Homefront – Investments Trusts
By Ian Cowie
Saturday 10 November 2012
Five years after house prices began to fall in America - and more than two decades after the biggest property bubble ever burst in Japan - one of the most successful investors in the world, is betting on recovery.
Fortunately for British investors keen to gain some exposure to international real estate, you don't need to tie up hundreds of thousands of pounds in bricks and mortar overseas. You can reduce the risks inherent in dealing with foreign tenants, tax and legislation by using a pooled fund - such as a unit or investment trust - where minimum investments are often just a few hundred pounds.
Some, such as the little-known Japan Residential Investment Company even pay a decent dividend. In this case, 6.6pc net of basic rate tax.
First, though, why would anyone want to buy into markets where prices have been falling for years? Some comfort can be taken from the fact that the American billionaire and investment guru Warren Buffett is leading the way back into property. He recently used his fund Berkshire Hathaway to obtain a majority stake in a US estate agent and other housing-related ventures.
While Mr Buffett is not infallible, he clearly knows that the first step toward making a profit is to buy low. American house prices have fallen by 50pc in some states and several analysts have begun to argue that they now represent good value.
Even bigger house price falls on the other side of the world are also attracting bargain-seekers. Tokyo property prices today are a fraction of the level they reached in 1989.
Since then, the Japanese stock market has fallen to a quarter of its peak level with similar declines in property valuations. But some investors willing to accept high risks in pursuit of high returns reckon that decline could be about to reverse. ……
…… Contrarian investors - or those who like to buy when others sell - may even take comfort from recent price falls. Alan Steel of Alan Steel Asset Management explained: "On the basis that the past really is a good guide to what happens next, the performance of the First State Global Property Securities Fund over the last five horrendously difficult years, augurs well for the next five years.
"This fund is up 57pc net of charges - double the average for the property sector. The managers obviously made correct calls geographically, with more than half their assets in the US and their second highest weighting in Australia - another winner."
Against all that, anyone who writes anything positive about property can expect to be vilified for 'ramping' by the super cynics of cyberspace, as your humble correspondent knows from personal experience. But the important point for investors is not the past or even the present - both of which are well documented - but what might happen in future.
Sharp falls in house prices and other property valuations have been noted around the world for five years now. But nobody will ring a bell at the bottom of the market and a trend is only a trend until it stops.
Quote courtesy of The Telegraph
Saturday 10 November 2012