MASTER INVESTOR: Dolf De Roos – The Global State of the Real Estate Market

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Dolf de Roos first began investing as an undergraduate while studying for a PH.D in electrical and electronic engineering at the University of Canterbury in New Zealand. He noticed that engineers were not uniformly wealthy, and started to study the rich to find out what they had in common, finding that it wasn’t age, gender or religious. Rather, they were all people of high integrity, and they all either made their money, or held their wealth, in real estate. “I knew then that I should invest in real estate,” says Dolf.

His book Real Estate Riches was a New York Times and Wall Street Journal bestseller. He regularly conducts seminars, investment tours and education events throughout the world, including the US, Australia, New Zealand, Europe and South Africa.

The current state of the Real Estate Market
As of today, the world economies are in turmoil, exemplified by Greece’s financial collapse shortly after the implosion of Wall Street in 2008 and growth in China, the second biggest economy in the world, falling to its lowest level since 2009. Rather than watch the news and panic, Dolf advises us to rather stand back and look out for the developing long-term trends, as Real Estate itself is often a long-term proposition. As such, if you purchased property just before the crash throughout 2008 and 2009, then three years later you would have found yourself down on your investment. However, if you go back and look through recorded history, generally at the end of any ten-year period you find prices higher than what they were. This is true for real estate across the board, the only exception being when property is destroyed through floods or another natural disaster. The real estate itself rarely if ever disappears otherwise.

Real estate, according to Dolf and despite all the ups and downs, will always be a desirable purchase and proposition. China has a population of 1.3B and the number of people reaching the ranks of the middle class is swelling enormously and in turn the amount of money leaving China for investment abroad is going up exponentially.

Opportunities in the Real Estate Market
The current state of global real estate market is on a general downturn. The chance of finding a bargain in the US market is well over while Australia’s housing price boom has begun coming down into a sustained decline.

Dolf sees Europe as being markedly underrated, chiefly throughout the greying of population (when the median age of a country or region rises due to rising life expectancy and/or declining fertility rates). This opens up all kinds of interesting property opportunities, from rest homes, medical facilities etc. Europe is currently home to a massive influx of refugees, all of which have to be accommodated for. By investing in real estate that caters to this increase, you are investing in a growing market with no signs of slowing down.

“If you go back and look through recorded history, generally at the end of any ten-year period you find prices higher than what they were”

Offshore investment options for South Africans
Dolf sites a number for reasons for not investing in property throughout South Africa, chief of which being the decline of the Rand over recent years. “If you look at the Rand over the past 15 years next to US and UK currency, there is a linear decline of around six to seven percent a year and no evidence on the horizon that that decline is going to come to a halt and reverse itself” he says. If we assume that things will go down by six percent annually, then there would have to be an upswing of at least a further six percent just to stand still and cover the investment costs. He is also keen to emphasize the effect that nationwide load shedding has had in shaking the confidence of prospective investors.

Dolf has always been a large supporter of offshore investment, reasoning that investment overseas gives your a hedge against a falling currency and falling economy. While spreading your money across the Continents may sound risky, keeping all your eggs in one basket opens you up to as many, if not more so risks. While investing solely at home may have been sensible 50 years ago, when the cost and effort to get to another country was enormous, in this day and age, when you can get on a place and be anywhere within 24 hours, the opportunity for offshore investment is at your feet.

Shipping your money overseas is often seen as being dishonest to your country, but, according to Dolf, by successfully investing your money overseas you bring the fruits of those investments back into the country and ultimately any capital grown that comes with it. In the case of a weaker home currency, you are bringing a strong forgiven currency into the country.

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