Property investments

No so long ago, the standard story from every would be property investment guru, real estate agent and mortgage provider was “get into property investing – you can not go wrong.”

Of course, this is the line still being pushed, but with around 25% of the world’s population having been stung one way or another “investing in property,” we are perhaps not quite so gullible. My perspective has always been that property is a good long-term investment and hedge against inflation – and a way of making a passive (well, relatively) income. The whole idea of property investments going up 10, 20 or even 40% in value over a one-year period was a disaster waiting to happen as far as I was concerned. I was lucky enough to extract myself from the US property market in 2003, and the UK market in 2006, so avoiding the disastrous fall in values we are still witnessing.

The only thing preventing the real estate markets from collapsing completely is massive, and I do mean massive, government injections of cash via the banking system. The banks in Spain, Dubai and the US are now the largest property holders in those countries – using government cash that is being printed out of thin air. Or in Dubai’s case – pumped in by Citibank and borrowed from big sister Abu Dhabi.

The only thing preventing the real estate markets from collapsing completely is massive, and I do mean massive, government injections of cash via the banking system. The banks in Spain, Dubai and the US are now the largest property holders in those countries – using government cash that is being printed out of thin air. Or in Dubai’s case – pumped in by Citibank and borrowed from big sister Abu Dhabi.

The rest of the world looks to be following along, with the UK printing £175 billion new pounds to pump into the system as the banks continue foreclosing on businesses and private house. Despite this – the British government Inc still needed to borrow a record amount of money in June - another £8 billion, bringing government debt of the £ 800 billion or 56.8% of GDP – assuming GDP does not drop any further. This money is largely going into bank’s coffers to prevent them from collapsing and being able to hold on to vast stocks of homes, thus preventing a true market correction.

The markets have not yet properly corrected, and at some point the stocks being held by the banks will either become worthless because the maintenance costs are such that they are largely being left to rot of sold off quietly to some one “in the know,” at a discount.

This cannot continue indefinitely, and at some point this stock must enter the market driving prices further down. I would not consider getting into property investments until this time. But there will be some serious bargains around for these with patience and cash.