Property — the affordable alternative to gold

Tony Kavanagh, managing director, Sherry FitzGerald Kavanagh.

Tony Kavanagh, managing director, Sherry FitzGerald Kavanagh.

With all the current global economic uncertainty the value of gold has reached a new high of $1,800 per ounce. Major economic structures have been shaken and continue to be, with speculation of a ‘double dip’ international recession. The euro prospect looks vulnerable, America’s sovereign rating has been downgraded, the dollar taking a hammering and other major currencies under pressure has led many investors to put substantial parts of their investments into gold, hence driving the price to record levels.

Many other forms of investment look decidedly shaky at this time also, once gilt edge investments in large financial institutions and even government bonds have now in many instances been downgraded to ‘junk status’. Where do people invest their cash? We hear every day about the huge drop in values of international share indices and the subsequent loss in values of individual investments, pensions fund investments, and so on.

Why do people buy gold at these times? Primarily because it is an internationally recognised, tangible, tradable asset. In effect, it can be physically seen, felt, and will sell across all economic borders or boundaries. The tangible aspect gives comfort and security to investors. Compare this to property, which has many similarities. Property even has some further advantages in that it can produce an income (rent ), provide for your needs (home, shelter, protection ), and provide a place of work or business, etc. Its main similarity to gold is that it is tangible. You can physically see it, feel it, and touch it. One current major difference from gold is that property prices have fallen in Ireland for the past four years and are now at an affordable level. Gold, on the other hand, has risen in value in the past 12 months and many now believe it is at an unaffordable level and is only worth purchasing if you have large sums to invest.

Property provides for the needs of individuals, families, and businesses. Even today many can ‘gear up’ to purchase it. In effect they can get a loan as financial institutions still consider property as security. Property is now affordable, having fallen by at least 50 per cent from its peak in 2006/2007. Those who are considering investing see huge advantages in the tangible aspects of property as well as the practical aspects. Even leaving cash reserves in a bank currently has no certainty. Will the currency be de-valued? Will the bank survive? These are some of the doubts in people’s minds.

Our experience at Sherry FitzGerald Kavanagh, particularly since May this year, is that many potential investors and possible homebuyers believe property now represents value and a secure investment. Sales of keenly priced property have been brisk over the past three months. In the past six weeks since the beginning of July, Sherry FitzGerald Kavanagh has agreed 15 sales on properties in and around Galway city. Many of these purchasers are cash purchasers and those who are only borrowing low loan to value amounts in the region of 30 to 40 per cent of the value of the property.

In effect, recent market activity suggests owner-occupier buyers and investors now believe it is a good time to buy your home or invest in property. When compared to many other forms of investment, it certainly now offers great value for money, and security with a tangible, usable, practical, asset that you can visit, use, touch, see, and trade.

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