Where Should I Invest My Money?
With stock markets plummeting around the globe due to the uncertainty of the global economy, and with some banks being allowed to fail, the question on everybody's lips is: Where should I invest my money; under the mattress?
By: Soho Properties
Laughable as that may seem, sales of safes have skyrocketed while, according to The Daily Mail (UK), even some furniture manufacturers have developed beds with in-built safes. But is this really a viable or realistic option for your money?
To stimulate consumer spending, the world's central banks have been forced by governments to introduce unprecedented cuts in interest rates. The pound, for example, is now at its lowest rate since the Bank of England was established in 1694.
The result of this is that commercial banks, although not lending money easily — and with 100% mortgages withdrawn in many countries — have cut interest rates dramatically, which has in turn has stimulated the incentive for investment in property where it’s assumed they have reached the end of the downturn.
Investors are hardly getting any interest at all from their bank deposits, and with dividend payments either being cut or suspended due to the slowdown in profits, selectively investment in real estate is a great alternative at the moment — it may actually be the safest of all options, if one discounts the fact that markets in the West remain unsure that property prices have yet bottomed out.
Under normal economic conditions, a zero rate of interest would guarantee that property prices would be high, with the ability to borrow money at almost no cost and, at the same time, enjoy a yield above bank rates, which would have lead to insatiable demand for real estate.
However, we are not living under "normal conditions"; we are living in extraordinary times, and the factors that have diluted these very "favourable conditions" are the drying up of credit and falling property prices in the West.
Christopher Heath, director of Soho Properties, in Bangkok, commented: "We are now seeing international investors taking a good look at what deals are available in the Thai property market, as property yields abroad and from other financial instruments are far more difficult, particularly in Europe, the US, Hong Kong, Singapore and Australia.
"The only real drawback here is that the Thai baht is quite high, although many analysts predict that its rate, supported by the Central Bank to keep exports buoyant, must surely retreat, and soon.
"For cash-rich buyers, this is a golden opportunity to pick up some real bargains, particularly from developers who have been affected by the credit crunch.
"Another option is to go for deals where developers are guaranteeing rental yields. This option works out really well for investors who can access a lower funding rate than the guaranteed rental yield."
It should be noted, however, that the assumption that banks are just not lending is misplaced; loans to financial corporations at the tail-end of last year rose nearly 43%.
Governments have put trillions of dollars into the banks and their economies in general in the form of stimulus packages, but the banks are wary of loans to businesses and individuals at present, which will have to be addressed in the very short term if the money from the bailouts is not be entirely squandered.
Paul Davies of Bangkok Property Condos & Homes Ltd, says: "The devaluation of properties in Thailand is far less than many other countries and the bounce-back from the global recession should be quicker in Thailand and Asia in general, therefore taking advantage of a re-sale in the future.
"There is also the fact that many people may take earlier retirement or redundancy packages due to the global slowdown and follow the many expats already here into the sun and enjoy the lower cost of living."
In Thailand, because of the Asian economic crisis of 1997, banks have not been permitted to invest in derivatives or risky loans, so the excesses and lack of liquidity of the Western banks do not apply.
Indeed, property prices in Thailand are not falling anywhere near as fast as they are elsewhere; in fact, there has actually been a very small downturn in the Bangkok property market.
In a related development and, to an extent, a boost in confidence for the Thai property sector, Accor, a European leader and one of the world's largest groups in hotels and services, is putting its bets on Thailand's tourism over the next few years, lining up four more hotel projects with Fico Group.
"Thailand will be able to recover quicker than other countries," Michael Issenberg, chairman and chief operating officer for Accor Asia Pacific, said. "I believe in the long-term potential of Thai tourism and will continue to expand in Thailand in the next few years."
What this amounts to is that as the Thai tourist industry starts to recover from the global fallout, investors in the Thai economy — more specifically, in its underlying property assets — will be well placed for high yields and large capital gains when the economies of the world eventually recover.
The Thai economy, whilst certainly sluggish, has not been as dramatically affected by the global slowdown as elsewhere due to its large current account reserves, and its property market has taken advantage of historically low interest rates.
Uncertainty is abundant at the moment, but it would be a very wise idea to take some time in assessing the possibilities of investing in the Thai property market, as property yields are a far surer answer than stuffing your money under the mattress and hoping for the best.
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Soho Properties is a leading Bangkok property real estate agent and location specialist, offering a first-class service for all your property-related needs.