Real estate investments: Tariffs are in the news, causing chaos in the global economy.
As I write, the U.S. dollar is 10% weaker than the euro and 8% weaker than the pound compared to where it was at the beginning of the year. The S&P 500 is down about 10% since then as well.
To paraphrase a Chinese proverb, the best time to diversify out of the U.S. dollar and stock market was six months ago. The next best time is now.
When the stock market is soaring, the anti-real estate crowd likes to write in and gloat. They say that real estate isn’t a great investment because their portfolio grew X% in the previous year and the value of their house only went up Y%.
Cryptophiles and gold bugs say the same thing.
Everyone has their preferred investment category, but that doesn’t mean the others aren’t good investments. At a minimum, you should hold some of the other categories in your portfolio, even if you really only believe in one.
My preference for real estate hasn’t kept me from holding stocks, mutual funds, or precious metals. It has, however, allowed me to sleep better at night… even during the last few weeks of tariff whiplash.
As a category, stocks are volatile. Individually, they can be a roller coaster. Real estate, on the other hand, tends to move slowly. You don’t wake up to find your house lost 20% of its value overnight because of an earnings report or trade headline.
Sometimes you see rapid movement… generally in an upwards direction, when a market factor creates opportunity. A developer in Greece told me about one market he knows of that saw 25% appreciation in a few months recently because of speculation.
When real estate values go down, again, they tend to go slowly. Rarely do they tank as quickly as the value of stocks can.
The bigger danger with real estate is liquidity—being able to sell when you want to sell. In the face of the current market climate, that doesn’t scare me. It reminds me of the importance of being deliberate and strategic with investments.
Lots of investors pulled money out of the stock market last month. They’re now looking for opportunities to redeploy that money. Some are looking at real estate.
One investor I know, who already had a reservation for a pre-construction project in Panama, bought at launch pricing. This went up by more than 10% by the time he needed to sign his contract. Locking in at least 10% profits before sending any money is a great feeling… but you have to sign the contract.
He was concerned about moving forward while the stock market was down… but even if he had to sell stocks down 10% to pay in full for his condo, he already had a 10% gain on paper with the real estate. Of course, he only had to sell some stocks to make his down payment.
The timing may not have been great for his stock portfolio, but his overall portfolio value was still healthy because he was diversifying…
Don’t let the uncertainty of the tariff whiplash keep you from creating a strong, diversified, global investment portfolio.
Stay diversified,
Lief Simon
Director, Overseas Property Alert