By Frits Panhuyzen
One of the most prominent gurus in the world, Marc Faber, knows it for sure: In his newsletter www.gloomboomdoom.com he sees, as well as former Bundesbank-banker Thilo Sarrazin, opportunities in for investors. The two would like to invest in real estate again.
Faber was originally a Swiss investment analyst, entrepreneur and author and lives since 1973 in Hong Kong. From there he sees the world. Property has over the years been an inflation-proof investment. Both Faber and Sarrazin expect for the coming years a significant inflation. The recent moves by the ECB also point in that direction. Faber provides in the next 10 years even 50% inflation. One of his arguments for property to move is that there is now real estate for sale for the (re) construction value. The investor who remains in cash, will pay the bill for the high inflation.
Always buildings needed
Stocks, bonds and related derivatives or asset titles remain essentially always a ‘virtual’ reality. The collapse of World Online and Fortis, to name just two examples, are clear evidence of this. But real estate is real and tangible. And I think everyone needs a house, whether an individual, a firm or a company. There will always be a building required.
Moreover, rents often linked to the consumer price index, so the rent will rise in line with inflation. So even if property values will decline even further, there is always the dividend that is so characteristic for investing in real estate.
After rain comes sunshine
I expect that in real estate the bottom is reached. The real estate market will face the trend upwards in the coming years. Now it is time to buy. There is more than enough supply and there are a few buyers, which creates very interesting prices. This has much more upside potential than downside. And even in worst case, property gives a good cash return from rental income.
Past crises showed the same picture regarding the development of property prices. Although in the past generated profits are no guarantee for the future, however they do offer a lot grip, and much hope for the property.
Frits Panhuyzen, Managing Director Synvest Investment
Oscar Ernstsen | 11th September 2012