DSR Asset Management Overseas Property Investments

DSR Market Analysis – Getting Leverage in Real Estate" href="http://www.dsrassetmanagement.co.uk/dsr-market-analysis-%e2%80%93-getting-leverage-in-real-estate/" rel="bookmark">DSR Market Analysis – Getting Leverage in Real Estate

Stocks, all other things being equal, are an invest­ment lever­aged to the value of their under­ly­ing product.

For any busi­ness, as the price that can be charged for a prod­uct rises, the profit mar­gin rises disproportionately.

This is because there is always a fixed cost ele­ment to a company’s oper­a­tional costs that acts as bal­last on the neg­a­tive side of the bal­ance sheet, and when prices rise that company’s ‘dis­pos­able income’ ie profit avail­able for re-investment and pay­ing div­i­dends, rises very sharply as a % of turnover.

Of course, when the process goes into reverse, the effects can be dev­as­tat­ing on share price. The price-time path of home­builder Tay­lor Wim­pey (TW) shows a dev­as­tat­ing 2 year decline. How­ever, the chart is show­ing fur­ther signs of bottoming.

British Land (BLND), like TW is largely an inventory-based con­glom­er­ate, whose core busi­ness needs no expla­na­tion. British land is what UK home­builders build on.

How is BLND far­ing? Broadly speak­ing they have fol­lowed the same path as TW, While British Land is test­ing the lows of 2000, Tay­lor Wim­pey is below the prices seen for the entire chart – apart from maybe the very low­est point of 1992. Over the longer term British Land has fared much the better.

In another essay I argued that the say­ing ‘Safe as Houses’ did not become an accepted par­a­digm overnight, but rather through many decades of real expe­ri­ence of fluc­tu­at­ing markets.

Mean­while all the dri­vers are in place for a global search for quality.

The new par­a­digm is glob­al­i­sa­tion, and our children’s chil­dren will be liv­ing under a much more inter­na­tional if not uni-national polit­i­cal construct.

National bound­aries will no longer be the imped­i­ment to move­ment they once were, and the search will be inten­si­fied for the best places on Earth, bid­ding up prices like old antiques at auc­tions. This would sug­gest that best way to take the long view of the prop­erty mar­ket is to invest in prime coastal and lake­side land.

His­tor­i­cally, build­ing land does bet­ter than homes, just as BLND has held up bet­ter than TW. At the height of the boom UK houses with large gar­dens suit­able for sub­di­vi­sion into smaller plots for build­ing were sell­ing for mul­ti­ples of sim­i­lar homes stand­ing on just their own footprint.

Putting together the land and glob­al­i­sa­tion argu­ments, we think per­haps the best way to take the long view of asset appre­ci­a­tion in real estate is to invest in prime coastal and lake­side land worldwide.

DSR Asset Man­age­ment Ltd has a select inter­na­tional land port­fo­lio of prop­er­ties in some of the best regions around the globe for growth, income and qual­ity of life.

For more infor­ma­tion about these and other invest­ment prop­erty or other over­seas property