If, like me, you have spent any time flicking through a half decent newspaper this morning you’ll have seen some pretty gloomy rhetoric about the growth prospects of even the strongest European economies. Strangely enough, I notice that the only economy forecast by the IMF to have higher growth next year than this is Spain – wasn’t expecting that one!
With the options for solving the Greek deficit dividing opinions along party lines just before France and Germany both enter election seasons, and Italy’s credit rating being downgraded again this week, there has certainly been more unwelcome pressure being put on the whole community. Added to that, the US economy seems to be suffering from its biggest crisis in confidence since 2008, and we all remember what happened then.
As I’ve said before in this blog, nobody really knows the twists and turns in the road ahead for the world’s major economies and markets over the next few months, let alone years. One thing I can reliably predict however is that many of you will be seeing what’s happening in the markets in London, Frankfurt and New York thinking that all this is only going to send values of property lower, right?
Will it though?
If you compare what’s happening now to any previous post-recession market at similar times of no or low growth, the likelihood is that most of what we are reading about in our newspapers today has already been priced in. By normal standards (if such a thing still exists), property prices in most of the territories we work in have been somewhere between low and ridiculously cheap for some time now. Whilst there is always an argument to say they can still go lower, that’s probably only going to happen in a doomsday scenario; say the catastrophic failure of a globally significant currency or major financial institution (and I don’t just mean a bank).
There are plenty of powerful international figureheads and more experienced and credible commentators than me who don’t think that’s likely to happen. Whilst we may stumble on through a drawn out period of ‘begrudging incrementalism’ as Norman Lamont called it this morning for a bit longer, fears that the world’s leaders won’t eventually get behind a solution are being exaggerated.
So we’re all willing this week’s continuing G20 summit in Washington to bring some unity and bold incisiveness, which would be more likely to cause markets in the US and EU to bounce back in the right direction than crash down further the wrong way.
It’s also important to remember that we’re close to the eye of the storm at the moment. The news story this week is all about about growth prospects (or lack of them) in the US and EU, whilst close to half the world’s countries are still growing steadily and some of them are flying. So from a global perspective, this is part of the continual cycle of shifting power and emphasis between countries and markets that started long before we became interested and will carry on long after it affects us as much as it feels at the moment.
All of which explains why, to some investors, the prevailing climate of uncertainty and nervousness actually present ideal conditions for making new investments, however paradoxical that may seem. The biggest gains are normally to be had when you act contrary to the rest of the market. Don’t get me wrong, you still need to do your homework and be selective, but there are plenty of property investment opportunities available out there right now that people should be feeling very confident about.