The last 12 months have been a wild ride for investors, with plenty of uncertainty. Now that there seems to be more clarity on where things are headed, these are some of the trending themes for investors to watch and use to find opportunities.
Changes In Foreign Investment Flows
The UN’s recent trade and development report reveals the impact of the past year on international capital flows. The data shows just under a 50% drop in foreign investment into the US over the last year to around $134B. Meanwhile Italy, Russia and the United Kingdom saw an almost 100% decline in this type of investment activity.
Obviously, these statistics need to be moderated with the extreme events happening during that period. It is unlikely a lasting trend that will impact long term demand and values for US assets. However, it may provide a short window of opportunity for investors to find better value investments, with less competition and higher yields.
Urban Vs. Suburban Real Estate
A variety of factors led to a significant exodus from big coastal cities to the suburbs, small towns and the south in 2020.
Big North American cities like Toronto have seen condo listing inventory soar by almost 140%, while property prices in some target areas may have risen by that much, or more.
People want more space, less crime, and healthier and safer places to live with more freedom. Some will find it out in rural areas. Though, the reality of this change of living pace may not prove to be for most ex-city dwellers. At least not for long. After the novelty wears off we’ll see how long this trend lasts.
Whether it sticks or not will also depend on taxes, lockdowns, crime rates, and anti-virus measures in cities like NYC and San Francisco.
While those markets absolutely were overpriced, it is unlikely they will lose their iconic appeal. If the prices correct, there could be a time when there are deals to be found in these places. As well as emerging markets.
Virus Proof Buildings
While completely virus proofing buildings may be impossible, many developers are working to make them a lot safer.
Ensuring each unit has its own air conditioning supply, air purifiers, and easy to clean surfaces are all great additions to apartment buildings. This could also help them rebound in popularity.
Whether these moves will ever be enough to lure people back to big office buildings in mass may be a completely different thing.
Hyper Volatility & Risk In Some Sectors
Some investment sectors are seeing incredible new pump and dump activity. Gamestop’s stock rocketing by almost 300% in 2021 driven by social media is one of the most notable. The dramatic rise of Bitcoin prices to new records, followed by a 25% drop in January is another example. Then there are several IPOs which may be questionable too.
If investors are going to bet on these roller coasters, then it is absolutely vital to balance that with tangible assets to preserve the rest of their capital.
Government Paid Rent
Government paid or subsidized rent is quite possibly a big trend that will grow over the next four years. If California follows through in its proposal to pay 80% of back rent to landlords for a year of lockdowns, expect that to create a whole new surge in demand for rental properties.