Explaining The fright To Safety

That the global financial crisis administered a dose of cold

, hard and acutely painful reality to those who thought they could rely on increasing equity in their homes to underpin their wealth ad infinitum is, by now, common knowledge but the debunking of the myth that property price increases were a sure thing carries with it a second and potentially more potent sting-in-the tail.

A Deltacontinental analyst explained that There is evidence to support the existence of a hardcore of potential property investors who, having missed the boat on late-90s HPI (House Price Inflation) and patiently waited for the inevitable correction, are salivating at the prospect of being able to swoop in to the markets with the sole intention of emulating stock market investors who buy the dips. These investors believe that property prices will suddenly bounce off their lows and take off to the upside again as they did during the boom years but what they fail to acknowledge is that this time, its different.

Something of an investor clich, perhaps, but Deltacontinental believes there is considerable merit in its application to the real estate market. Take the UKs real estate bubble as the quintessential example of the extremes that these markets are capable of reaching. In the decade following the last house price crash in the UK, property prices exploded partially thanks to the widespread availability of credit. Self-certification of income, less-than-prime lending criteria and loans that provided borrowers with funds to not only purchase the property outright without a deposit but to furnish it and purchase a new car to accessorize the driveway safe in the belief that the effects of HPI would soon render the value of the home greater than the value of the loan.

Recent history has shown that such beliefs were somewhat erroneous.

The reason it will be different next time around is fairly simpleeasy credit isnt coming back any time soon because the securitization markets which provided the funds during the boom remain effectively closed. The investors who bought the packaged up mortgage-backed securities will need years to regain their confidence in these investment products that have proven so disastrously overpriced and misrepresented.

Deltacontinental strategists suggest that those looking to acquire property in markets that have sold off significantly will most likely have to wait a decade or more before they witness appreciation of any note in the value of their holdings. These markets could bump along the bottom for years. The likelihood is that those buying THIS dip will probably see the value of their investments plummet as austerity measures affect peoples inclination to buy and banks curb lending even further because of possible sovereign debt defaults in other countries, said one strategist.

This paradigm shift coincides with the rise of the emerging economies of the BRIC nations which will continue to prove more attractive to the big investors than another binge on mortgage-backed securities from nations and their citizens that are, frankly, over-burdened by debt. After all, why lend money to those who have already proven that they cant pay it back?

Deltacontinental analysts say that commodities, equities and property markets in DEVELOPING nations represent the best way of accumulating wealth in the years ahead.

by:Adam Warner

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