Dubai Begins to Stabilise

Dubai is definitely a popular market for international investment, whether it’s in property, shares, or other assets. This is because it’s a market known for its pronounced boom and bust cycles. The very rapid growth of the boom periods serves to attract investors, but the bust stages of the cycle naturally see a slowdown in activity.

Recently, Dubai has been in the grip of a correction. This has been a far, far less pronounced correction than previous years have seen, partly thanks to the government’s introduction of a robust set of safeguards to prevent a repeat of past catastrophes. Indeed, with prices falling faster than relatively stable rents, some property investors have continued to be charmed by the resulting increase in net yields and bought into the market anyway.

For the most part, though, Dubai’s correction has naturally seen a slowdown in investment. But when it is booming, Dubai remains a prime, high-yielding investment market and even some fairly disastrous crashes of the past have failed to dent the popularity that the market enjoys when the going is good. This means that many investors have not so much turned away from the market during the slowdown as simply decided to watch from the sidelines until things turn around.

According to a recent report from Knight Frank, residential property prices in Dubai – which could also be taken to at least some extent as an indicator of the economy as a whole – fell by a total of 9% in the twelve months to April but are showing signs of stabilising. Higher-end properties, often favoured by investors, delivered a performance ahead of the wider market with prices falling only 5% in that time.

Some of the key investment property types may have already more-or-less stabilised, with neither prime apartments nor villas showing significant changes over the twelve month period. Of these two property classes, the strongest-performing at present are prime apartments, which even managed a period of quarterly growth. Prime apartment values grew by 2% between the last quarter of 2015 and the first quarter of 2016.

Knight Frank’s report predicts that Dubai’s property market will have fully stabilised by the end of this year, and will begin edging modestly upwards in 2017. Several factors, the report says, have helped with this relative stability and will likely continue to aid the next recovery. Most notably, these include the approach of Expo 2020 and the high levels of infrastructure and development investment from the Dubai government in preparation. However, there are also factors which currently remain uncertain and are likely to have a significant impact on any recovery, notably oil prices, the international ramifications of Brexit, and the approaching US presidential election.


07 2016

EU Referendum: The Impact on Property Investment

As the EU referendum approaches, many analysts are trying to forecast what will happen to the UK’s property market in the event of the British public voting to either leave or remain in the European Union. There is a lot of uncertainty both about how the vote will go and about what will happen afterwards – unfortunately for property investors who would like to know how the market is going.

However, while the polls have not even opened yet, the very fact the referendum is taking place is already having an impact on UK properties, and particularly on the investment market. In fact, the biggest factor exerting an influence on property right now is the very fact that the consequences of the vote remain uncertain.

A Slowdown Driven by Uncertainty

Opinion polls consistently show that the British public is fairly evenly split on whether to depart from the union or to stay a part of it. This makes the result of the referendum near impossible to predict with anything approaching certainty. Furthermore, even if a vote is assumed one way or another, the implications for the property market are hardly less uncertain. In the event of an “out” vote, forecasters find it hard to predict or agree on what will happen to property, though many are predicting a drop in values for at least the short term if not longer. Even if the UK chooses to remain, however, this does not by any means necessarily mean that the status quo will be preserved. The government has pledged to renegotiate the “deal” the UK has with the EU, and the implications of this for property or any other sector of the economy depend on what shape any new deal might take.

Naturally, all this uncertainty – with a drop in values featuring as a very real possibility – is not appealing to investors. As such, many landlords and other buyers are finding it best to hold off on their property purchases until they know where the market is going. This, combined with other factors such as the stamp duty increase, has led the property market to slow down considerably.

The Exceptions

Caution and a slowdown in buying activity is definitely the rule with the pre-referendum property market. Like every rule, however, it has its exceptions. Obviously buying has not completely ceased, but there are two groups of buyers who are completely bucking the trend and actively choosing the run-up to the referendum as a time to buy.

The first are the buyers who are drawn by the opportunity to get a better price while buying is slow. These are primarily owner-occupiers whose priority is getting a place to live at the best price, and investors who are confident they can weather any storm the referendum kicks off until things swing back their way again. Secondly, some international investors are finding UK property very appealing at the moment because of favourable exchange rates. The economic uncertainty of the referendum has caused the pound to drop in value quite steeply, so buyers converting from other currencies are getting more value for the same amount of expenditure.


