In years gone by the vast majority of property investors would stick to their local markets on which there were plenty of statistics is to hand. It was very easy to get hold of the local press to see what was happening, price movements and even talking to local estate agents was very easy. The Internet has changed this for many people with the ability to read as much information about overseas markets as has been historically available about local markets. So, why should you consider overseas property investment for your portfolio?
Price brackets
The actual price of property around the world varies enormously as does the potential for long-term rental income and capital gain. We only need to look at the London property market as one example of an area of the world which is in the eyes of many overinflated. It is not difficult to find other property markets around the world which will give you more perceived “value for money” compared to leading markets like London. However, whether you pay £100,000 for a property or £1 million it is the potential for long-term capital appreciation and rental income which should weigh most heavily in your mind.
Spreading the risk
In the good times it is very easy, in theory at least, to make money from property markets as economies are buoyant and individuals/families have more cash available. History shows us that property cycles do not always move in tandem across the globe and therefore the idea of spreading your risk makes sense in the longer term. If for example you have exposure to the UK and US markets, if the UK market is struggling but the US market is doing particularly well, and vice versa, this will introduce a form of balance to your investments.
This does not stop you focusing on particular areas and increasing your exposure but it is a good strategy to inject some balance.
Currency considerations
While currency fluctuations should not be a reason to invest in any particular market it is difficult not to at least investigate areas where your home currency gives greater value for money when exchanged into a foreign currency. One example of this is UK sterling which has fallen in the region of 15% since the surprising Brexit vote. In theory this makes the UK property market all the more attractive to US investors, as an example, because their dollar spending power has increased by 15%.
There are also ways and means of hedging your currency exposure after you have invested into overseas property markets. It is probably worthwhile discussing these in more detail with your financial adviser.
Widen your knowledge
Very often you will see property cycles repeated at different times around the world and if you have experience in spotting untapped markets it can be useful to replicate this strategy overseas. You will need to take in local cultures, local investment strategies and even local regulations. However, all investment markets are cyclical to a certain degree and the characteristics of markets for the future are often replicated time and time again. No one property market is the same but there are often similar characteristics which you can use to your long-term gain.