World’s Largest Money Manager Kick Starts Reverse Gold Rush
By Paul Esajian on May 11, 2015
The world’s biggest money manager just kicked off a reverse gold rush that could see a massive shift of investment to real estate.
Gold has been a perceived stronghold for individuals, investors, banks, and nations for centuries. Those days may be over – at least for now. Huge amounts of capital could soon be added to the hundreds of billions in funds chasing real estate. So what sparked this new landslide? What does it mean for individual investors?
Larry Fink is the head of the world’s single largest money fund: BlackRock. His recent comments at a conference in Asia have already begun impacting markets. Fink sounded the gong, marking the end of gold as a wealth preservation tool. Instead, he handed the torch to contemporary art, and real estate investment.
Between April 6th and 25th 2015, gold lost 20% of its value. It’s down over 38% since its recent peak in 2011. If it continues the cycle, it will lose more than half its value again, falling from almost $2,000 an ounce, to trading for less than $300 an ounce. If it returns to 1970s era or earlier prices, the drop could be even bigger.
Art may be a great tool for the ultra-wealthy. It can be quite a bit different for the average individual. Pricing and valuation challenges can be difficult for the amateur art lover. Then there are changing tastes, and the difficulty of resale.
Real estate and art are increasingly being woven together. We see this in fashion label condo buildings, and in architectural styles and interior design. This is especially true at the top of the market, and in high end luxury markets. This is where fashionable real estate continues to attempt to break new records in price per square foot.
Prime real estate in the most well-known cities may continue to draw investment by the wealthy, and from builders who can maximize on large price per square foot spreads. However, the yields in the hottest zones may eventually suffer due to competition and lack of inventory.
Outside of the urban cores of Manhattan and San Francisco, regular real estate investors can still find plenty of deals. Selecting the right real estate investments, and investment strategy is really about finding the best match for your personal goals and timeline, as well as avoiding the risks you can’t tolerate. Those that want to boost wealth quickly in the short term will invest differently to those looking for bury existing wealth for several decades. Those seeking income and cash flow to live on will invest in those desiring to score large lump sums to reinvest.
Falling gold prices is only the beginning of the fallout of comments like this. The uber-wealthy can be slow to restructure portfolios and get cash into new investments. This can give regular individuals the advantage. To not only replicate success, but beat the performance of super-sized funds individual investors can act faster, and get into real estate investments before they go up. In many cases they can flip properties to those with heavy capital, but without the time to market for the lowest priced deals. Much of the big money will also be going into mortgage debt and securities versus direct investment into homes or condos. In order to feed a growing demand for this debt, those securitizing it will have to push for more lenient underwriting standards, and expedited lending. That’s great news for the average home buyer, and fix and flip investors. The easier borrowing is the faster real estate investors can act, and the faster home values grow.
Right now is the time to get ahead of the curve in real estate, and to purchase appreciating assets. The question is where and how you will invest in property?