05 2016

The Budget 2016: Key Points for Investors

A wide range of new measures and reforms were announced this month by George Osborne as part of the government’s annual budget. This includes some potentially important news for investors. Some of the key points that are likely to have ramifications for investment portfolios include:

ISA Allowance Increase

The annual limit for ISA deposits is top be increased from £15,240 to £20,000. Due to the flexibility of ISAs, this has the potential to benefit several core aspects of an investment portfolio. It means that greater amounts of money can be invested in stocks and shares which are held in this tax-free wrapper. Another investment class, the increasingly popular practice of peer-to-peer lending, is finally gaining its long-discussed ISA eligibility under the new Innovative Finance ISA, and will therefore also be eligible for tax-free investment under the increased limit. Furthermore, cash remains an important aspect of even the most successful investment portfolios, and is of course also eligible for contributing to the new ISA deposit limit.

Capital Gains Decrease

A cut to Capital Gains tax – which is both significant and imminent – looks like excellent news for investors at first glance. From 6th April this year, the standard rate of Capital Gains Tax will fall from 18% to 10%, and the higher rate from 28% to 20%. However, the value of this move for investors is somewhat weakened by the fact that certain key assets are excluded from the cut. Most importantly, sale of properties besides your main home will not be subject to the reduction, so any buy-to-let investments you may hold will still attract the old rate when sold. “Carried Interest” – executive profits earned through private investment firms – will also be exempted from the reduction.

No More Restraints on Landlords

Remarkably, one of the things that delighted investors most about the latest government Budget was the things it didn’t contain. Specifically, investors were pleased by the fact that – with the exception of excluding investment property sales from the Capital Gains cut – there were no further attempts to reign in buy-to-let investment. In response to a market which the government believed to favour landlords over homebuyers, the government introduced a string of measures over the course of last year that bit into the profitability of buy-to-let. These included significant tax reforms for landlords – notably the loss of mortgage rate relief – and an increase in stamp duty. The last of these measures, revealed in the Autumn, were taken as a sign that the government may not have been done with this line of reform and that further measures may have waited around the corner. The near-complete absence of further buy-to-let censures from the Budget has therefore been taken as both a relief and reassurance.


03 2016

Is it Really Time to Sell Everything?

The economy is facing some challenges this year, and some are comparing the situation to the one just before the 2008 financial crisis. The Royal Bank of Scotland seems to have taken a more pessimistic stance than most, telling its clients to be prepared for a “cataclysmic” 2016.

For this reason, RBS told clients that they should “sell everything” and these two words quickly got repeated in headline after headline. They even began trending on social media – not exactly odd for some kinds of news, an unusual distinction for words of financial advice.

But is it really time to sell everything, or is RBS overreacting? Well naturally there is no strict right or wrong answer, certainly without knowing the future, but things are not as simple as they first appear. The number of headlines parroting those two words could easily have given the impression that the whole financial system is going to come tumbling down any minute and there is a race to get out and things are, thankfully, not really quite that desperate.

Even RBS was not advocating the sale of absolutely everything – not quite anyway. The full sentence was “Sell everything except high-quality bonds.” Of course, this is not all that much more optimistic – especially when it was followed by the words “This is about return of capital, not return on capital. In a crowded hall exit doors are small.”

While the year is one in which the UK economy faces a lot of potential challenges and it is predicted that stock markets could fall significantly, this does not necessarily equate to a “sell everything” situation. Indeed Andrew Roberts, the RBS Strategist behind the advice, admits that his views on how to deal with the year ahead fall somewhat on the extreme side.

Others are giving very different advice. Indeed, some have responded to Roberts’ missive by giving advice that falls at the opposite extreme. The real thing to consider, however, is that there is no one-size-fits-all solution to anything but the most extraordinary of financial situations. The year looks to be a challenging one for the UK economy, but at present it is not remotely clear what is going to happen or how much impact that will make. If stock markets are has hard-hit as RBS fears, some industries may be hit more than others. If nothing else is taken from Roberts’ warning, it should probably be taken as an indicator that this is a time to review portfolios, seek advice, and think about what you might want to sell – either right away or if a bear market does indeed start to bite.


