High Confidence in Property Investment

Confidence in real estate as an investment vehicle is high this year, particularly from institutional investors. With plenty of ready cash, these funds are busy buying into the best property investment opportunities available around the world.

According to Colin Dyer, CEO at Jones Lang LaSalle, the location of the best opportunities isn’t widespread. Interviewed on Reuters, Dyer believes that the Asian and European markets will generally bottom out in the first half of this year. Other property markets such as the US will take longer to recover from the slowdown.

The new positive trend in real estate also depends on the type of investment. Dyer points out that several commercial property markets are already back on the upward climb. Examples of markets returning to previous levels include Hong Kong, major Chinese cities, London and Paris. Dyer says that confidence has returned to these cities whose property markets “have sprung back very quickly”. In less liquid markets, he believes that recovery will take longer.

Dyer contrasts the entry and exit of the property market downturn in many parts of the world. While he says the entry “was pretty uniform and pretty worldwide” with price drops of around 40%, the exit is showing “very different patterns according to the general economic background in each country and local investor confidence”. In this context, he says that the debacle of property in Dubai “is very much a local story”.

Talking about the structure of real estate markets, Dyer says that he has seen a distinct change in the present property cycle. He has noticed that institutional investors have retained their portfolios during this cycle. “In previous cycles, they’ve bailed out of real estate and lost confidence,” he says, “and this hasn’t happened this time”. According to Dyer, the investment management funds held by Jones Lang LaSalle have maintained their allocations during the recent downward trend.

Dyer also highlights that private equity currently has “lots of funds still to spend”. He believes that this ready cash was accumulated at the end of the previous property investment boom. This private equity, along with recapitalised Real Estate Investment Trusts (REITs), is “in a very good position with lots of dry powder to spend”. These “well-capitalised organisations” will set the trend over the next 12 to 18 months by buying good opportunities globally.

Although many economies and property markets are showing green shoots, not all are recovering at the same speed. Jones Lang LaSalle’s CEO makes the distinction between the V-shaped recoveries – these are found in London, Hong Kong and New York where markets are deep and traditionally very liquid – and U-shaped recoveries in secondary locations. Recoveries here will take longer and the regains in prices will be more gradual.

Obelisk’s own market research confirms this trend of recovery in specific markets. We have also noticed that private equity has large and liquid funds for good opportunities in real estate investment. Our recommendations for these funds include Brazil where the property market has not suffered at all from the global downturn. On the contrary, real estate in Brazil is currently on a strong upward trend with prices steadily rising.

For more information on overseas property investment and to find out about Obelisk's latest projects, contact Obelisk on 0034 952 820 319.

Obelisk also produces its Absolute Guide Series which contains the most recent investment information on 30 of the world’s top emerging markets. They can be downloaded free of charge at www.absoluteguideseries.com.

Contact us via email: info@obeliskinternational.com or visit our website: www.obeliskinvestmentproperty.com.

Investment in Ukraine Land Makes Sense

Soft commodities are widely believed to be the investment of the future and a must-have in any self-discerning portfolio. Recent studies and statistics show that if you invest in soft commodities via agricultural land in Ukraine you are on to a winner.

Farmland in Ukraine is one of the world’s most fertile and has the potential to become one of the most productive. New technology and better farming techniques are being introduced with excellent results.

The ever-increasing yields from land mean that Ukraine is now among global leaders in grain sales. In 2009, Ukraine became market leader in Spain, Tunisia, Algeria, Egypt and Saudi, and also entered the Far Eastern markets of Japan and Korea for the first time.

Ukraine farmland has several advantages in a very competitive industry. Along with more effective farming methods, Ukraine has reduced freight prices. In addition, the devaluation of the Hryvnia currency has increased profitability.

Agricultural land in Ukraine is currently under-exploited. However, as the pressure for more food rises globally, more land in Ukraine is being farmed. Just a decade ago one million hectares were under crops. In 2009, Ukraine farmed 4.2 million hectares, a massive increase of 420%. Likewise, farms are getting bigger – the average farm size grew from just 28 hectares to 101 between 1999 and 2009. Reflecting this growth in agriculture are the production volumes from Ukraine land. These saw a year-on-year increase of 5% in January this year.

