Why are people investing in residential markets of other countries?
CENTURY 21 Spain has given me and the IE Business School the opportunity to participate in the presentation of this “Market Pulse” report upon globalisation and its effects in residential markets worldwide. First of all I must admit that when Ricardo Sousa proposed me to participate in the presentation of the report I immediately accepted as I found it to be very interesting as well as different and funny do to its different approaches and results when compared to those of other organisations. “Confidencial Imobiliário”, a Portuguese research company was responsible to conduct this study with data from CENTURY 21 International Masters. I must clarify that neither myself nor the IE Business School participated in this survey therefore I can only express my personal opinion and comments on the results published. When we look at the report at a glance, the first think we can observe is the massive flows produced by globalisation and the different reasons to invest in an apartment in any chosen country. Even though the universe of the survey is limited as there are some countries that have not been included, as the Nordics nor India and Pakistan we can well differentiate these main reasons amongst others: the most important one being the flow to more developed countries with well-established and stabilised governments, secondly we see climate as a driver to invest, usually from very cold countries to warmer ones and the third main one is a pure investment reason mainly in top financial and cosmopolitan cities like New York, London and Paris. With regards the first reason the Golden Visa policy established by different countries as Spain and Portugal have drawn the interest of wealthy individuals willing to obtain European residence or other more developed countries as the USA or Canada amongst others. Concerning climate reasons we observe flows caused by tourism and also by retired people willing to spend their long and cold winters in more comfortable climates leaving the summer time to get back to their origin countries. This is observed in Sothern European countries, in the Caribbean and South-eastern Asian countries. As per the third reason we find individuals from many different countries that want to invest in an apartment in cosmopolitan cities of the world, where they can find anything they desire in terms of supplies and mainly leisure. Within the above reasons we can observe some other secondary reasons as language and culture as the flows from many countries of the Commonwealth towards England or from Latin America to Spain where besides they share the same religion and therefore it becomes another reason. The idea to compare different prices using the Big Mac Index is very interesting. A big Mac Hamburger is sold in almost any corner of the world and gives us the idea of the purchasing power of the average population of any given country. In this way comparing the number of Big Mac’s necessary to purchase one sqm of an apartment gives us much information upon prices and purchase capacity. On the other hand the indices and data of prices measured in local working hours reflects the enormous efforts, not to say impossible to buy an apartment in some countries which also tells us the divergence created by the impact of foreign investors purchasing in that country. I believe that of these current flows we will see some new ones in the future from countries that are now starting to have a medium-high class individuals with purchasing power to invest in another country following the same above-mentioned reasons, as I believe those will continue to be the same.
Pedro Abella Langa
IE Business School