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Real Estate 'A Safe Haven' In Times Of Economic Turmoil?

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Real Estate 'A Safe Haven' In Times Of Economic Turmoil?

By - Thursday 01 September 2011

Following the announcement earlier this month that Standard and Poor's had downgraded the US's credit rating from its AAA status to AA+, global markets tumbled, with billions of dollars wiped off the price of stocks and shares around the world. While the FTSE 100 has gained some ground since the decision at the start of August, it may have left investors wondering where exactly their money will be safe.

Gold is often considered a go-to commodity in times of economic uncertainty, but even the value of this precious metal dropped towards the beginning of the year. While gold prices have recovered somewhat over the past two months, there have still been peaks and troughs that may have caused some concern among investors looking for a safe haven on global markets.

And as the base rate of interest remains low in the UK and US, as well as around Europe, with governments fighting to reduce sizable budget deficits, traditional savings accounts are not offering a particularly good return on your capital investment either. Which leaves the question, where exactly should you invest if you are looking for security? Research published recently by suggests that real estate investment could be the solution.

The organisation revealed that, since January 2011, house prices in the UK have risen by 2.1 per cent. Over the same period, the FTSE 100 shed 13.7 per cent of its value, while cash savings offer a return of just 1.04 per cent. Samantha Baden, property analyst at the firm, commented: "No investment is immune to changes in economic circumstances, but some are more vulnerable than others. In the current economic climate, against a backdrop of high inflation, even maintaining the value of an investment can be difficult, but for 2011 so far, the property market has managed to deliver this."

Head of investment management at London Central Portfolio Hugh Best explained recently that the real estate sector is less likely to experience sudden fluctuations in its value because it "doesn't have as much of a knee-jerk reaction as things like stocks and shares". He pointed out that due to the nature of the property market problems often pass before it has a chance to react one way or the other. Mr Best stated that major changes in the UK's real estate industry are not anticipated, adding that it is likely to follow an "upward trend" for the rest of the year.

He observed that in times of instability, investors look for what they consider to be a "safe haven" and at present, the London property market in particular delivers the kinds of returns many people are seeking. Fluctuations in currency values are just one of many reasons that investors from the Asia-Pacific region and the Middle East are drawn to assets in the UK's capital, Mr Best continued.

It would appear that both commercial and residential real estate is performing well in London at present. Mat Oakley, director of commercial research at Savills, noted recently that retailers are always keen to snap up space in the city's most desirable locations, regardless of the rent being asked for such properties.

And it isn't just London's commercial property market that has improved. Figures published earlier this month by CB Richard Ellis revealed that, overall, the capital value of global real estate assets rose in the second quarter of this year. According to the firm, year-on-year growth of 15.2 per cent was largely driven by the Asia-Pacific markets, while the Europe, Middle East and Africa data suggested that the rate of capital value increases had slowed during the three months from April to June this year, compared to the same period in 2010.

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*This page is provided for information purposes only and should not be construed as offering advice. IPIN is not licensed to give financial advice and all information provided by IPIN regarding real estate should never be treated as specific advice or regulations. This is standard practice with property investment companies as the purchase of property as an investment is not regulated by the UK or other Financial Services Authorities.

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