The rich and fertile soil found throughout Ukraine produces grains (corn, barley and wheat) and sunflower. Together with Argentina and Russia, Ukraine forms part of the so-called Sunflower Triangle. The increased quality of Ukraine sunflower crops plus a consistent export level of an average of 1.76 million tonnes over the last three years ensure that Ukraine is a leader in the sunflower industry.

But all this is just the tip of the iceberg. According to the US Department of Agriculture (USDA), Ukraine has huge potential in agriculture, a potential that will gradually be realised over the next ten years. The recent USDA ‘Agricultural Projections to 2019’ report finds that Ukraine along with Russia and Kazakhstan will become major agricultural players by 2020.

The report says that traditional exporters such as Australia, the EU and US will “remain important in global trade in the coming decade. But countries that are making significant investments in their agricultural sectors and increasingly pursuing policies to encourage agricultural production, including Ukraine and Kazakhstan, are expected to have an increasing presence in export markets for basic agricultural commodities”.

The report highlights corn exports from the Former Soviet Union, which are predicted to rise to 8.4 million tonnes by 2019. The bulk of these exports will come from Ukraine where “favourable resource endowments, wider use of hybrid seed, and greater investment in agriculture, stimulate corn production”.

Barley is also hugely important crop for Ukraine, which together with Russia, has an almost 50% share of the world’s barley trade. According to USDA, “Ukraine became the world’s largest barley exporter in 2009 and is projected to remain so throughout the projection period (2019)”.

Obelisk believes that when it comes to investment in agricultural land, the statistics from Ukraine speak for themselves. With farming productivity increasing annually, the future for investment in Ukraine land is very bright.

For more information on overseas property investment and to find out about Obelisk's latest projects, contact Obelisk on 0034 952 820 319.

Obelisk also produces its Absolute Guide Series which contains the most recent investment information on 30 of the world’s top emerging markets. They can be downloaded free of charge at www.absoluteguideseries.com.

Contact us via email: info@obeliskinternational.com or visit our website: www.obeliskinvestmentproperty.com.

Brazil Investment Receives Further Boost

Investment in Brazil recently received a boost with the issue of new banknotes. This is part of the push to make the Brazilian currency fully convertible, an event that will inevitably encourage further investment into Brazil.

With the Brazil stock exchange producing some of the best results globally and investment in Brazil currently booming, the country is seeing a vast inflow of funds. The Brazil real was one of the top performing currencies during 2009 and this has acted as a honeypot for capital inflows into Brazil via direct investment or equities.

However, Brazil’s currency cannot be freely traded or fully converted into other currencies. Recognising that this is a slight obstacle in the way of outflow investment from Brazil, the Central Bank of Brazil is keen to bring the real into line with other freely traded international currencies. The new ‘family’ of real banknotes is the first step in the process.

R$50 and R$100 banknotes were unveiled in a high-profile ceremony in Brazil. These highest denomination notes are first to be released into circulation. The Central Bank of Brazil will release other notes over the next two years with R$10 and R$20 notes due to be issued early next year and R$2 and R$5 will follow suit in early 2012.

The new bills in Brazil incorporate the latest security measures to guard against counterfeiting. These measures include high-quality watermarks and holographic material. The increased security of Brazil’s notes brings them up to standards similar to those found in the world’s most important currencies. High-tech anti-counterfeiting measures also add to the appeal of the currency in Brazil, making investing in Brazil more attractive.

Speaking at the presentation, Finance Minister Guido Mantega said the release of the new banknotes was in preparation for international circulation as “there is already demand for the real to be used outside Brazil”.

Over the last five years, Brazil has gone from strength to strength. The stability of the economy characterised by controlled inflation, high annual growth forecasts for the near future and an increasingly-affluent middle class have all contributed to making Brazil one of the top investment destinations globally.

