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Despite global economic gloom, US property market shows exciting opportunity for investors right now!

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Miami

Mark Mashiter, Director at Qualitas Property International, one of the top UK based professional real estate investment companies, working in the US market buying and selling land and property, talks about the state of the US market and the opportunities that currently exist for investors there.Miami

“Prices today in the US are up to 80% under their peak values before the market crash in 2006.  With signs of recovery already being reported, (house prices have again showed their second year-on-year increase), prices will continue to steadily increase making this a unique window of opportunity to invest in the USA if you can find the right deal.”

Investing in real estate has up until recently been the preserve of those chasing high risk, high yield deals and those investors who choose to invest counter cyclically. This is because the scale and depth of the housing crash has caused home prices to drop almost 80% in some areas.  However since the 4th quarter last year positive news regarding the fundamental economic markers for the housing market have started to appear with greater and greater regularity. So much so in fact that many market observers from Warren Buffet to the Wall St Journal have called the bottom of the market and in some States area price rises have occurred.

However the U.S. is not one homogenous market, rather a series of small independent markets, therefore while in some areas such as Arizona and Florida the recovery is in full swing, others such as Indiana, Michigan and Illinois are still in the mire of the crash.

Key indicators such as Housing Starts, Population Growth, Household Formations, Jobs Growth, Median House Price and Inventory are all important factors to look at when looking at a market.

In July 2012 the Florida Realtors Association Chief Economist Dr John Tuccillo, said:  “The trend we’ve seen established over the past year is continuing….  “In June, every housing market indicator moved in the right direction. Closed sales are up, but so are pending sales, median prices, average prices and the ratio of sales price to list price. Conversely, listings are down, days on market are down and – most important – inventories are down. We have now reached a six months’ supply of inventory for existing single-family homes and 5.9-months’ supply for townhouse-condos.”

Dr Tuccillo went on to say:  “With an improving employment environment in Florida, we expect that the housing market recovery will continue in the future.” So good news for Florida – but what about the rest of the country…

In many areas of the US there is a large pent up demand from people looking to buy their homes. This demographic includes those who have delayed buying a home through lack of availability of credit, turmoil in the market, lack of new housing stock as builders haven’t built, as well as a lack of affordability as house prices came off an all time high. Although difficult to quantify precisely, a recent Hanley Wood survey  carried out in May 2012 found that as many as 2 million potential owners in the US are waiting for the right time to buy a home, with 29% of renters and 19% of homeowners planning to purchase a home during the next couple of years.

The housing market will only be seen to be truly recovered when builders large and small pick up their tools again. The statistics nationwide are looking up with the number of building permits issued at a seasonally adjusted annual rate of 780,000, 7.9 percent above the April rate and 25.0 percent greater than the prior-year month.

David Crowe, the Chief Economist of the National Association of Home Builders in America, said in a separate statement:  “While many challenges continue to weigh down the housing recovery – including those related to builders’ and buyers’ access to credit, poor appraisals and the number of distressed properties in certain markets – production of single-family homes is now the strongest it has been since 2010 due to rising consumer demand brought on by improving market conditions.”

Doug Duncan, SVP and Chief Economist of Fannie Mae says: “While consumers remain cautious about the general economy, their attitudes toward the housing market continue to improve. Although this positive trend may be short-lived if the general economy falters, one might ask whether consumers are increasingly seeing the current environment as a unique opportunity to buy a home while home prices remain depressed, rental costs are increasing, and interest rates are near historic lows.”

Florida – the biggest opportunity for investors…

In South West Florida’s Lee County, which was once the poster boy region for the housing crash, the statistics are even more positive with building permits for single family homes in the first 2 quarters of this year having increased by more than 70%. According to MetroStudy’s Chief Economist, Brad Hunter, “The builders that I have talked to are managing to push their prices up. I think that is a good sign because builders would not be raising their prices if there was not demand to support that.”

Mr Mashiter concludes: “First and foremost we are property investors ourselves so we look carefully at the underpinning fundamentals and localised trends of any market in which we buy property for ourselves or recommend to others, following are some of our recommendations.”

