The start of the year is often a time for resolving to get fit, eat healthier food or forsake that evening glass of wine. It can also be the perfect opportunity to take a fresh look at your investment portfolio, whether you want to preserve wealth for your children and their families or to set enough money aside to buy that holiday home you have always wanted.
For people that live and invest in the UK, 2019 is a very significant year. 29th March 2019, the date the UK plans to leave the EU, is fast approaching, and across the global financial markets investors have been positioning themselves for what is an unprecedented political and economic event. Have you thought about how this might affect your investment decisions? Will you rein in your appetite for risk, or wade into the deep water to embrace the rewards that can emerge from uncertainty?
At Pionr it is our belief that international property investment can deliver at both ends of this spectrum if it is integrated within a diversified investment portfolio. Real estate has a well-deserved reputation for combining stability with excellent yields and returns, particularly over the long-term, where it often enjoys far less price fluctuation than other investment classes. The stability of property makes it the perfect asset class around which to build a robust portfolio, and this could be crucial in the uncertain months and years that lie ahead.
We have 7 reasons why we think you should consider investing in international property in 2019. Some of these relate to poor performance in other major asset classes, whilst others are grounded in the reality that international property, particularly in Europe is seeing impressive growth in certain geographies and sectors.
1.The European industrial property market is booming
2017 saw the greatest amount of industrial space built in Europe in its history – more than 3.7 million sqm. This represents a 68% increase over 2016, and a 55% increase over the existing record dating back to 2007 (an additional 1.2 million sqm). The total industrial space in the region has increased by 17% as a result. In spite of this huge growth in supply, the average occupancy rate reached a record-breaking 95.1%. In effect, take-up is greater than ever and new additions have no problem finding their occupiers before or during development. In fact, the leasing market is performing equally as well, with 6.7 million sqm under contract, one million more than last year, this growth is fantastic news for investors looking to develop their holdings of yielding assets. It’s very likely that this positive trend will continue in various guises as micro-fabrication becomes popular thanks to 3D printing technology and specialised distribution hubs continue to be built to deliver on the retail vision of near-instantaneous delivery.
2.Two-year low across the UK stock market
The FTSE 100 index recently fell to its lowest level since July 2016, and back below the dotcom boom peak. The key factor driving this fall was reported to be the arrest of Huawei’s chief financial officer Meng Wanzhou, for alleged violations of U.S. sanctions. Clearly this isolated incident is actually part of the far wider topic of the USA’s ever-evolving relationship with China. Fears of a trade war between the nations lay heavy and play a significant role in the decisions made by Wall Street traders, which in turn have a significant effect on the UK market and any stocks you hold there.
3.Modern flexible office space on the continent is luring big businesses away from London
Despite the Brexit scaremongering that immediately followed the EU referendum, the mass business exodus from London never really happened. There has been a gradual withdrawal of financial institutions though, with businesses like Goldman Sachs setting up hubs in Frankfurt and Paris to conduct the business it will no longer be able to carry out from London post the UK’s departure from the EU. We expect to see quite a few more businesses relocating some of their functions to other European cities as supply meets specific demands.
Take France as an example, investment in the country is up 27 per cent year on year. 73 per cent of this was concentrated in Paris, with La Défense holding its position as the financial epicentre in the city. Investors from all over the world, including China and Asia, are deploying capital, and businesses such as Goldman Sachs are choosing to hedge their Brexit bets and move their headquarters here. Coupled with the revered French culture and greater investment into modern, flexible office space, it is no wonder that this area is becoming so sought after. These same drivers are also working in Amsterdam, Frankfurt, Lisbon and Brussels, giving investors plenty of scope to diversify across territories.
4.Shrinking yields in short-term UK bonds
The inherent uncertainty of the UK market has driven thirty-year bond yields to fall by 17 basis points to 1.66 percent, the most since 24th June 2016, the day after the Brexit referendum. Those on 10-year bonds dropped 10 basis points to 1.16 percent, the lowest level since May. Investors are seeking the safety of longer-dated U.K. bonds after Prime Minister Theresa May stepped up preparations for a no-deal Brexit scenario. John Wraith, head of U.K. macro rates at UBS Group AG commented that “The market clearly believes she will not get anything material enough from the EU to turn that scale of opposition around, so even if the vote is delayed it’s going to end in the same way -- with a big defeat for the government.”
5.For every equity crowdfunding success there are likely to be 4 fails
Crowdfunding websites such as Kickstarter and Indiegogo give companies an alternative way to raise funds to bring their products and services to market. But not all investors want to add to their growing mountain of electronic devices or clutter at home. The alternative is equity crowdfunding. Instead of buying a product that may or may not ship at some point in the future, you can buy a small stake in a start-up company instead. It’s worth noting that despite its accessibility and the low minimum investment amounts, equity crowdfunding in early-stage companies is one of the riskiest types of investment, as 80% of start-ups fail within two years. This means it is vitally important not to place all of your eggs in one basket, especially as equity investors are not always legally entitled to dividend payments, and will always be paid out last in the case of a business failing.
6.Leading cryptocurrency has worst month since 2011
You may have noticed the prolonged bear market cryptocurrencies have been facing during the past year, or perhaps you didn’t if you have not invested in one before. Last month was actually the worst on record for investors in Bitcoin since 2011. Taking a less short-sighted view, this is only the most recent bear market, of which there have been many before, and clearly some of the cryptocurrencies will rise again, but when you consider everything you need to be wary of when investing in this type of asset – hot wallets, cold wallets, exchanges, 3rd parties getting hacked (Mt. Gox for example) - there might be some less abstract investment opportunities that have the potential to perform just as well in the long-term, but also offer the safety net of real intrinsic physical value.
7.You can now access a whole world of property investment opportunities from one platform
As we have already established, the international property market is full of attractive investment opportunities, unfortunately many of the best projects never reach the public domain and even if you can find them how will you decide which to invest in? You need to be able to understand the financial models, the industry jargon and all of the potential factors that contribute to a given properties risk profile, such as long-term leases coming to an end and unfavourable dilapidation agreements. Don’t forget the elephant in the room, the level of investment required in the first place. It is possible to buy really cheap residential stock as an individual investor, but the majority of property investment deals are counted in the millions, rather than tens of thousands or even hundreds of thousands.
Pionr removes these barriers, giving you the opportunity to view, understand and assess a wide variety of international projects offered by our global network of trusted project sponsors, so that you can pick the ones that suit you and your financial objectives. If you are looking for a regular income how about an office building in the Budapest following a capital expenditure strategy which offers projected net yields that are significantly greater that those achieved in London? Perhaps long-term growth is what matters more? In that case an exciting residential development in the Vienna commuter belt offering a projected total return of 19% over 12 months could be of interest. The added bonus received when making international property investments via Pionr, is that you have not only diversified your investment portfolio into a new asset class, you have also mitigated against the risk of a fall in Sterling as your investment will be held in each property’s native currency.
As the New Year fast approaches the international property asset class appears to offer a stable foundation around which investors can build a resilient portfolio that should be able to weather the potentially turbulent times that lie ahead. Pionr makes this opportunity accessible to a far wider number of investors than ever before. We look forward to welcoming you as an investor in 2019.