The property investment opportunity in growing economies is accentuated by the nature of property itself. As the economy grows demand for quality housing grows, and prices rise.

Demand is flexible in the sense that individuals can decide immediately to buy or not buy property. Supply, however, is much more constrained in a growing economy as it takes time to build property. The result is that demand for good quality housing often exceeds supply, and there is upward pressure on property prices and rents.

Investment at the early stage of this cycle provides the largest possibility for capital growth. When economies slow down property prices level out or may fall (in the long run they rarely fall to below their value at the beginning of a transitional period).

However, even when prices level off or begin falling (at the top of the cycle) rental income can rise, as we have seen in the UK over the last year. This is because people are less willing to buy when prices are levelling or falling, hence they rent and boost the rental market increasing investors’ current cash flows. Thus, for the property investor, there are potential gains at all stages of the cycle.

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view disclaimerPlease note: As with all investment property purchases, you are advised to take proper financial and legal advice at all stages. Investment values can decrease as well as increase. The content of this website is for informational purposes only, and readers are advised to speak to qualified legal experts and financial planners before taking any action. The information, tables, projections, and estimations provided by Validus are for indication only and do not represent factual information unless otherwise stated. The information is supplied without any guarantees whatsoever.