Where to invest in 2021

As well as a Chinese virus, the year 2020 brought with it a whirlwind of events in practically every area of our lives. And the area of investment was no different. How has the world changed and where should you make investments in 2021?

2020 was an exceptionally turbulent year. If you’re looking for a simple prediction as to what the coming year is going to be like, it would probably pay off most to invest in a crystal ball and development of clairvoyant skills. But that is the nature of markets.

However, some basic rules remain the same, such as diversification, avoiding investing in areas that you do not understand and taking into account longer-term horizons when investing, as well as steering clear of “miraculous offers” from all sorts of companies that promise profits in the range of tens of percentage points with “virtually” zero risk.  

So where should you be looking to make investments in 2021?

Foreign real estate

You probably wouldn’t expect specialists in foreign real estate to recommend anything else but foreign real estate.  But we are not the only ones who see interesting opportunities on the real estate market. Another group who rate foreign residential real estate among the most attractive investment opportunities are dollar millionaires. That is, successful people who have long-term experience of evaluating their property. We too have a few good arguments as to why investing in foreign real estate could be the right choice for the year 2021, whether it is an investment property, or perhaps a little house somewhere by the sea or in the mountains.

1. Diversification

A suitable diversification portfolio reduces the risk of loss. It is one of the above mentioned rules for every investor. Real estate, as a conservative investment, should be a part of every portfolio. In the case of foreign real estate, this is not only a question of diversification among individual products, but also currency and geographical diversification.

While we don’t want to cause unnecessary alarm, when monitoring current political developments in the world, you may observe a tendency which, albeit only in inconspicuous steps, could lead to partial restrictions in handling your own property or disproportionate taxation in the future.

Even in our country, you wouldn’t be at all surprised if certain political entities came up with the idea of a special tax in second residences and any other additionally owned real estate. You may even have heard similar suggestions from the mouths of some politicians. That is one reason why it may be wiser not to invest in real estate solely in the Czech Republic. Not to mention that fact that real estate prices in the country are relatively high at the present time.

2. Evaluation of real estate and income from leasing

The coronavirus pandemic has been quite a shock for stock markets. But there has been no significant slump in real estate prices. On the contrary, in a number of countries real estate prices have continued to grow. The appreciation of a property’s price over time, which almost always occurs in the case of real estate in the longer term, therefore remains a reward for lower real estate liquidity.

Houses and apartments intended as a second homes enjoy the greatest interest among investors in foreign real estate. This typically means properties by the sea or in the mountains. If you purpose real estate exclusively for your own use, you will not have to address the issue of potential returns from leasing.

Most people, however, combine their own use of a property and leasing at times when they are not using it.  Restrictions on tourism in 2020, of course, may have resulted in reduced profit from leasing. On the other hand, in Austria, for instance, overnight stays for domestic tourists compensated for potential drops in accommodation of foreign clientele to a considerable extent.

The world is looking at the year 2021 with optimism in connection with the gradual authorisation of anti-coronavirus vaccines and the fact that a number of countries have already begun mass vaccinations of their populations as of the end of 2020.

At the same time, the segment of real estate for use as second homes has not suffered the fate of apartments purchased for rent via Airbnb, for example in Prague or other similar cities, where, in addition, there is a risk of further restrictions by states in the future.

3. Investment in foreign real estate can reap rewards even in extraordinary times

Over the past year, we have witnessed events that probably very few people would have foreseen. Measures connected with the worldwide Covid-19 pandemic changed the workings of the world that we were accustomed to.

Yet even in these times, own real estate abroad has proven to reap rewards. Coastal climates or the pure Alpine air are the best way to strengthen your immunity. And if you can rely on the facilities of your own house, you can safely enjoy a holiday at a time when some accommodation facilities have been forced to stay closed.

At the same time, after the initial shock connected with absolute isolation in some countries subsided, people who owned, for example, a property or a yacht in a particular country were among the first who were permitted to travel there. And at a moment when the Czech Republic ranked among the worst afflicted countries in the world, a number of people took advantage of the opportunity to take shelter in their second homes abroad. Working from home by the seaside had an undeniable charm.

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