Good sensible advice isn’t always forthcoming in the investment sector. We would like to offer the following advice, free of charge.
“It isn’t what people think that is important, but the reason they think what they think.”
The typical investor took a cold bath last year, because too much of his/her portfolio was in Traditional Stocks and Shares. His weighting was probably tilted too much toward the tech market and his/her portfolio was not diverse enough to produce a healthy return.
If that describes you, you’re probably a bit gun shy about the Stock Market especially since new recession predictions are proliferating faster than reality TV shows these days.
But an economic slowdown or even a new full-blown recession doesn’t necessarily mean it’s time to cash in your remaining stocks and shares and hide all of your money under the mattress. Instead, this should be a time to review the lessons which you learned during the last market meltdown and make the necessary adjustments to your long-term investment portfolio and investment strategy.
Today is probably the best time to diversify your portfolio and invest in Spanish Property, for one reason: Recessions = Panic = Lower real estate demand = lower price tags. As the real estate business crashes, property prices are in decline, Bank repossessions are everywhere – this means, opportunities are everywhere, and at a discounted price tag.
If you could have the opportunity to buy a quality property at up to 50 % BMV (below market value), would this be a good call? If the location is good, and the holiday rental potential is there, then it should be a very good buy signal for any switched on, opportunistic investor.
As we know, rents go up and down depending upon demand, but construction costs will probably never go down significantly in our lifetimes, given that commodities and labor continue to get more expensive. Since every investor would rather buy an existing building than build one at the moment, nothing is getting built until values exceed replacement costs. As we learned in microeconomics, rents (prices) will quickly rise if properties (supplies) stay the same, while demand increases. I cannot tell you exactly when demand will pick up, but it historically it always has, especially in prime locations or in holiday destinations.
One last piece of advice: never invest in real estate with an expectation that your property’s value will go up – it’s not always the case. Instead, invest with cash flow in mind – invest in rental property.
The property market will recover this much we can guarantee.