LONDON – The fallout from Britain leaving the EU may stimulate increased investment in real estate in a number of emerging markets, including Pakistan.
Such speculation has been fueled by the way in which markets in the developed world have been rocked by Brexit. In the immediate aftermath of Britain’s decision, the Sterling took a nosedive and plummeted to a two-month low against the dollar. As a result, British public limited companies lost around £100 billion in value.
Experts also do not have an encouraging outlook for the future. The devaluation of the pound could lead to inflation and a rise in interest rates, which would depress the housing market, which is enough to scare international investors away.
With America approaching a period of uncertainty around the presidential elections, and Britain in turmoil, some investors are looking to emerging markets for investments in 2016, and real estate is an asset where investors are almost always bullish.
“While you can read nothing but negativity in the media following Brexit we see it quite differently,” said Saad Arshed , managing director of LamudiPakistan—the online property platform. “With investors scared away from Britain, and the United States still in a downturn, high-growth countries such as Mexico, the Philippines, and Pakistan offer a good alternative investment opportunities, and going forward will be fundamental in a balanced portfolio,” said Arshed.
Emerging economies hold strong domestic demand
The countries in the emerging markets trade predominantly with each other and the United States. Of course, the E.U is not an insignificant trading partner but they do not dominate trade or growth figures. The impact on countries such as Mexico will be much less given their biggest trade partners are the United States, Canada, China, and Spain. In Asian countries their trade to Britain is insignificant; for example Pakistan’ top trading partners are the United States, China, and Afghanistan.
Real estate in the emerging markets
Investors will look increasingly to the emerging markets as an alternative with the downturn in Western developed nations. The opportunities are enticing: higher-potential returns, lower entry prices, and favorable long-term growth indicators. According to a report by EY, the middle class will expand by three billion over the next two decades, with the vast majority of that growth in the emerging world. This equates to long-term demand for real estate. As more people rise into the middle class their expectation for modern residential housing will increase. Emerging market real estate investment exist in stocks, REITs, foreign direct investment, and ETFs.