What does the “globalisation of property” mean for investors?
Do you want to invest in the global economy?
You don’t have a choice.
Even if you’re investing in boring old properties down at the end of the street, these days you are still investing in the global economy.
We are all globalists now.
We’re in the middle of the Knowledge Source Power Challenge and today I wanted to have a look at why I take such an interest in the global economy, and why relentless self-education has to be one of your habits.
Bloomberg was running the story last week about how a number of property markets across the world are following each other lower. You thought it was just Sydney and Melbourne, but no, we’re not alone there.
In Manhattan, the median condo price dipped below $1 million for the first time in three years. Hong Kong home values endured their longest losing streak since 2008, while prices in outer London neighborhoods fell for the first time since 2011. Sydney home owners are grappling with the worst real estate slump since the 1980s.
Luxury residential prices are growing at the slowest rate since 2012, according to a Knight Frank index of prime properties in 43 cities…
Governments became concerned the gains were unsustainable, and reacted with measures aimed at curbing the flows of international money…
Similar dynamics are playing out around the world. The number of home sales in Vancouver dropped 32 percent in 2018 from the previous year, following a series of new taxes, stricter mortgage rules and rising interest rates.
Median prices in Auckland registered their first annual drop since 2008 after the New Zealand government passed legislation to restrict foreign buying that it said was partly to blame for escalating housing costs.
Home prices have dropped 11 percent in Sydney from their 2017 peak after government restrictions on foreign purchases and tighter credit.
I knew this was happening but it was interesting to see the data all in one place.
It’s on the IMF’s radar too. Last year they released a report showing that house price growth has become increasingly synchronised at both the city and country level, particularly since the global financial crisis.
The global economy is a new beast. Financial markets are integrated, inflation trends are global in their reach, interest rates are synchronised thanks to free-flowing capital, and institutional money managers tend to hunt in packs. Taken together, all property markets, even your humble little suburb, are global property markets now.
I mean, it used to be the case that houses were just consumables. They were just things people lived in.
Then, with the rise of the property investing class, they became assets. They became things we invested in as well as lived in.
And now, with the integration of the world’s financial markets, they are behaving like financial assets – like stocks and bonds. What happens here depends on what investors all over the world are doing.
This is the new reality. Property is a global financial asset.
And it means we need to keep one eye on what the global economy is doing. We need to keep our vision broad.
Now that is easier said than done. I’m lucky enough to have a research assistant who keeps me up to speed. (Of course I’ll share the gold with you here – watch this space).
But for now, it is just enough to take an interest in this space. And even simply being aware that property now behaves like a global financial asset will put you a good stride ahead of the pack.
But the broader point here is that no strategy survives for long. The world is changing. Strategy’s that made sense five years ago are obsolete now.
So we have to treat our education and development as an ongoing concern. It’s not a do-it-once, set-and-forget type thing.
You need to be constantly curious – how can I be better, stronger, more savvy?
Curiosity is the key. Ask the question, and the rest will take care of itself.