Emerging Market Property Investment: Fortune Favours the Bold

PR Log (Press Release) – May 20, 2008 – What I have been saying for a while now was confirmed by Standard Life Apr 18 when they announced that emerging markets are the safest place to invest in the current global economic slowdown. Standard Life made the announcement alongside making a major investment into the emerging market of Brazil, as they put their money where their mouth is.

They explained that emerging markets are currently excellent investment locations, because the two big emerging markets, China and India, are massive importers of the basic materials that the new emerging markets are exporting cheaper than any of the established markets.

For a long time now I have said that a global market slowdown will actually be good for emerging markets, because as people and businesses tighten their belts, they will increasingly turn to the lower cost of the new emerging markets, to relocate their operations to, outsource to, import from, and holiday in.

This can only be good news for emerging market property. When you buy a property in an emerging market, you are buying to capitalise on either the influx of businesses, the influx of tourists, or, if you’re lucky, both.

You are relying on these things, a: because incoming tourists and businesses importing their top level management, translates to lots of people to rent out your property to. But also, because the incoming money, be it from tourists or new business and the employment thereof, increases the affluence of the area, this causes living costs and the cost of building materials to rise, which then means wages have to go up, translating to increases in the costs of building properties, all of which pushes house prices up, sometimes by as much as 50% per year.

You will only get growth like that in an emerging market. Some people, and I don’t mean Joe down the road, but well respected people in the industry, say that emerging market property is cheap, and likely to stay that way.

But I have always said, once a market starts to emerge, be it triggered by growth in new businesses or tourism growth, the cycle I laid out above begins and it is a cycle that has perpetual motion; increasing house prices means more money in tax revenues, wealthier developers putting money back into the economy, thus continuing to increase affluence, not to mention members of the local communities getting promoted, small business becoming big from rising tourism, all translating to rises in living costs, higher wages and keeping house price growth strong.

Some would say that investing in an emerging market property is a bold move, but in that case — as Standard Life’s announcement proves — the saying: fortune favours the bold has never been more true of anything, than it is of an emerging market property investment in the current climate.

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