While there have certainly been exceptions to the rule, throughout most of modern history, property has been a good investment. Large property portfolios have made many entrepreneurs wealthy and, if you go about it smartly, you minimise risk as much as possible.
But let’s talk about those exceptions to the rule. The past year and a half has certainly been unlike anyone predicted. It has consistently been called “unprecedented” and, in terms of the property market, unprecedented has often meant bad.
However, the property market has defied many people’s expectations. Many experts and laypeople expected property prices to plummet, with the economic crash leaving few people able to buy homes. Furthermore, fewer people than ever were looking to buy new homes.
In most parts of the world, including throughout the UK, property did suffer a dip. But it was more of a blip than anything substantial. The market quickly recovered and we’re now looking at record highs. Property throughout Wales has soared in prices. In property epicentres, prices have increased by more than 24% in the past 12 months. This trend is not UK-specific, but has occurred in many other parts of the world.
If you have been planning on buying property abroad, this is not great news. While none of us want the global property market to crash, the rising prices are making it difficult to invest. They also leave us with the question of whether it is wise to invest when prices are at an all time high.
Nonetheless, we cannot put off our lives indefinitely, and you may have to decide whether to go ahead buying a property abroad or to invest at home instead.
Here are some of the considerations to take into account.
Why is property booming?
It is important to first look at the reasons property around the world is booming. The simple answer is that supply is at an all time low. Construction slowed to a halt during periods of the pandemic. This was due to restrictions and subsequent shortages in materials. This was also due to companies being unwilling to invest in building new properties during such an uncertain time.
Furthermore, people have been unable to move. Those who planned on selling their homes at the start of 2020 quickly took their properties off the market. Since many of these same people are now strapped for cash, they are no longer looking to move.
Therefore, the prices are not due to particularly high demand but to low supply. This is not going to last forever, but when the tide will change is anyone’s guess. As an investor, it is prudent to consider the factors you can control.
If you are buying in Wales, you can use your local knowledge and presence to make predictions about the property market. You may not get everything right, but you will do far better than you would when trying to bet on the property markets abroad. While you have a fairly good idea of how Wales is doing coming out of the pandemic, as well as how locals are thinking, you would have to make many more assumptions if you were planning on buying in Australia.
Another reason to consider buying at home rather than abroad is the matter of currency conversion. When buying abroad, you have to deal with international money transfers. Not only will you have to deal with the admin of sending large sums of money to a foreign country, but you will also have to cover the costs.
International money transfers should not be as expensive as they still are. While there are some excellent independent money transfer companies, you may have no choice but to use a bank when dealing with property sellers abroad. You can use this money transfer fee calculator to get an estimate of the kind of sums you would be paying.
When buying at home, you are simply paying your bond as you would any other bill. You don’t have to worry about exchange rates either. While the pound sterling to euro rate is fairly stable, the small differences add up. Every time you make a payment, you send a different amount than you did the previous time.
Of course, buying abroad has always come with the difficulties of international payments. It is something you need to accept if you want to invest overseas. However, together with the other reasons on this list, it may be a factor that convinces you to keep your money at home.
Consolidating in an uncertain world
There is one major factor that is keeping a lot of global citizens grounded, even as the pandemic draws to an end. We live in a very uncertain world at the moment, and it has been a long time since we have had any real stability. There are many people who simply don’t have the appetite for change that they once did.
Your personal appetite for change is, of course, subjective. However, consider the risks in investing in property abroad instead of consolidating your life at home. It looks like we will get back to normal at some point in the near future. Vaccines are working and global tourism is back on track. But if we’ve learnt anything over the past eighteen months, it is that the entire world can change in a very short amount of time.
We have still not seen the end of the COVID-19 pandemic, even as we approach 2022. There is no clear path forward. The virus is still mutating and we are still learning to live in a new normal. The last thing you want is property overseas that you suddenly cannot reach.
If you plan on renting your property out while you are at home, you may struggle to find renters. Again, you have a fairly good idea of the local response to the pandemic, but other countries are less predictable. Looking at Australia again, for example, you will see that their strict pandemic response would make renting out your property to tourists very difficult. They have gone into a number of lockdowns due to just a handful of cases.
When to buy property abroad
The question becomes whether there will ever be a good time to buy property abroad again. The answer is that it depends. In reality, holiday homes as a concept are becoming somewhat anachronistic. With Airbnb and similar services, finding a beautiful home to stay in when travelling anywhere in the world is easier than ever.
If you are buying to invest, however, it is a good idea to wait until the global tourism industry has recovered. Even if the country you want to buy in is doing well, international tourism is diverse. Certain countries which are not doing as well will still have lockdowns and will continue to be on red lists, limiting the number of travellers leaving. It is also important to remember that, on the whole, people are poorer now than they were at the start of 2020.
Investing in property at all right now might not be the best idea considering the high prices. Investing in property abroad comes with a range of other barriers.