Cape Coral, a city in Florida, which consistently ranks in the top ten places to open a business and CNN.com called it the 5th fastest growing US city in the past decade. The land in Cape Coral is currently up to 75% under its peak values since 2006, meaning that once construction starts, land values in desirable areas will increase dramatically.  Land in Cape Coral has the potential to at the very least double in value in the next 3-5 years making it a sound investment.

“Cape Coral – Land investment focus, we can currently purchase a 10,000sq.ft land plot with full planning permission to build a 3-4 bedroom home for just $15,000.  This same plot would have sold for $90,000 back in 2006!”

Orlando is still one of the most popular destinations in the States to visit with Disney remaining one of the most popular tourist destinations in the World. However, what makes Orlando one of the best places to buy now is that it saw one of the largest drop in prices during the crash, meaning that prices will increase dramatically over the next 5 years, and there is a consistently strong rental demand. This means now you can buy a property up to 70% under its peak values in 2006 ensuring massive gains.

“We can purchase a 2 bedroom condo in Orlando with up to a 70% discount from peak prices in 2006, currently for $59,000 (50% below construction costs) with a tenant in place generating between $6,000 – $8,000 a year.  Expect prices to increase strongly over the next 5 years, as these deals disappear and the market returns to levels above the cost of construction.”

Miami still has unbelievable deals around, with the ability to purchase incredible homes which are already tenanted and will consistently achieve a secure rental income whist prices increase.  This is the higher end of the market in Florida with heavy competition from South American investors, so finding a strong investment property is becoming increasingly difficult in a city that is seeing property values increase and  that offers top tier rentals.

“We can pick up 3 bed luxury town homes in gated community at $102,900 (70% discount from 2006 peak values) with long term tenant generating $8000 per year rental income.”

For further information on the US market or any of these investment deals please visit www.qualitasproperty.com or call 0207 993 4192.

 

 

 

Investing

Northern Trust: Outsourcing Accelerates Through Pandemic as Investment Managers Seek to Improve Margins, Enhance Business Resilience, and Future-Proof Operations

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Northern Trust: Outsourcing Accelerates Through Pandemic as Investment Managers Seek to Improve Margins, Enhance Business Resilience, and Future-Proof Operations 1

White Paper Sees Increase in Managers Outsourcing Middle and Front Office Functions to Achieve Optimal Business Structures

According to a white paper published today by Northern Trust (Nasdaq: NTRS), investment managers of all sizes and strategies have been prompted to undertake a comprehensive review of their operating models as a result of the Covid-19 pandemic which has accelerated existing trends that are compounding cost pressures. This has led increasing numbers of managers to outsource in-house dealing and other functions, such as foreign exchange and transition management, hitherto seen as core.

While cost savings remain a core driver, and indeed are one outcome of outsourcing, costs are no longer the only focus. Far from being solely a defensive reaction to increased pressure on margins, the white paper (‘From Niche to Norm’) describes outsourcing as part of the target operating model, or moving toward the ‘Optimal State’ for many investment managers, and  explains how the focus “has expanded to the variety of other potential benefits offered – enhanced capabilities, improved governance and operational resilience.”

Gary Paulin, global head of Integrated Trading Solutions at Northern Trust Capital Markets said: “The pandemic has challenged a range of operational assumptions. Working from home has, for example, questioned the need for a portfolio manager to be in close proximity with the dealing desk. Previously considered essential, the pandemic has effectively forced firms to ‘outsource‘ their trading desks to remote working setups and the effectiveness of this process has disproved the requirement for proximity, in turn, easing the path to third-party outsourcing. Many investment managers are actively considering outsourcing to a hyper-scale, expert provider as a potential, cost efficient solution – one that maintains service quality and, hopefully, improves it whilst adding resiliency.”

Northern Trust’s white paper compares outsourced trading to software-as-a-service stating: “instead of carrying the cost and complexity of running an in-house solution, firms move to an outsourced one, free up capital to invest in strategic growth and move costs from a fixed to a variable basis in line with the direction of travel for revenues.” 

