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Property on investors’ radar |
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the star online 24 march, 2008
GIVEN the volatility in the equity and financial markets since late last year, investors, both retail and institutional, are looking for safer places to park their money. Inflationary pressure also plays a role in where the money goes.
Property is an asset class that, in recent times, has entered the radar of investors seeking capital gains, yields or as a hedge against inflation.
For example, in tandem with economic growth, the property markets of Ireland and Spain were booming until recently while in metropolises such as Hong Kong, London, Mumbai, New York, Shanghai, Singapore and Sydney, commercial and residential property prices have risen due to their roles as global or regional financial hubs.
However, this asset class is complex, as street and market sentiment count for a lot. For residential properties, investment is based heavily on location while for commercial properties, economic growth and business sentiment are important factors. Supply and demand also influence the price, capital gains and yields.
Property prices in certain markets might have levelled off or fallen on account of the mortgage crisis in the US and the subsequent turmoil that has ensued but if ever there was a time to purchase property it might be now in those markets that have seen falling prices such as in the US.
The US Federal Reserve's move to cut the federal funds rate - the key interest rate that influences consumer credit, has also fuelled a property boom in Asia where interest rates have been kept low in tandem with the Fed's.
Due to this comparatively low-interest rate regime across most of East and Southeast Asia, there is a good spread or gap between returns and financing of properties.
Australia on the other hand is facing higher interest rates but due to the lack of supply in the residential component of the property market, there might be a property boom although not till two years down the road when pressure for housing builds up, according to a February report by an economist with an Australian bank.
For more information: http://biz.thestar.com.my/news/story.asp?file=/2008/3/24/business/20732452&sec=business
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