01 2016

FTSE 100 Shares Falling

The FTSE 100 dropped 5.2% between last Monday and Friday, making last week the worst for the London share index in 2015 so far. The 5.2% loss equates to a fall of 363 points.

Friday was an especially bad day for the prominent UK share index, with a fall of 2.8%. This was not just an overall drop, but a pretty much universal one for the companies that make up the index with almost all of them falling in value or managing to only hold steady. Just one company managed to actually record a gain on Friday; Royal Mail, which experienced a rise of 1.6%.

UK shares are not the only ones suffering at present, nor the only ones to be hit especially hard last Friday. The stock exchanges of Frankfurt and Paris fell by 3% on Friday.

Over in the US, major Wall Street indexes such as the Dow Jones, S&P 500 and Nasdaq all recorded falls around the 3% mark as well. The S&P 500 was hit especially hard on Friday, experiencing its biggest single-day drop for almost four years. It fell by 3.19% or 64.8 points. Nasdaq fell even further, with a drop of 3.52%.

The widespread fall in share values has been attributed in no small part to disappointing manufacturing figures from China, which is one of the biggest manufacturing centres for large and small businesses across the world. The less-than-stellar data has worsened economic fears surrounding many major markets. China’s own stock market is also performing poorly at present, with the government investing state pension funds in an effort to stimulate the market and stop the rapid slide in values. According to some experts, such as CMC Markets analyst Nicholas Teo, these and other issues with China’s economy could hold back the global recovery.

Oil prices are also falling, and this is very much a related phenomenon in terms of its impact on a number of major companies in many markets. In the US, in particular, the New York crude oil price fell below the US$40 per barrel mark for the first time since the global recession.

Last week’s poor performance of the FTSE 100 index may have been the worse of any single week this year, but it is merely the continuation of a current trend. The FTSE 100 has now recorded a drop for nine sessions in a row – the longest period of consistent loss since 2011.


08 2015

Penny Stocks: Don’t get Taken in by the Hype

If you browse around investment sites and financial advice pages, it’s not hard to find adverts extolling the values of penny stocks. Many have ridiculous claims such as “Turn £50 into £1000 every day,” and they can even appear on respectable sites because webmasters often have limited control over what adverts are shown on the site.

It’s easy to see that the more absurd claims are too good to be true. However, it’s also easy to wonder whether these are wild exaggerations describing an investment class that is nonetheless profitable. Penny stocks themselves are, of course, legitimate stocks on respectable exchanges – they are just the very cheapest ones. Furthermore, the claims made in adverts aren’t always so absurd as the more extreme examples. Some of the adverts make much more modest and realistic claims, making it harder to assess their value.

While it’s not impossible to profit from penny stocks, they are generally not recommended at all. Avoid getting taken in by the hype, and if you approach penny stocks at all then do so with care.

What Are Penny Stocks?

So what are penny stocks anyway? Quite simply, they are stocks and shares in small companies (or often companies whose values have plummeted because they are in trouble) which trade for pennies. Some even trade for less than a penny per share. Obviously, this makes them cheap to buy and easy to obtain in large quantities.

Because their values are so very low, they tend to be particularly volatile. Even a small price movement tends to represent a significant percentage, and if they are bought in very large quantities this can make a significant difference to the value of your portfolio.

What are the Catches?

Without the careful phrasing and selective fact-picking that is used by companies pushing penny stocks, you may well have spotted the first catch already. Price movements tend to be proportionally significant, and they can go in both directions. While this means there is indeed the potential for big profits, there is just as much potential for equally big losses.

This isn’t the full extent of it though. Penny stocks lend themselves extremely well to price manipulation and scams – and most of the companies that try very hard to push them are doing so for reasons along these lines. Penny stocks are easy to obtain in large quantities, and because they are lesser-traded than their big brothers even a comparatively small spate of buying or selling can push their values around. Many companies try to push people to invest in their chosen penny stocks simply so they can use those funds to manipulate the market and take advantage of it for themselves. They are much more likely to see a profit than you are – and it could well come at your expense. For this reason, if you invest in penny stocks at all it should not be through a recommendation from a source you don’t have good reason to trust.


