscious mind. I realized I had been heavily influenced by this sentence since I first started on my financial journey almost 5 years ago. You can read more about it here but the point I want to make is that the “I” quadrant is where most people want to be in, whether they are current in the “E”, “S” or “B” quadrant.
“Cashflow Quadrant” also states that most successful people gets 70% of their income from the “I” quadrant, and 30% from the “E” quadrant, which includes business owners who are employees for their business.
So why do many people, whether they are in the “E”, “S” or “B” quadrants not building up their skills in the “I” quadrant? Or is investing so straight forward that you don’t have to pay attention to it?
Its my experience that you have to pay as much attention to your “I” quadrant skills as any of the other quadrants. If you lose your focus on your investments, you will lose your wealth at the same time. Whats the point of making money to invest, only to lose it? or for it to grow so slowly that you might as well stick to your business in the first place?
So I beseech you to start building up your investment knowledge now, not in stocks, not in bond, not in commodities, not in currencies, but in the numbers of the businesses, the interaction of markets with the world, and the risk level of the investment.
As a closing, I’d like to inform you that my report on the investments I’m looking at will be out this week, so look out for it!
This article is taken from the AsiaOne. As a description of the various markets Tim Murphy did a study on, he recommended the following places which might take a place in your real estate investment portfolio.
I’m more interested in his analysis of the markets, especially the transparency and ease of making a good and legitimate investment, as well as the areas of market which would be a safer investment, rather than the timing issue.
This is because as a rule, I do not purchase real estate when the price is high, but that’s only because my risk tolerance is low, and my real estate has to have cash flow even in the event property prices goes back down to its last low.
Different people have different thoughts and beliefs, so the timing depends totally on the individual investor.
SIGNS of renewed confidence for global investors are very apparent today, after the global recession last year. Here are six markets that we would recommend to investors seeking to grow their property portfolio.
Vietnam
Vietnam’s export economy and growing aspirational population makes it a strong market for growth potential. Also, demand for residential accommodation is outgrowing supply at a rapid rate. There are about 60,000 units scheduled for completion through to 2012 versus the 110,000 homes required in the same period.
Vietnam has a dynamic and cyclical property market that is heavily influenced by its stock market, so this is often a barometer for tracking the performance of the property sector. Over the past few months, the property market looks to be levelling out and there has been a significant rise in supply as developer confidence returns. The fourth quarter of 2009 saw twice as many launches of new schemes as the previous period.
For international investors who don’t know the market, choosing the right property can be a daunting task. Buyers would be wise to look for projects by reputable international developers.
Malaysia
For investors who want lower risk with solid yields and capital growth at affordable prices, I always recommend including a property in Kuala Lumpur in their portfolio. Malaysia is an export-based economy with strong fundamentals and will grow steadily as the global economy continues to recover.
The government encourages little speculation and recently introduced a real property gains tax of 5 per cent on any property sold within five years of purchase. The best time to buy is when interest rates are low and banks are lending freely. Currently, loan to values of 70-80 per cent are easily achievable. The property market is transparent with laws based largely on the UK legal system which makes investing in property very simple. For a private investor, there are thousands of websites to visit that have all the relevant information to compare and contrast the various opportunities available.
KL is Malaysia’s most developed and liquid property market with international appeal and considerable domestic demand. When buying, consider the location of the property carefully. Traffic can be tiresome and it is best to buy close to a public transport node. While property ownership for foreigners can be freehold title, it is also important to note that there are restrictions for foreigners buying property in Malaysia. For example, purchases of under RM500,000 are not permitted.
Hong Kong
The best time to buy in Hong Kong is when land supply is short and interest rates are low. The past 12 months have seen a massive 33 per cent rise in the property market, making it the highest growth rate in the developed world.
The property market responds rapidly to stock market performance, and as the China economy continues to grow, so too will Hong Kong’s. A direct result of this growth is that there are a number of mainland Chinese residents buying property in Hong Kong who are happy to pay higher prices. Sustained buying interest from cash-rich individuals and the tight supply in the luxury sector will push up property prices by 10 per cent over the next 12 months.