Guy Gibson, global head of Institutional Brokerage at Northern Trust Capital Markets said: “The opportunity to deploy capital to build new fund structures, develop new offerings, focus on distribution and enhance in-house research has been taken up by several of our clients to the benefit of their investment approach, and to the benefit of their investors.  Additionally, in the last two months alone, many firms have recognized that outsourcing to a well-capitalized, global platform has enabled them to take advantage of cost-contained growth opportunities in new markets.”

A further development, which has echoes of the journey the technology industry has already undertaken, is the move towards ‘whole office’ solutions, which represent the next potential wave in outsourcing.

According to Paulin; “recently we have observed a growing number of managers wanting to outsource to a single, hyper-scale professional service provider who can do everything, everywhere. This aligns with Northern Trust’s strategy to deliver platform solutions for the whole office, serving our clients’ needs across the entire investment lifecycle.”

The white paper can be downloaded here.

Integrated Trading Solutions is Northern Trust’s outsourced trading capability that combines worldwide locations and trading expertise in equities and fixed income and derivatives with access to global markets, high-quality liquidity and an integrated middle and back office service as well as other services, such as FX. It helps asset owners and asset managers to meaningfully lower costs, reduce risk, manage regulatory compliance and enhance transparency and operational efficiency.

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How are investors traversing the UK’s transition out of lockdown?

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How are investors traversing the UK’s transition out of lockdown? 2

By Giles Coghlan, Chief Currency Analyst, HYCM

Just when we thought we had overcome the initial health challenges posed by COVID-19, the UK Government has once again introduced lockdown measures in certain regions to curb a rise in new cases. This is happening at a time when the government is trying to bring about the country’s post-pandemic recovery and prevent a prolonged economic downturn.

This is the reality of the “new normal” – a constant battle to both contain the spread of the virus but also avoid extended economic stagnation.

Of course, no matter how many policies are introduced to spur on investment, traders and investors are likely to act with caution for the foreseeable future. There are simply too many unknowns to content with at the moment.

To try and measure investor sentiment towards different asset classes at present, HYCM recently commissioned research to uncover which assets investors are planning to invest in over the coming 12 months. After surveying over 900 UK-based investors, our figures show just how COVID-19 has affected different investor portfolios. I have analysed the key findings below.

Cash retreat

At present, it seems that by far the most common asset class for investors is cash savings, with 78% of investors identifying as having some form of savings in a bank account. Other popular assets were stocks and shares (48%) and property (38%). While not surprising, when viewed in the context of investor’s future plans for investment, it becomes evident that security, above all else, is what investors are currently seeking.

A third of those surveyed (32%) said that they intended to put more of their wealth into their savings account, the most common strategy by far among those surveyed. This was followed by stocks and shares (21%), property (17%), and fixed interest securities (17%).

When asked about what impact COVID-19 has had on their portfolios throughout 2020, 43% stated that their portfolio had decreased in value as a consequence of the pandemic. This has evidently had an effect on investors’ mindsets, with 73% stating that they were not planning on making any major investment decisions for the rest of the year.

Looking at the road ahead

So, it seems that many investors are adopting a wait-and-see approach; hoping that the promise of a V-shaped recovery comes to fruition. The issue, however, is that this exact type of hesitancy when it comes to investing may well slow the pace of economic recovery. Financial markets need stimulus in order to help facilitate a post-pandemic economic resurgence, but if said financial stimulation only arrives once the recovery has already begun, the economy risks extended stagnation.

It seems, then, that there are two possible set outcomes on the path ahead. The first is a steady decline in COVID-19 cases, then an economic downturn as the markets correct themselves, followed by a return to relative economic stability. The second potential outcome is a second spike of COVID-19 cases which incurs a second nationwide lockdown – delaying an economic revival for the foreseeable future. At present, the former of these two scenarios is seemingly playing out with economic growth and GDP steadily increasing; but recent COVID-19 case upticks show that it’s still too soon to be certain of either scenario.

A cautious approach, therefore, will evidently remain the most common investment strategy looking ahead. But investors must remember that, even in the most uncertain times, there are always opportunities for returns on investment. Merely transforming a varied portfolio into cash savings risks a long-term decline in value.