06 2015

Tracker Funds vs Managed Funds

Investment funds are popular as a hands-off way to access the stock market. They allow investors to just put their funds in one place, and let the fund manager work out which actual companies are worth investing in at any given time.

However, recently funds with no manager have become increasingly popular. Tracker funds don’t rely on a single manager to actively maintain and modify the fund’s portfolio of investments. Rather, they maintain interests in a diverse and representative range of companies and sectors across the exchange. In this way, they hope to “track” the movements of the exchange as closely as possible.

The Two Different Approaches

The aim of managed funds is to beat the market and maximise profit, which as always comes with an extra element of risk and instability. The role of the manager is to serve as the expert who knows when and where to invest for greatest profits, avoiding the weakest sectors at any given time and focussing on the strongest for the greatest returns.

Tracker funds take the view that few if any fund managers can really, consistently beat the market for very long. Their stance is that it is better to skip the fund manager, and therefore cut down on the fees investors have to pay, and instead focus on keeping pace with the market which is much easier and somewhat less risky. It’s an option for investors who prefer comparative stability and predictability (though it should be noted that these are things which the stock market rarely offers in any great abundance).

Which is Better?

As is so often the case, there is no particular right or wrong answer to this question – yet it remains a question worth discussing.

The approach of tracker funds seems to be one which has paid off in recent years. In accordance with the idea that no fund manager can consistently beat the market and it is better to keep pace with it, recently tracker funds have regularly beaten out funds with expert managers in terms of overall performance.

However, this is not always the case. It is often said that when things are bullish and the market is on the rise, tracker funds which keep pace with the exchange’s overall growth tend to perform better than managed funds which try to pursue even better returns. When things turn around and a bear market starts to set in, however, managed funds tend to do comparatively well at damage limitation which tracker funds meekly follow the market downwards. This may be why many (though by no means all) managed funds come out on top over longer terms.

Overall, of course, the matter also depends heavily on which specific funds are under discussion. As always, it is important to properly research a fund before investing in it.


05 2015

The Most Popular Niche Property Investment Assets

Investors are increasingly turning towards niche assets over mainstream ones. The reasons for this are varied. Some niche assets have been outperforming their mainstream counterparts for a while, and are forecast to keep doing so. Other investors simply recognise niche investments as a way to add extra diversity to their portfolio.

At present, some of the most popular niche assets for investment include:

Care Homes and Retirement Properties

Britain is currently home to an aging population, and demand for end-of-life care is increasing. Developers are funding care homes and other retirement developments such as sheltered accommodation in much the same way as they would fund other large-scale projects –by selling units to investors off-plan or, in some cases, upon completion. These are affordable and often come with attractive terms such as assured high-level returns for the first few years and guaranteed developer buy-back. However, they also have their fair share of catches; a very limited resale market, the uncertainty of buying off-plan or new developments, and in a few cases such exceptionally high management fees that returns have been all but wiped out.

Student Property

Student property has risen in popularity so rapidly over recent years that it may soon be debatable whether it can still be called “niche.” It has even been called the UK’s best-performing asset class in a report from Knight Frank, having outperformed mainstream buy-to-let for a while now. Student properties can be family homes broken up into homes in multiple occupation (HMOs), or purpose-built student pods. This kind of property is particularly popular at the moment, as student numbers have been steadily increasing and the abolition of intake caps has led many investors to hope for an especially big jump next September. Purpose-built properties are a more affordable way into these markets, but share some of the disadvantages of care homes such as large numbers of off-plan developments and limited resale options.

Hotel Rooms

Hotels are another type of development which is increasingly being fuelled by investor funds. Either rooms will be sold off-plan to investors to fund development, or soon after completion to provide the developer with faster and more definite profit on the expense of construction.  Hotel rooms are affordable as properties go, and have the potential to perform very well indeed in prime markets. They also often allow for a certain amount of personal usage per year, and if you invest in a good hotel and a desirable location this can be a very nice perk indeed. However, you are essentially investing in not just a property but a business as well. If the hotel doesn’t do well as a business, your investment will falter. Once again, there is also a limited resale market and the uncertainty that comes from most developments being either off-plan or newly-built.


