Key takeaways from the week

  • US and UK indices were higher for the second week in a row and have regained all of the losses incurred after the UK voted to exit the European Union two weeks ago. Elsewhere equity indices were mixed;
  • With a 4% gain in the market over the past two weeks, the S&P 500 closed just below its all-time high. Helping stocks accelerate toward all-time highs were strong economic data last week, as the economy added 287,000 jobs in June and the ISM Non-manufacturing Index hit its highest level in 2016;
  • In addition to this strong data, the Federal Reserve's meeting minutes assured the market that it would raise short-term interest rates at a gradual pace; and
  • Global bond yields reached record lows last week amid a flight to safety and expectations for monetary easing post Brexit.

If so, his hands might be tied

An Englishman's home may be his castle, but how useful is that castle if all his money is tied up in it and he needs it back quickly?

If you might need quick access to your capital, then you should be wary of investing in any form of property.

The meteoric rise in UK house prices combined with more stringent lending criteria and increasing purchasing fees have made buying a property very difficult. Different ways of accessing property investment have developed though, in the form of unitised funds (generally commercial property in nature), or REITS (real-estate investment trust). Both offer cheaper access to property but recent events have proven that the age old issue remains - that of liquidity.

Put simply, can you get your money back if you need it?

The delays experienced with selling a house are well-documented. Negative equity is still an issue for many, resulting in property being retained for longer rather than sold. These problems have wider effects when combined with a shock market event (such as Brexit), the results of which we are now seeing affecting the other forms of property investment.

The recent suspension of 8 (at the time of writing) property funds in the UK highlights the fundamental issue with an illiquid underlying asset. If too many people want to get their money back at the same time, a property fund will not have enough cash. To protect the interests of the fund and other investors, the fund has to suspend trading of its units, to work through the period and potentially sell a property to create the cash required.

Is, therefore, a unitised property investment worth having? All types of property investment can work but it has to be for the right type of investor.

Property related liquidity issues are unavoidable, so you must be sure that you can weather a liquidity issue if you want exposure to property. Expatriates are more susceptible to changes in circumstance and therefore may need access to their capital quickly. This means liquidity becomes even more important than normal for expatriate investors, and property investment must be carefully considered before taking it on.

If you need help or have any questions about liquidity or this then please get in touch.  

 

Market data

Equity Indices Value Weekly Change
FTSE 100 6,590.64 0.19%
S&P 500 2,129.9 1.28%
Hang Seng 20,564.17 -1.11%
Nikkei 225  15,106 -3.68%
Dax 30 9,629.66 -1.5%
Shanghai Composite Index 2,988.06 1.90%
Bonds  Value Weekly Change
US 10 yr 1.37% -6.57%
UK 10 yr 0.71% -21.13%
Commodities / Energy Price Weekly Change
Gold $1,359.75 1.76%
Brent Crude Oil $45.98 -8.05%
Currencies Majors Value Weekly Change 
EUR-USD 1.1036 -0.94%
USD-JPY 102.09 -0.45%
GBP-USD 1.2901 -2.86%
GBP-EUR 1.172 -1.69%
Central Bank  Rate
Fed Reserve 0.50%
ECB 0.00%
Bank of England 0.50%
Bank of Japan -0.10%
Prices as at Friday 8 July 2016

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