High Risk Investment Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. For more information please refer to HYCM’s Risk Disclosure.

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Hatton Gardens 5 top tips for investing in Diamonds

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Hatton Gardens 5 top tips for investing in Diamonds 3

By Ben Stinson, Head of eCommerce at Diamonds Factory

Investing in diamonds can be extremely rewarding, but only if you know what to look for. For investors who lack experience, finding your diamond in the rough can be quite daunting.

For even the most beginner of diamond investors, the essentials are fairly obvious. For instance, you need to ask yourself will the diamond hold its value over time? What’s the overall condition of the stone and the jewellery? Is there history behind the item in question?

Although common sense plays a big part in investing, people often need insider tips and tricks to go from beginner to expert. Tony French, the in-house Diamond Consultant, at Diamonds Factory shares his professional knowledge on the 5 most important things to look for when investing in diamonds.

1: Using cut, weight and colour to determine value

Firstly, consider the shape, colour, and weight of your diamond, as this can play a pivotal role in guaranteeing growth in the value of your item. Granted, investing trends change with time, but a round cut of your diamond will almost always be the most sought after. The cut of your diamond is incredibly important, as it can influence the sparkle and therefore, the overall value. It’s a similar story for the intensity of some colours, such as Pink, Red, Blue, Green etc. Concerning weight, the heavier (bigger) stones will generally increase in value by a bigger percentage. Collectively these factors also contribute to the supply and demand aspect, which will determine their high price, and will ensure your item is re-sellable.

2: Provenance

Looking for significant value? Well, aim to own jewellery or diamonds that come from an important public figure. If you’re lucky enough to own a piece that has significant history, or was owned by a celebrity or person of interest, it’s an absolute must to have concrete evidence of this. Immediately, this proof will increase an item’s overall value, and there’s a good chance the stardom of your item might drum up interest amongst diehard fans, increasing the value even further…

Equally, it’s possible to proactively bring provenance to unique diamonds of yours. For instance, you can offer to loan bespoke, or unusual pieces for film, theatre, or TV performances – then it can be advertised as worn by xyz.

3: Find the source

Ben Stinson

Ben Stinson

Establishing your diamond’s source is one of the most important things you can do when investing in diamonds. If you’re starting out, try to purchase diamonds that have NOT been owned by too many people, as the overall value of the diamond will reflect multiple ownership. Alternatively, I’d always recommend buying from suppliers like ourselves or other suppliers and retailers, who buy directly from the people who have had them certified.

Primarily, this will allow you to have a greater degree of transparency, which is crucial when buying such a valuable item. Next, you should immediately see an increase in value of your diamonds, as identifying a source will allow traceability and therefore, market context.

4: Certification

Linked closely with my previous point, is the requirement to ensure that your diamonds are certified by a credible lab, and you have the evidence to prove so (a written document with specific grading details about your diamonds) – this will remove any doubts of impropriety.

It’s essential to remember that not all labs are the same, and many labs are better than others. Both the AGS (American Gem Society) and GIA (Gemological Institute of America) have great reputations and are world renowned. I’d recommend doing your own research into the labs, and when you’ve found the pieces that you’d like to invest in, then make an informed decision based upon your findings. Ultimately, proving certification will make your stones easier to insure, and deep down, you can have peace of mind knowing you have got what you have paid for.

Don’t forget to keep this paperwork in a safe location as well – you’d be surprised how many people we’ve met who have lost, or forget where they’ve placed it.

5:  Patience is a virtue…

If the market is strong, it might be tempting to look for an immediate sale once you’ve purchased a high value item. However, I suggest holding onto your diamonds for some time before even thinking about selling. More often than not, an item is more likely to increase in value over a few years than a few days – try and wait a little longer!

Equally, I would encourage having your diamonds, or jewellery professionally valued regularly. If you don’t have the knowledge to make a rough judgement on how much your pieces are worth, a consultant or expert can provide both a valuation, and contextualise that amount in the wider market. From there, you should be empowered with the knowledge to decide whether to keep or sell.

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