04 2015

Shares vs Property: Choosing the Right Investment

Though there are many different types of investment, both mainstream and niche, two asset classes still seem to dominate the market. Among seasoned investors and those looking to boost their savings alike, property investments and shares seem decidedly the two most popular choices (though the recent rise of peer-to-peer lending looks like it could soon challenge their duopoly). There is no right or wrong answer to which is the better, but rather it depends on your own investment goals and a careful consideration of several factors.


One key deciding factor is the amount you are willing to spend. Stocks and shares can be invested in with very small amounts indeed, but purchasing a property will obviously cost a lot more. The outlay on a property investment is not necessarily equivalent to the total value of a property. A buy-to-let mortgage can reduce your outlay significantly but also eat into your returns, and certain niche property types can be bought for comparatively low prices but these also tend to have catches. Even when these factors are considered, however, property investment still involves a much greater minimum outlay than shares, so your decision could rest entirely on the amount you are willing to invest.


Property is generally considered a more secure investment than stocks and shares. This is largely because shares can be highly volatile, fluctuating rapidly and proving highly sensitive to a large number of market conditions down to the level of the individual companies you invest in. However, this obviously does not form a guarantee that properties will perform better than shares in years to come – merely that this is what has tended to happen so far. Furthermore, there is a lot of variation depending on where exactly you invest. Properties of some types and in some areas perform well, others very poorly. Likewise, certain investments in shares – particularly funds that are expertly managed and spread across a broad spectrum of the market – tend to be much less risky than others. Remember that both, however, carry the possibility of losing money instead of gaining it.


Naturally, the returns on offer will be a significant factor. Sadly, this is surprisingly hard to pin down. Returns from shares will vary massively, though the very highest returns are only usually received by a very small and lucky segment of investors. In general, a well-chosen and good-quality property will probably deliver higher returns than shares. However, this is further complicated by the matter of liquidity. Shares are highly liquid, so if you have invested well and want to access your returns or regain your original funds you can do so in minutes. Property has two income streams: rent and (hopefully) value growth. The former is liquid but the latter – along with your original investment – is tied up in the property and can only be accessed through a lengthy resale process.


02 2015

The Housing Market: What to Expect in 2015

The UK’s housing market has been performing strongly for some time. Property has become one of the country’s most popular investment assets, attracting attention from buyers both at home and abroad.

In particular, capital growth has been strong with residential property values rising significantly. The capital growth that property investments have provided recently has outpaced the performance of many other asset types significantly, and has far outpaced the returns on offer from simple bank accounts. However, the later part of last year saw value growth in the residential property market begin to slow. This has left many investors as well as homeowners especially keen to find out how the market is expected to perform over the course of the coming year.

The twelve months leading up to December 2014 saw house prices rise by just 7.2% – the lowest rate of annual growth that has been observed in the market since November 2013. This represents the fourth month in a row that growth levels have fallen, suggesting a marked trend of deceleration is currently being seen.

Most experts are predicting that 2015 will see the deceleration in capital growth displayed in the later part of 2014 continue. Residential property values will continue to rise, but more slowly than they have been doing over the past couple of years.

There is an unusual level of consistency between predictions from multiple experts on just how much growth the housing market will see over the course of the coming year. Many experts predict a straight 4% figure, or a small range at a similar level. Many of those who do deviate from this 4% figure only do so by a single percentage point. While these predictions are obviously speculative and subject to revision if any significant shift takes place in the market or new factors come into existence, the consistency of these estimates makes it easy to believe that a 4% figure is indeed likely.

Contrary to previous years, this means that returns from capital growth will not be all that far above the best savings accounts. However, when property is purchased as an investment rather than a residence, capital growth is usually only one source of returns. When the second, more liquid income stream of rent is considered, property is still considered by many to be a good investment to hold in the coming year. However, those taking a more long-term view may want to consider the fact that some believe deceleration in capital growth will continue beyond 2015, with returns continuing to dwindle over the following year.


01 2015