At Obelisk, we see the release of high-tech banknotes as yet another step along the road towards a fully developed economy. The bid to internationalise the currency in Brazil is also a welcome addition to the long list of reasons why one of the best bets at the moment is Brazilian real estate.

For more information on overseas property investment and to find out about Obelisk's latest projects, contact Obelisk on 0034 952 820 319.

Obelisk also produces its Absolute Guide Series which contains the most recent investment information on 30 of the world’s top emerging markets. They can be downloaded free of charge at www.absoluteguideseries.com.

Contact us via email: info@obeliskinternational.com or visit our website: www.obeliskinvestmentproperty.com.

A Great Decade for Agriculture Investment

As the world population grows so does the need for more food. Along with this constant demand for food supplies go changes in diet and a huge increase in the use of biofuel. The combination of these three factors means that investment in agricultural land will be one of the rising stars during this next decade.

To invest in agricultural land is, by extension, to invest in soft commodities, an option that is growing in importance within individual portfolios. This new protagonist is a result of more accessible investment in commodities and their potential for excellent returns.

Commenting in the Times on this new trend, Mike Horseman, an independent financial adviser, said that “Commodities are definitely going to play a bigger part in people’s investment decisions in the future”. He advises that individuals allocate up to 15% of their portfolios to commodities.

Commodities fall into several categories with foods being one of the largest. Foods are also one of the commodities in highest demand. With the global population expected to grow by 1.1% a year until 2019 and 150 new mouths born every minute, this demand is here to stay.

The US Department of Agriculture (USDA) ‘Agricultural Projections to 2019’ report looks at the recent changes in the world economy and the increasingly important role that developing nations play in it. These countries are expected to have the highest GDP growth rates for the next few years, while developed nations recover slowly from deep recession.

The report states that developing nations will constitute 84% of the world’s population by 2019 with China and India accounting for a massive 37% between them. As their economies grow, the populations’ purchasing power also grows. “Economic growth in developing countries is especially important because food consumption and (animal) feed use are particularly responsive to income growth,” says the USDA report.

According to USDA, “developing countries will play an increasingly important role in the global economy and growth in food demand”. As incomes increase, the population tends to change its diet to include more animal-based foods. This is particularly noticeable in China and India where the local populations are eating more meat, dairy products and processed foods (vegetable oils are a major component of these). This type of food is often imported and more expensive than traditional diet components.

Demand for agricultural products is boosted further by the ever-growing expansion of the use of biofuels, particularly in the US and EU. Biofuels are mostly made from agricultural crops. Ethanol comes from fermented sugars found in numerous crops including wheat, corn and beet, and biodiesel from vegetable oils such as rapeseed, sunflower and soy.

In conclusion to its ten-year projection, the USDA says that “the long-term growth in global demand for agricultural products will hold prices at historically high levels” over the next ten years. In particular, corn, wheat and soybean crops are projected to achieve consistently high prices per bushel between now and 2019.

At Obelisk, we believe that agricultural commodities are a win-win addition to an investment portfolio. Not only do they bring all-important diversity, they also provide promising returns. And, unlike some commodity categories such as base metals used in industry, agricultural commodities barely suffer during economic downturns. This is due to an underlying constant demand – people always have to eat.

The combination of “historically high levels” for prices and a constant and increasing demand for more and better food mean that investment in agricultural land is a must for all portfolios over the next decade. And undoubtedly beyond.

BRICs for Car Investment

Since Goldman Sachs coined the BRIC acronym, Brazil, Russia, India and China have come to the forefront of the world stage. Not only are their economies growing, but investment in these emerging markets is booming.

The four giants already have a bigger share of world trade than the US. Share values in the BRICs more than doubled between 2005 and 2009 and their predicted GDP growth this year is the envy of most developed nations. Just ten years ago, only one BRIC had investment grading, a status now shared by all four.

Each BRIC has carved its world niche. China has become top exporter of goods, recently exceeding Germany’s export value to take the world number one position. Russia has large oil and gas deposits, while India excels in software. And Brazil dominates the agricultural commodity markets with what the Financial Times calls, “super-competitive farmers”.

