The thing about investing in real estate is that you can’t avoid but to take a certain degree of speculation to reap the most returns out of your investment. New York and London remain the number one spots to invest in global real estate, but the sad truth is, not many can afford properties in these metropolises.
However, don’t let the lack of capital put you off global real estate investment completely. As with most investment, the higher the risk, the higher the return. By observing the global property market, you may be able to gauge where the next hotspot to join New York and London will be in the next 10 years.
International real estate markets, like global markets generally, have been affected by the debt crisis in Europe and an economic slowdown in China. While formidable obstacles remain, these economic headwinds could be diminishing – the perfect time for investors to put their foot in.
So, what changed this year?
One of the most significant changes from a year ago is the general trend towards increasing prices. According to The Wealth Report 2014 by Knight Frank, in 2013, values fell in only 39% of the locations featured, compared with almost 50% in 2012. Besides, there was a double-digit growth in 20% of markets last year, when 2012 only saw growth in 15% of the markets.
Here are some of the cities to look out for if you are considering investing in real estate outside of Malaysia:
1. Jakarta, Indonesia
Indonesia’s economy is fast becoming one of the most exciting growth markets in the Asia Pacific region.
According to the same Knight Frank’s report, it is ranked as the number one fastest growing luxury residential property market in the Prime International Residential Index (PIRI).
With the Gross Domestic Product (GDP) growth of 6.4%, the city is set to double the middle class population by 2020, from 74 million to 141 million. As a result of such positive socio-economic trends, Indonesia’s capital city is now ranked as Asia Pacific’s best investment destination in Emerging Trends.
2. Sao Paulo, Brazil
In 2013, house prices rose by 13.9% (7.6% inflation-adjusted) in Sao Paulo, based on a report published on Global Property Guide. House prices in Sao Paulo increased 15.8% in 2012, 27% in 2011, 24% in 2010, and 21.6% in 2009.
Though last year it had one of the lowest growth since 2008, experts are still pinning this as one of the hotspots for global property investors.
According to Knight Frank, Sao Paulo heads the current Latin American top five list. Current trends suggest that the city is also set to see its Ultra High Net Worth Individuals (UHNWI) population ranking rise from 11th to eighth position globally by 2023.
Many foreign investors remain optimistic after the successful 2014 FIFA World Cup held in mid-2014, and the upcoming Olympics in 2016, which are both seen to have positive impact on house prices.
3. Istanbul, Turkey
As another emerging market following closely behind Dubai and Abu Dhabi, Istanbul is ranked as one of the hotspots by Knight Frank.
The enhanced status of Turkey as a safe haven location for investors from the Gulf and North Africa has propelled the city higher in the ranking. Furthermore, with the country’s strong economic growth rate, Istanbul is shaping up to be a wise property investment destination.
According to REIDIN, a global real estate information company, from 2012 up until January 2013, Istanbul, has seen a 19.47% growth in residential sales prices for existing homes.
4. Mumbai, India
Currently, Mumbai, India’s financial capital is one of the most expensive places in the world to buy a condominium unit. However, it is a pretty good second option if you can’t afford places like London or New York.
With the booming media industry, growth in the young, affluent middle class, and an exciting economy, Mumbai is set to become one of the biggest metropolitan cities, and may even rival Singapore and Dubai.
Predicted to make it to the top 10 global cities in 10 years, it is now a good time for foreign investors to make their move on this property market.
5. Sydney, Australia
Australia has long been popular with Asian buyers. Although it still has not broken into the top four rankings of cities in Asia-Pacific, Sydney is steadily growing in importance as a wealth hub for the region.
Despite its geographical remoteness, it comes in as the fifth placed hotspot in Knight Frank’s global cities ranking for the region.
According to Nicholas Holt, Knight Frank’s Head of Asia-Pacific Research, Sydney’s prime market growth is expected to continue into 2014, buoyed by low interest rates and steady foreign demand, especially from South-East Asia and China.
With Singapore already ranked third in the top 10 global cities list, many other Asian markets are slugging it out in the hope of making the list and becoming the region’s alpha urban hub.
With the Malaysian government’s various cooling measures on the local housing market, Malaysian investors are expected to have their interest in overseas properties pique further, especially in Australia, the UK and New Zealand. However, for those who may not have capital as big as the UHNWI, the above emerging markets are a good place to start.
