The storm that is still building on the international economic scene, including the recent stark declines in oil prices and prices of industrial metals, is showcasing the risks that can suddenly occur to investments and other assets that are more dependent on monetary policy than others.
Is China Good for Real Estate?
Shadowed by the Greece crisis, many missed the issues on the Chinese stock market, which has been in steady decline for months now. In the meantime, the US commercial real estate has been fairly stable so far this year, despite the chaos surrounding it.
Instability outside of the commercial real estate sector may well end up being a boost for this market, as investors hunt for more stable places to park their low risk funds. Apart from gold and U.S T-Bills, there are few other investments that inspire investor confidence as much as owning property. Stocks in well placed real estate investment companies may also start to rise.
Where is the Risk?
With all the turmoil, investors are adjusting, altering or scrapping many of their existing investment strategies almost on a daily basis, including in real estate. However, for those who fully understand the various implications, taxes and often hidden expenses involved in investing in US real estate market, there may be opportunities.
On the flip side, commercial real estate investment is a long term investment that while it has liquidity, extracting funds from a real estate investment can be tricky, and more importantly time consuming. As a result, changing investment strategy to suddenly invest in this market may not be the most prudent thing to do as the turmoil is not guaranteed to continue.
While it might be tempting to sink money into bricks and mortar, the long term costs may outweigh the short term comfort from having funds in a stable market. For investors prepared to commit long term however, there is definitely a lower risk opportunity there for now.