As Lief and I sat down at our dining room table this weekend to finalize the program for next month’s Global Property Online Summit, we took stock.
More than 90% of the U.S. population and more than 35% of the entire global population are under instruction to stay at home and shelter in place. More than 25 million American workers (and counting) have filed for first-time unemployment, and trillions of dollars have been erased from stock portfolios.
We humans are living through the greatest health crisis since the Spanish Flu of 1918 and could face the biggest market meltdown since the Great Depression. The personal and financial challenges we’re navigating are existential, the pain and hardship they’re creating overwhelming.
What do they mean in the context of the conversation we carry on day-to-day in these dispatches?
We believe the COVID-19 crisis is also going to lead to one of the greatest buyer’s markets the world has ever seen.
Overleveraged owners, bankrupt businesses, desperate sellers, and rock-bottom currency values will translate to the fire-sale of a generation if not the century. The 18th-century British nobleman and banker Baron Rothschild said it so we don’t have to. You should buy when there’s blood in the streets, and that’s the view today.
With the help of contacts in key markets worldwide, we’re tracking pre-crisis trends, property listings, government interventions, currency values, and COVID-19 casualties. All the from-the-scenes intelligence, perspective, context, and calls to action we’re collecting and filtering will form the basis for the conversation we’ll conduct with the help of more than two dozen of the most seasoned global property pros in the world during our Global Property Online Summit taking place May 12–15.
We want to be prepared to move as soon as it makes sense to do so… and, of course, we want you to feel armed and ready to act right alongside us.
That’s why, when Lief and I mapped out the four days of this event, we worked to balance discussion of key markets and current investment opportunities with education and training.
This program will be the best overview of where and what to buy as the coronavirus crisis continues to provide us this moment to dig in and dig down…
It will also be a comprehensive How To Buy Real Estate Overseas Primer. We want to be sure you understand not only the reasons you should be thinking about buying real estate in another country right now… but also how to do it safely and with confidence.
We must consider that COVID-19 is not the only global catastrophe we could face in our lifetimes. Given that position, we further believe it is more critical than it has ever been to expand where you spend your time and your money so you’re not at the mercy of any single government, economy, marketplace, or currency.
Our overriding objective during next month’s Global Property Online Summit will be to show you how to build a diversified portfolio of hard assets overseas to generate cash flow to fund the lifestyle, the retirement, and the legacy you want.
So, as Lief and I sat down to consider our world post-pandemic, what did we conclude?
What will global property markets look like after the COVID-19 crisis?
Here’s a sneak peek of the conversation we’ll be leading during next month’s Summit…
We do not believe we’re going to see 40% to 70% drops as we did in the wake of the 2008/2009 global crisis, when real estate markets worldwide took huge hits with few exceptions. However, localized markets and individual properties will experience those levels of price reductions, even if only in U.S. dollar terms.
The Crisis Is Creating A Supercharged U.S. Dollar
That is to say, one of the biggest opportunities created by the current crisis is going to have to do with supercharged U.S. dollar buying power.
The Colombian peso and Brazilian real, for example, have weakened significantly against the U.S. dollar since the virus crisis began. These countries are oil exporters and commodity producers. The values of their currencies depend on their abilities to sell those products on the global market in dollars and then trade those dollars back into pesos and reais.
Will the Colombian peso or the real return to pre-virus levels once the crisis abates and oil prices begin to recover? Probably. Meanwhile, properties in these countries will stand out as crisis-level buys for U.S. dollar holders.
Tourist Rentals Will Be Hit Hard
Short-term rentals are a key element of any global property portfolio, a top choice for generating diversified cash flow overseas. What’s the post-COVID-19 picture for this asset class?
The vacation rental business disappeared overnight when borders closed and planes stopped flying. Hotels are being converted to hospitals in some countries, and short-term rentals are being relisted as long-term.
That’s one benefit of owning a furnished rental. You can reposition it according to market demand. In Dublin, Ireland, for example, the available inventory of long-term rentals jumped 83% last month compared with March 2019, while short-term rental listings on Airbnb fell accordingly.
