In recent times membership of the European Union was a catalyst for growth for emerging property markets with many former Eastern Bloc countries benefiting enormously from the funds which flow after membership. Enormous investment in infrastructure, employment markets, regulations and the property sector have changed the investment outlook for many of these former Eastern Bloc countries.
Those with larger property portfolios often have a small portion associated with emerging property markets looking to tap in to the potential growth areas of the future. Is it now time to look at emerging markets again in light of the troubled economic times?
Risk/reward ratio
When looking at any investment it is vital that you consider the risk/reward ratio as you would require additional potential rewards for taking a greater risk. With a touch of irony, some of the more mature markets such as Spain and Portugal offer the greatest potential in the medium to long term although there may be further downside risk in the short term.
The economic situation across Europe is troubled at the moment, doubts around the U.K.’s continued membership weigh heavy and the European Central Bank has been forced to inject enormous amounts of capital into the markets. If the larger property markets of Spain and Portugal are troubled what can we expect from some of the smaller emerging markets in Europe and elsewhere around the world?
Bulgaria, Ireland and Poland
It may surprise some to learn that Bulgaria, Ireland and Poland have been put forward as potential growth markets in the short, medium and longer term. The likes of Bulgaria and Poland have benefited from enormous infrastructure investment and indeed Bulgaria has been very active on the corporate front looking to attract international giants such as Google.
Ireland may be a surprise entry to this particular list but the Irish economy has bounced back from its troubles much quicker than many had expected. The European bailout repayment is ahead of schedule and while there are significant properties left unsold across the country there is no doubt demand is starting to grow. When you bear in mind the financial scandals and economic troubles of recent times this has been a very quick recovery.
Is there value in more mature property markets?
It is difficult to compare like for like at the moment due to the economic concerns gripping Europe and the rest of the world. In general many believe that the UK market is “fully valued” especially when compared to the likes of Spain and Portugal which are struggling. The significant property overhang impacting Spain and Portugal has reduced of late, with many corporate investors showing interest, but there is still much property to shift. So, do you really need to look outside of the likes of Spain and Portugal for long-term value?
At this moment in time the long-term future of the European Union and the euro is in doubt in the minds of some investors. The forthcoming UK referendum about membership of the European Union will be vital, a recovery in European economies is needed and only when the deluge of unwanted properties have been snapped up can markets really start to recover. In the short term there may be opportunities in some of the “emerging markets” but with some of the more mature markets still struggling is there any need to increase your risk profile at the moment?