Protect Your Money From European Recessions With The Oldest Asset Known To Man

Europe recessionI read in the paper this morning that France became the latest big European economy to slide back into recession this week as it took a third dip into negative territory.

Italy is still in its longest recession on record and even Germany, a country that has managed to stay out of a recession (just), posted a pitiful 0.1% GDP for the first quarter.

Recessions are generally bad news for property markets. They result in rising unemployment and, in the worst cases, bankruptcy, social unrest and all those other nasty things. With fewer people having the means to buy homes and the banks reluctant to lend money, property prices also begin to fall.

Recessions, however, are not bad news for property investors.

From the dawn of time we as human beings have sought shelter. Since we first emerged from the African plains we didn’t have much hair to protect us and travelling north to a Europe gripped by the Ice Age meant that shelter was just as important as that animal fur coat.

Back then it was caves, but the thing about property now is it offers us shelter both literally and metaphorically.

A house not only puts a roof over our heads, it can also know
how to remove moss from your roof over our money. When times are tough, as most of Europe is finding now, an investment in property will provide shelter from the worst a recession can throw at us – certainly in the longer term.

In simple terms recessions affect us all in two ways, they take money out of your pocket as earnings remain frozen and they take money from your bank account as savings interest rates fall.

The bank manager isn’t going to reward you for saving hard and preparing for the worst in a recession. No, the bank will actually lower the interest rate so that it can keep hold of more of your money.

At the same time that silent killer we call inflation will continue eroding the value of those savings and steadily reduce your spending power.

By investing that same money into property on the other hand, the value of that investment is protected because you have an asset. This asset may lose value in the short term – if we look at what has happened in the past 5 years that is certainly true in Europe.

Fortunately that value will always rise in the long term. This is because there will always be demand for that most basic of human needs – shelter.

The other great thing about property is that when we purchase it in a country where an economy is growing and property prices are rising, it is also possible to make yourself a profit even in the short term. In our growing market we often see spectacular capital growth, only without the strong rental market we see in the recessionary economy. When people don’t have the means to get finance or if they don’t earn enough, they rent.

Above all property gives you choices, take a long term view and invest now while property prices and interest rates are at historic lows, or look beyond Europe to countries like Turkey, Brazil or the booming state of Florida in the US for fast returns.

Either way, investing in property will allow you to get the best out of your hard earned money while others sit on the sidelines refusing to evolve with the times and fearing a European breakup or the US falling off the fiscal cliff.

What are your thoughts on investing in property in a recession? Please leave your comments below:

Kind regards

Brett Tudor
Property Expert

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