When it comes to car manufacturing, all four BRICs share potential and there has been a huge recent increase in those investing in Brazil and China. This multi-million investment by the world’s top manufacturers has kept the automobile sector afloat during the last 18 months – one of the most difficult periods ever for car sales globally.

The market for cars in Brazil is booming. Sales of all vehicles in the country reached 3.14 million last year, an all-time record and an 11% increase on 2008. Topping the sales was Fiat with 737,000 vehicles followed by Volkswagen with 686,000 and GM with 595,000.

Like so many sectors in Brazil at the moment, the automobile market offers potential for huge growth. Brazil’s population numbers around 200 million, but the ratio of cars to people is one car per seven people. Compare this to the US where the ratio comes in at one car per 1.2 Americans and it’s easy to appreciate the potential.

Sales of cars are expected to rise even further this year with experts predicting that total sales will reach 5.7 million cars by 2020. This massive hike is fuelled by the growing purchasing power of Brazilians who are increasingly affluent and keen to buy consumer goods. For many Brazilians, cars are top of their must-have lists.

Unsurprisingly, investment in Brazil – the fifth largest market for car manufacturers in the world – runs to billions. Ford is investing R$4.6 billion (US$2.3 billion) between 2011 and 2015. Volkswagen is injecting R$6.2 billion of investment funds into Brazil from this year to 2014. Investment by Fiat is also high – R$1.8 billion will find its way into car manufacturing in Brazil and Argentina this year alone. French manufacturers, Peugeot and Renault, are also investing around R$1 billion each in Brazil.

While the car industry falters in many developed nations, car manufacturing in Brazil is a very different story. Ford in Brazil made profits during 23 consecutive quarters up to Q3 last year. Ford’s President in Brazil, Marcos de Oliveira claims these results are due to Brazil’s economic strength and stability. “The big difference is the stability Brazil has achieved over the last ten years,” he said.

At Obelisk, we believe the success of the car manufacturing industry in Brazil is yet another indication of the country’s huge potential. A booming economy, ever-richer population and massive resources all combine to make Brazil the BRIC of the moment. And the list of investment opportunities – property, commodities, alternative investments – seems endless. When it comes to sugar, cars or real estate, Brazil is quite simply the place to be.

For more information on overseas property investment and to find out about Obelisk's latest projects, contact Obelisk on 0034 952 820 319.

Obelisk also produces its Absolute Guide Series which contains the most recent investment information on 30 of the world’s top emerging markets. They can be downloaded free of charge at www.absoluteguideseries.com.

Contact us via email: info@obeliskinternational.com or visit our website: www.obeliskinvestmentproperty.com.

Brazil Powerhouse for Property Investment

Successful property investment is all about choosing a location that brings together the right ingredients for price growth and high returns. All these ingredients can be found in the booming Brazilian real estate market.

Latin America is fast emerging as an area to watch for overseas property investment. But not all nations within this continent are equally promising. According to PricewaterhouseCoopers (PWC), Mexico and Brazil are the countries with “the biggest potential”. However, when it comes to real estate, Brazil is the “powerhouse” since Mexico’s economy is suffering serious effects from the downturn in the US economy.

PWC recently published its annual Emerging Trends in Real Estate report. The section dedicated to property outside the US and Canada focuses on Brazil. One source quoted in the report says that Brazil is the place that offers “real estate value drivers”. These drivers are a growing property market, a rapidly growing middle class – Brazil’s middle class accounted for 53.2% of the population in 2009 – and a huge supply of resources.

Brazil’s privileged position as a powerhouse for property investment is boosted by numerous other factors. Controlled inflation is one of them – Brazil has successfully reined in its inflation rate to just over 4%, no mean feat for a country that once experienced 2,500% inflation. Unlike many developed nations, the phrase ‘credit crunch’ is practically unheard of in Brazil where mortgage lending increased by nearly 80% in the first nine months of last year.

