The future of the emerging market was called into question at the beginning of this year. On one side commentators and bloggers on property forums were posting that the current focus on banking problems in the U.K. and economic problems in the U.S. will cause property investment in emerging markets to slow, in favour of established markets.
On the other side experts are forecasting that the emerging market of Brazil will become the world's fifth largest economy over the next few years. And Standard Life research showed that the new emerging markets would grow strongly throughout a global slowdown, as the big emerging markets with their continued growth, carry the new ones forward by importing basic materials from them because they can do so more cheaply than any of the world's established markets. What's the truth here?
Emerging markets are just that: emerging. No matter how slow global economies get, businesses from Asia where growth will remain strong will favour trading and importing from emerging markets. People will always take their yearly holidays, and most of the emerging markets are fuelled by massively rising tourism.
How Emerging Markets Grow Throughout a Global Slowdown
As visitors from the developed countries spend their money on accommodation and their holiday spends in emerging markets, it develops the country's economy and helps to spread affluence.
As tourism grows travel operators start looking at the country and/or sending scouts to investigate its potential, the number of flights to the country often increases and before you know it Trump tower and hotel chains are sprouting up, and employing all but top-level management – which are brought in from outside – from within the local population. The most responsible of these companies will pay more than they need to, both to keep the best staff, and to help regenerate the economy and alleviate poverty.
Even without promotion, new businesses like that and growth in local businesses through increasing Asian trade provides higher wages and more employment for members of the communities, more people obtain the opportunity to look at renting their own place, and then in a few years time the possibility of buying their own home, which will provide sales on the resale market for buyers now. This all brings massive regeneration into the community and the economy.
For the above reasons growth in the newer emerging markets is actually fuelled by a global slowdown. We were predicting this in January, but it is now getting to the point where this is being proven, by the likes of Standard Life's research mentioned above.
Emerging Market Property
In property terms, off plan properties in emerging markets that are fuelled by tourism see the quickest and highest levels of capital growth.
So, the shrewdest investors will put their money into a swanky off-plan apartment or villa around the time that flights start increasing, major tour operators launch a new destination, and hotel chains like Hilton get in on the action.
We are always striving and researching to try and open up a new emerging market to overseas property investors before anyone else. When emerging market property starts to receive interest from global buyers, this in itself causes prices to rise, because property no longer has to be marketed to what locals can afford, but what international buyers are willing to pay.
Furthermore, as an economy develops prices start to rise for building materials, builders and labourers along with all wages; rise in line with increasing living costs, this all pushes house prices up.
The Emerging Market Cycle
Therefore the emergence of a market has what can be called perpetual motion; once the emerging market cycle starts, it very rarely stops.
In short, once experts start calling a location an emerging market, and overseas property agents start offering property there, then the chances are prices are already rising across the board, and will continue to do so for the foreseeable future.
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About David Stanley Redfern
David Stanley Redfern is one of the U.K.'s leading overseas property investment specialists. The reasons for this are an incomparable range of international properties spanning 40 destinations worldwide, and unrivalled customer care, which lasts long after the purchase has been completed. Experienced, professional staff and membership to the overseas property market's regulatory body, as well as their stringent due diligence procedures gives buyers the confidence that any purchase with David Stanley Redfern is a safe one.
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