With strong liquidity in the banking system and a further drop in funding costs, average prices in the traditional luxury districts grew 9.6 per cent quarter on quarter at end-November 2009, showing there is still growth in the market.
Like Malaysia, Hong Kong’s property market is relatively transparent and sourcing a good deal is simple if you have the time to do your research. Keep away from off-plan developments in Hong Kong, as you will get a better yield from the secondary market. Look for areas that are built up and continuing to show growth such as Sheung Wan. Do be aware of the buildings going up in the vicinity of any development. If you are buying your apartment for the view, make sure that nothing can be built in front of it.
Singapore
The Singapore government is very nimble when it comes to changing regulations on buying property, which can both be a disadvantage and an advantage to investors.
Singapore had a robust residential market in the midst of the economic recession, and 2009 saw about 14,500 new homes sold, second only to 2007. This compares starkly against the 4,382 units sold by developers in 2008. In Q4 of last year, the government added a number of regulations to prevent a property bubble forming, and earlier this year added a 3 per cent stamp duty for investors who sell their residential property within 12 months of purchase. I believe that 2010 holds a lot of promise for the luxury sector, as demand from more confident buyers is being answered by developers.
Singapore has a very transparent property market and for those buyers lucky enough to live locally, sourcing property is simple. However, for those based outside Singapore, deals are snapped up very quickly by the local market. So it’s best to fly there and spend some time looking yourself. Look out for a reputable developer with a proven track record and projects in the most sought-after areas – districts 9, 10 or 11.
London
London is one of the most internationally traded property sectors in the world and is seen as a barometer for the global economy. The best time to buy London property for international investors is now.
London presents opportunities when supply is low, mortgage finance is difficult for local investors limiting their buying power and when the pound is weakening. All of these factors conspire to allow savvy international investors to pick up deals that normally wouldn’t be available to buyers overseas.
This means that there are a large number of opportunities for investors in Asia. However, quantity often does not equal quality. Deals that reach the Asian market are often lower quality, mass market developments. For international investors, it is best to seek advice from property investment groups who can source quality deals by conducting thorough research and underwriting a tranch of units. Investors should be wary of off-plan property in areas with a lot of supply. Look for projects in a quality central location with good transport links to the city.
Australia
Due to its population growth and geography, Australia is experiencing an undersupply of housing. In 2008, Australia’s population grew by 2.6 per cent – which is the equivalent of the entire population of Canberra – in one year. Occupancy rates are always very dependable, with figures such as 98 per cent in cities like Melbourne becoming the norm. These trends are creating great opportunities for foreign investors right now.
Another factor currently contributing to the success of the economy is Australia’s extremely successful export relationship with China. Last year, Australia exported more coal to China than any other country in the world and 2010 is set to exceed last year’s numbers. While the resources sector accounts for only 2 per cent of Australia’s economy, it has a very positive trickle-down effect on sectors such as the property market.
There are a number of factors to consider when purchasing property in this market. Perhaps the most important is to make sure you buy where local Australians want to live. As an international buyer, you are restricted to only buying new property. Also, note that Australia has strict and tight deadlines for the purchase process and local agencies are much less likely to understand the logistical issues for international investors.
There is likely to be a significant increase in funds invested in property markets globally this year. Right now, Asian markets, Australia and the UK are showing the most appeal and we would strongly recommend conducting further research in these areas.
Tim Murphy is managing director and founder of IP Global, a property investment company specialising in acquiring property in emerging, distressed and recovering markets
There are always times when you will have low energy. It doesn’t matter who you are, how rich you are and how much you know. Times of low energy have their place in life, as the duality contrast to high energy.
The thing is, what do you wish to achieve during your time of low energy? When you have high energy, you learn better, your actions will have more potency, and your mind will move faster. In contrast, times of low energy is the time to rejuvenate your soul, to do critical thinking and to plan for yourself. Its a signal for you to STOP, and review your life.
You can do so via meditation, yoga and other such exercises, or just going to a nice relaxing place just to think, and once you have finished your review, your energy level will rise and you will learn from your past experiences from inside you.
So don’t be afraid of having a period of low energy, and use it properly so you can live your life more fully.