In addition, Brazil has a diversified export market with an emphasis on agricultural commodities, cars and energy. Not to mention the vast offshore oil reserves about to be exploited.
PWC commentators earmark residential housing as the best bet for investment in the Brazilian property market. According to the report, “markets are underserved and the growing population desperately requires more apartments and single-family homes”.

Part of this demand will be met by the massive government social housing programme, Minha Casa, Minha Vida, which aims to build 1 million low-cost homes throughout Brazil by the end of this year. However, this will satisfy only some of the demand. PWC believes that “demand is locked in” and that those making investment in Brazil property can expect 25% to 30% returns.

Seen from a continental perspective, Brazil has no serious competitors bar Chile although PWC points out that Chile’s small real estate markets restrict investment possibilities. Neighbouring Argentina offers few promising prospects for property investment due to endemic political problems, high inflation and poor domestic demand.

Colombia has potential but the report believes it needs to make more progress economically – Colombia lags some five to ten years behind Brazil. Peru is perhaps a rising star and has a fast-growing economy, but lacks the maturity of Brazil. And political problems make property investment in Venezuela a no-no.

Brazil is therefore the top favourite. But PWC cautions against hasty and uninformed property investment. “You can’t just parachute in, make investments and have success without local partners,” warns the report.

As with all property investment, success comes with local knowledge and expertise, something Obelisk’s established presence in Brazil can provide. Several years of investment in the area means Obelisk has acquired the necessary know-how and reputation to facilitate successful investment in Brazil. In addition, Obelisk has created a trusted network of associates in Brazil, also essential to ensure that this investment “powerhouse” delivers the goods.

For more information on overseas property investment and to find out about Obelisk's latest projects, contact Obelisk on 0034 952 820 319.

Obelisk also produces its Absolute Guide Series which contains the most recent investment information on 30 of the world’s top emerging markets. They can be downloaded free of charge at www.absoluteguideseries.com.

Contact us via email: info@obeliskinternational.com or visit our website: www.obeliskinvestmentproperty.com.

Best Bets for Property Investment in 2010

The direction overseas property investment destinations are going to take this year is, in many cases, uncertain. But in 2010, one thing is for sure – maximum return from property investment can only be achieved by following the fundamentals.

Investment tips for the year offered in the Emerging Trends in Real Estate 2010 report published by PricewaterhouseCoopers (PWC) is go back to basics. After a good 18 months of troubled waters in many property investment markets – e.g. Spain, Florida and Cyprus – it is time to return to the ground rules of prudent investment.

According to the report, this is the year to take your time, invest with a medium to long-term view, buy land and deal in cash. The report, in its 31st edition, looks at the real estate market in the US, Canada and Latin America. It states that 2010 “will be the worst time for investors to sell properties in the report’s 30-year history”. However, there is a note of optimism for the buyer who will find “a much-improving environment to buy (with cash)”.

In these circumstances, PWC believes investors need to bid their time. “Early is the new wrong,” says the report, which cautions against rushing into a property investment even in areas when rock-bottom bargains are available.
The report recommends taking your time before you make an investment decision and then advises that you hold on to the investment for a five to seven-year period. This medium to long-term timescale – Obelisk recommends an investment schedule of five to ten years – allows the property investment to reach its full potential.

Emerging Trends in Real Estate 2010 recommends land investment as one of the best bets for 2010. Land investment is tipped on the grounds that prices may not ever be as low again. In any case, including land in an investment portfolio is always a win-win strategy. As Mark Twain famously said, “Buy land: they’re not making it anymore”.

PWC also tips hotels and green homes for property investment with most potential this year. The report expects an abundance of hotels at low prices to enter the investment market to the extent that one interviewee in the report claims that “you’ll be able to steal good hotels”. Residential investment with a ‘green’ or ‘eco’ focus – e.g. smaller homes within easy reach of amenities and workplaces – is a safe bet for developers.

In the residential property sector, PWC believes that apartments are a good buy. In particular, apartments and holiday homes in top resorts are an interesting target for property investment, especially those in beachfront locations. As the report says, “beachfront condominiums in south Florida always bounce back”. The same investment advice can be applied to apartments in prime resorts in Europe such as Marbella, the Algarve and the French Riviera.