Since the advent of Airbnb, many cities have seen sharp declines in long-term rental supply, increasing the cost of housing for locals. In an active tourist destination, a short-term rental can produce a much higher net yield than one rented long-term. Now we’re going to see a dramatic shift, which is good news for locals looking for affordable housing but not necessarily for global property investors. However, we believe this is a temporary trend and will revert as tourist markets are reborn.
You can easily switch a rental from short- to long-term in a European city, but making a change like that won’t get you far in a resort town like Playa del Carmen, Mexico, where’s there’s next to zero long-term rental demand.
Expect, therefore, to see hugely discounted vacation rental prices in destinations like Playa del Carmen when people begin traveling again. Also expect to see properties for sale at discounted prices from owners who either need to sell their investment real estate to shore up their personal financial situations back home or because an extended loss of cash flow has put them behind on their mortgage payments.
As we try to remind you often, leverage is a double-edged sword.
More Seller Financing Options Than Ever
Speaking of leverage, note that banks in countries where financing has been an option for foreign buyers will be focused on helping locals recover first. We think institutional financing options, therefore, for us foreign investors will become thinner on the ground for a period.
On the other hand, we also predict that global property buyers will find sellers and developers more open to more creative terms than they’ve been in a long time, especially in Latin American markets dependent on foreign buyers.
We’ll detail markets where seller financing will be particularly easier to come by during next month’s Summit.
We’ll also introduce specific offers that feature in some cases unheard-of seller terms.
Where To Buy On The Dip
Some markets in Europe are already experiencing broad real estate price drops. In Portugal, for example, a market we know well and where values had appreciated significantly between 2015 and 2019—particularly in Lisbon, Porto, and Lagos—we expect prices to soften and perhaps to fall when pent-up supply is released after Europe reopens. The window of opportunity here, though, will be short.
Our top Portugal experts will join us to discuss live.
We predict price drops across Latin America. Emerging markets are going to be hardest hit by the pandemic crisis, and their economies will be slowest to recover. This means countries at the top of your post-crisis opportunity list should include Mexico, Belize, and Brazil.
Panama is an exception in this regard in this part of the world.
This country reacted quickly to the coronavirus threat, showing itself again to be more than just another Banana Republic. Panama closed its borders in a matter of days then restricted the movement of its residents in inventive ways. Right now, women are allowed to leave their homes at assigned two-hour increments Mondays, Wednesdays, and Fridays, while men are able to be out for two hours at a time only Tuesdays, Thursdays, and Saturdays. Everyone has to stay home Sundays, and the government has banned the sale of alcohol.
No baby boom for Panama, but we predict a quicker return of economic activity certainly than anywhere else in the region.
In addition, our contacts in the country report that President Laurentino “Nito” Cortizo’s administration is planning an aggressive program of investor incentives to attract direct foreign investment post-pandemic lockdown.
The CEO of Panama’s leading development group will participate in next month’s Summit to detail the current situation in this market and the best specific investment opportunities he sees emerging.
The Winningest Of All Cashflow Investments Overseas
The second cash-flowing asset class every diversified global property portfolio should include is agriculture. Amidst and in the wake of the COVID-19 crisis, this investment option remains the big winner.
While short-term rentals are producing zero cash flow during the global shutdown, agricultural properties are still growing food… and people are still eating, meaning crops need to be harvested.
The United States, Germany, and other developed-world markets rely on migrant workers for their harvests. With borders closed, farmers in these countries are worried about how they’re going to bring in their crops before they rot in the fields.
In the countries we recommend for turn-key agriculture investment, farmers don’t rely on migrant labor. They use seasonal workers, but recruit them locally. One more benefit of diversification.
The surest way to prepare for whatever tomorrow brings is to diversify beyond your home borders, both your life and your investments. If you’re searching for options right now, wondering what to do in the face of the current global landscape, please remember this critical truth.
It’s crisis times like these when a diversified lifestyle and a truly globally diversified portfolio of hard assets really pay off.
So set the worrying aside. It only drains your energy and slows your progress.
How can you make sure you come through this crisis stage not only whole but stronger than ever? You must diversify into hard assets to generate cash flow overseas. It is the smartest strategy for protecting and growing wealth, especially in times of crisis and remains the slow and steady tortoise in the race to wealth and security.