Are the biggest ever property value gains just ahead? If so where will they be realized, and what make or break factor has the power to make all of the difference in net investment returns and mitigating risk?
While much of the property news headlines have been pessimistic, and focused on ‘moderating growth’, veteran property investment advisors foresee incredible gains on the horizon. They just might not be where most expect them to be. They also recognize the power of investment property management.
Thawing Property Market to Unleash Super-Sized Value Gains
While a handful of overseas investment property destinations continue to fuel media readership with bubble rumors, industry experts see a global market coming out of deep freeze, with trillions in equity going up for grabs.
In fact, if anything, media fear mongering will only unlock a global property value tsunami as flight capital exits China, prime Central London, and other previous safe havens for safety in new destinations with more life in them.
Even in top destinations such as New York and Chicago, data compiler RealtyTrac reports distressed property is trading for 48% to 63.5% under market value. The pending upward correction from this alone will add trillions to property equity over the next 3 years.
Worldwide historical data shows once property prices recover, new boom phases generally last an average of 7 to 15 years. In San Diego, California which was recently pegged as the fastest growing U.S. metro analysts predict it will take another 3 to 4 years before values even return to their previous highs. For recovering markets like New York, Chicago, Miami, and Dublin this suggests at least a decade of bullish property value gains ahead.
Pent Up Demand & High Velocity Gains in Hidden Niches
A 99 page PowerPoint delivered by the Chief Economist of the U.S. National Association of Realtors in Washington, DC on May 15th, 2014 revealed several important trends, and delivered insights into the next big market shifts.
Attendees at the Washington economic and real estate forum, were privy to statistical data which highlights several market segments swelling with pent up demand for property. Among these of course are an additional 3 million American adults 35 years old and under which are living at home in the wake of the financial crisis. Being added to this pool are thousands more still being evicted from their homes as slow bank repossessions finally make their way to courts.
The result is a ballooning multi-generational pool of captive renters which will drive rental property vacancy rates to record lows in the U.S., while extremely limited inventory in cities with jobs pushes home values and rental rates up at a double digit pace.
A similar trend is moving under the surface in Australian cities; Brisbane and Melbourne where a young population flocks to urban environments for enhanced lifestyles and job opportunities, but is finding a lack of suitable apartments.
In addition to lifting existing property values, these trends are making unique buildings, filling this critical void in top re-emerging markets in high demand. In the U.S. this has recently caused a significant separation in the higher value of new build properties, versus existing real estate.
Investment Property Management: The Gatekeeper of Net Investment Returns
There is one secret in the overseas real estate industry few talk about. This is that behind the veil of incredible promotional visuals and destination projections nothing really matters more for mitigating risk, and maximizing net returns than investment property management.
As evidenced by the exit from the mostly deeply distressed low end foreclosure property markets by large private equity firms Blackstone and Cerberus, and transitioning to shed securitized rental portfolios backed by them, and transitioning to rental property financing and new development, investment property management is increasingly separating the investor returns.
Even the best international property opportunities can see potential returns buffeted by inexperienced management, while others enjoy significant wealth building and superior yields.
The extent of the net financial differences can be as disparate as the experience level and financial strength of the property investment advisors involved. Consider the latest data shows the average Realtor in the USA does just $1.8M in annual volume, across 13 transaction, and earns less than $50,000 per year. The average Realtor acting as an investment property manager holds just 30 units under management. This is contrasted by international property investment advisors such as IP Global, which has managed $1.5 billion in investment property dealing for its clients across 26 markets worldwide.