Outside the US and Canada, PWC turns its attentions south to Latin America where the report says “investment opportunities center on Brazil”. According to the report, Brazil property has the essential ingredients for “real estate value drivers”. These are a growing market, an emerging middle class and an abundance of resources. Unlike other Latin America markets with the exception of Chile – real estate here is one to watch – Brazil offers potential and excellent outlook.

The PWC recommendations of timely investment over the medium to long term in land and/or Brazil coincide with the Obelisk investment strategy. We believe that this is the winning formula for property investment that brings both exceptional returns and peace of mind.

For more information on overseas property investment and to find out about Obelisk's latest projects, contact Obelisk on 0034 952 820 319.

Obelisk also produces its Absolute Guide Series which contains the most recent investment information on 30 of the world’s top emerging markets. They can be downloaded free of charge at www.absoluteguideseries.com.

Contact us via email: info@obeliskinternational.com or visit our website: www.obeliskinvestmentproperty.com.

Challenging Outlook for Investment in Europe

While investment in emerging markets looks extremely promising for 2010, the outlook for Europe is challenging. However, some countries represent better property investment opportunities than others.

The Jones Lang LaSalle ‘Capital Markets Outlook 2010’ examines the investment climate for commercial property in Europe and subtitles its report “Uneven Terrain”. On the positive side, the report finds that the worst is now over and that “market drivers are trending up”. It also points out that the cyclical nature of property investment means that this has been one of the most profitable times to invest and quotes profit taking in the UK as an example.

However, in spite of the fact that “there will be winners in 2010”, Jones Lang LaSalle believes that investment in real estate in Europe faces several key challenges. These include difficulties in establishing pricing levels and the problem of financing – an obstacle facing property investment in most developed countries at the moment. The uneven recovery throughout European economies is an additional issue.

The report claims that equity inflows into the property sector will grow this year with equity capital focussing on “well-let, prime assets”. Overall, investment volumes will remain low but considerably higher than 2009. Jones Lang LaSalle expects a year-on-year increase of 20%, taking volumes back to those last seen in 2002.

The report concludes that this year will be an uneven one for investment with some contradictory elements. However, it reiterates that “the mood is decidedly more positive at the start of 2010”. The report says that the reasons behind this are “more clarity and certainty over the future”, which is both hopeful and a relief.

When it comes to predictions for the European real estate market, Nigel Roberts, the Chairman of EMEA Research at Jones Lang LaSalle divides his forecast into three categories for growth this year. At one end are countries where the property market will bounce back because of a shortage of supply. Examples here include the UK and Russia. Russia has the additional advantage of emerging economy status – the IMF has just increased its GDP growth forecast by 2.1% for Russia.

Next, Mr Roberts believes are the European nations presenting a combination of “stable economies and strong demand drivers”. The Scandinavian countries are the main cases in point in this category. This is confirmed by recent price rises in Norway and Finland.

According to Mr Roberts, medium-term investment prospects will be popular this year with investors who have become more cautious in the light of recent economic events. This sector will be looking at countries that are “mature, liquid and have a strong wealth base”. Candidates for real estate investment here include France, Germany and Switzerland. Finally, Jones Lang LaSalle believes there may be some resurgence in Central and Eastern Europe this year and next as GDP growth bounces back.

In conclusion, investment in Europe faces a year of mixed results. Obelisk market research points to better investment opportunities elsewhere in the world, particularly emerging markets. Here, strong economic growth and internal consumer demand look set to ensure far greater returns on money than those found in Europe.

For more information on overseas property investment and to find out about Obelisk's latest projects, contact Obelisk on 0034 952 820 319.

Obelisk also produces its Absolute Guide Series which contains the most recent investment information on 30 of the world’s top emerging markets. They can be downloaded free of charge at www.absoluteguideseries.com.

Contact us via email: info@obeliskinternational.com or visit our website: www.obeliskinvestmentproperty.com.