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Double digit annual return as solid as bricks and mortar? time to look across the pond

By Sophie Carter – Sep 2nd 2014 //

 

The US has rightly been held as one of the world’s most important indicators of global prosperity for many years. The rise of China and other emerging markets has changed that dynamic in recent times, but fundamentally the success of the US is an important measure for the state of financial markets.

 

One level down, the property market is seen as a key indicator of the health of the US economy as a whole, and thus its movements are tracked internationally by investors, analysts, academics, bankers and the corporate world.

 

That the 2007-2008 credit crunch was the result of poor risk management controls when it came to approving mortgages, and compounded by repackaging of these ‘toxic’ asset bundles is nothing new. Nor is it news that the US housing market suffered a major dip as a result as prices dropped, with lending volumes and demand low.

 

However, in the intervening years, starting with the two coastal regions, the market has recovered, and in some cases surpassed, to pre-crash levels. What is less well known and understood is the investment opportunity that lies not in the prime locations of New York or San Francisco, which were relatively well insulated from the crash, but the mid-West and other less ‘glamorous’ locations across the country.

 

Locations such as St. Louis in Missouri, Chestnut in Alabama and Montgomery in Kentucky are not names that roll off the tongue of many. But, from an economic perspective, it is these cities that are seeing the growth which is sustaining the recovery which started on the coasts and is now spreading in-land. If the waves crashed on the coast, they’re now moving inshore and being felt all over the inner states.

 

St. Louis is the 19th largest metropolitan area in the United States and boasts 2.8 million inhabitants. The magazine The Atlantic ranked St. Louis as one of the 100 best cities to live in. From a business standpoint, the city also score high marks: nine out of the world’s 500 largest companies are located in St. Louis and Kiplinger selected St. Louis as one of the ten best cities in which to do business.

 

In the last two years, the region has seen a recovery alongside the economic recovery felt throughout the United States. The energy industry is operating again in the region and the agricultural sector had a good year. Even the auto industry is flourishing alongside the recovery plans, with Americans back to buying new vehicles. The main outcome of this is that companies are recruiting new employees. And these workers need somewhere to live.


What we are seeing in cities across the Mid-West is the development of large, multi-family properties; sites which typically have between 200 and 500 apartments or homes. These apartments are not targeted at the wealthiest end of society by any means, but at young professionals, starting out in their careers, or those with young families. They are gainfully employed, and are reliable and respectful tenants. Essentially, the sorts of people any property investor would want to have as tenants, especially when returns of 8% yield can be delivered, in addition to any capital appreciation the property may deliver over time.

 

This opportunity is not going to last forever. The dollar is currently comparatively weak against the pound, giving British investors an added incentive to invest, especially when house price growth in the UK is forecast to start dropping off.

 

Sure enough, in time, prices will rise and the overall purchase cost of the sites will become prohibitive as to make the returns unattractive, or at least less attractive than can be secured today.

 

I know property is good bet – that’s why I made it my second career. Why not spend some time seeing what you money could buy your in bricks and mortar terms across the pond. I am sure it won’t regret it.

If you want to learn more on how to wisely invest in US Click Here
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