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Are emerging markets the best for property investment?

6th July 2009 | back to article listings BACK    print this article PRINT

Year after year the same destinations top the lists of the most popular places for people to invest in property. At the end of last month, Primelocation reported that Spain accounted for 30.53 per cent of all overseas property searches in May 2009, ahead of France (27.01 per cent), the US (14.34 per cent), Italy (6.24 per cent) and Portugal (5.93 per cent). News of a decline in the Spanish property market appeared not to put off would-be investors either, with a 27 per cent increase in searches observed over the previous year, lifting the country ahead of France in the rankings.

But less established property markets, such as Cape Verde, may be a better bet for investors in the long term. Bryan Collings, who manages the Ignis HEXAM Global Emerging Markets Fund, this week outlined a number of reasons why emerging markets could be a good place to invest money. He drew up a top ten list of key factors, which included predictions that the population in such countries will outstrip that of developed nations in the coming decades, while their economies will become increasingly important.

In addition, people in these countries will also be in a better position to spend, which could keep domestic demand for property strong. Mr Collings remarked: "The world's savings are concentrated in emerging markets, which hold 75 per cent of the world's total foreign exchange reserves. Emerging economies are less indebted than their developed peers at the country, company and individual level. Importantly, banks in emerging market countries have emerged from the recent credit crisis relatively unscathed as they generally had little or no exposure to the 'toxic assets' associated with the subprime mortgage fallout in the US. This provides strong foundations on which to build future growth."

Cape Verde is an example of an emerging country that has been left relatively unscathed by the global economic downturn compared to western states. Macauhub reported figures from the islands' central bank at the end of last month, which forecasted that while economic growth will fall from the eight per cent rates seen in recent years, it will still be around 4.7 to 5.7 per cent for 2009. The government is aiming to supplement falls in foreign investment caused by the credit crunch by pumping money into public infrastructure, which it is believed will help the country's gross domestic product to continue rising at a healthy rate.

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