By Shan Saeed
Sophisticated investors in the last 10 years have taken a long position in an asset class which appreciates during turbulent, i.e. REAL ESTATE – The only fixed asset that goes up during difficult times. In fact, real estate has become the NEW GLOBAL CURRENCY as the global economy continues to stay volatile and uncertain. Smart investors are feeling edgy due to political uncertainty in few markets like USA/UK /Europe. Tangible assets are given higher weightage in consideration as we navigate through treacherous times ahead.
I was reading the latest issue of Economist Magazine 2017, property prices are overheating in Australia, rebalancing in London and upsurge in ASEAN markets. How to gauge the fair value of the property market in any country? There are only three variables to assess the fair valuation of real estate
1. Rental
2. Income
3. Cost price
In all real estate markets, demographics, urbanisation and economic boom are the key variables for sophisticated investors who want to take a long position, according to Financial Times.
Sovereign wealth funds are piling into the property at an unprecedented pace in a bid to improve performance as the world’s largest investors grapple with low-interest rates. State-backed investment vehicles, which are used by countries either to save for a rainy day or to provide money for future generations, increased their allocations to property by 29 per cent in 2015, according to 77 sovereign funds with $8.7 trillion in assets under management.
Most sovereign funds are looking at the asset classes from the global perspective but are keenly focusing on Asia – where the growth is robust and solid. Some of the key real estate markets in ASEAN are Kuala Lumpur, Penang, Makati, Johor Bahru, HCMC, Bangkok, Jakarta, and Melacca.
Some ASEAN cities are booming as they are part of Belt and Road Initiative started by China. High-speed train has become the new obsession with many governments. Modern infra-structure has a strong correlation with GDP and drives real estate prices higher. Most of the smart investors are going long on real estate – reason, It’s The New Global Currency.
About the author
Shan Saeed is Chief Economist at IQI Global, one of the top brokerage houses, advising clients in Kuala Lumpur, Singapore, London, Melbourne, Dubai, Penang, Makati, HCMC, Manama and Toronto. Shan can be reached at shan.saeed@iqi-group.com
