The global financial markets are in turmoil with China and the United States faltering, leaving investors at a loss as to where to put their next big investment. Blue-chip shareholders are suffering large scale losses and investment safe havens are becoming difficult to find. But could real estate in the emerging markets hold the answer?
Statistics released by the Global Property Guide point to significant increases in house prices in Asia, including Pakistan. Leading the charge are countries such as Qatar with a 16 percent rise in the third quarter of 2015. Close on its heels was Mexico with 5.45 percent and the Philippines, with 5.41 percent.
Pakistan’s numbers are relatively flat, with some increases in Karachi, Islamabad and Lahore. Lower prices is some areas are expected to increase rather than decrease demand.
The Hunt For the Perfect Investment
Kian Moini, Co-founder of global property portal Lamudi, points out that the movement of investors to the emerging markets is a natural response to the global economic crisis.
“Now more than ever, investors are looking at opportunities in less saturated locations, like Pakistan,” he said. “With so much uncertainty in the stock market, buyers are turning to real estate as an alternative. Real estate assets are much less volatile and can withstand the negative effects of the global economic downturn.”
In high-growth markets like Pakistan, you can purchase a luxury two-bedroom apartment for around US$71,000 according to the latest listings on Lamudi. Compare that with the staggering $1,799,605 stated by Foxton.co.uk for a similar two-bedroom flat in central London. In the Philippines, a country that has displayed impressive growth across the board, especially in real estate, a two-bedroom demands an asking price of $100,837. But are there risks involved?
Arguably the biggest deterrent to investment in the emerging markets is the unpredictability of the political landscape. However, this is something that many of these countries are urgently seeking to remedy. Take the case of Karachi, Pakistan, where the security situation has vastly improved over the past year.
President Joko Widodo in Indonesia has made a significant impact since coming to power. Changes to foreign ownership laws in the country has resulted in a large increase in demand. The average price of a two-bed flat in the world’s biggest archipelago sits at about $62,864. Across many emerging markets, governments are stabilising and are opening up to foreign investment.
2015 marked the year where global stock markets devalued in proportions unseen since 2008. Everything from U.S. gamemakers to Chinese electrical appliance makers have fallen by an average of 11 percent in 2016, according to a Bloomberg Business report. The problem is that when investors become risk averse as they are at the moment, solidly performing stocks get dumped in the same way that poor performing ones do.
Losses have spanned the globe and risk-hedging consumers are looking to real estate to bolster their portfolio. Countries like Sri Lanka, where a two bed can be acquired for $160,981 on average, can be deemed a preferential alternative for cash-rich investors looking to diversify.
It would be wrong to suggest that investing in the emerging markets is the perfect alternative to the stock market, but with extensive research and the help of a real estate professional, property can form a key component in a balanced portfolio.