Strong Dollar Creates Global Property Bargain

The currency gods have conspired against the doom-and-gloomers who have been predicting (even, it seems to me sometimes, demanding) the demise of the U.S. dollar. The dollar continues to appreciate against many currencies, including the currencies of commodity-producing countries such as Colombia, Brazil, Canada, Australia, Chile, and New Zealand. Over the last 30 days, the U.S. dollar has rallied further against these currencies, augmenting close to a year’s worth of steady appreciation.

The opportunity this has created for us global property investors is enormous.

You have the chance of your lifetime right now to diversify your real estate portfolio by picking up some absolute bargains. I’m acting as quickly as I can.

A real estate colleague in Colombia reports that August was his best sales month in 11 years doing business in that country. He’s selling properties to U.S.-dollar buyers within 24 and 48 hours of listing them. He contacted me to ask if I were interested in selling my apartment in Medellín. If so, he has a buyer, he says. I told him my apartment isn’t for sale.

In today’s Colombia, I’m not a seller. I’m a buyer. I’m clearing my desk to make time to pay more attention to certain markets, including Medellín, Colombia, where I want to be able to pull the trigger on additional investments as soon as possible.

Earlier this summer, I bought an apartment in Portugal. I was keen to take advantage of the dollar’s strength versus the euro… I had a trip planned to Portugal… so, while there (for a conference I hosted in July), I acted. I looked at a dozen apartments over two days and agreed the terms for the purchase of one of them before leaving the country. I don’t always act so quickly, but I knew I wouldn’t have time to be back in Portugal anytime soon. It was then or never… and the weak euro combined with the down market and low prices in Portugal was too great a chance to miss.

In August, I traveled to Ireland, where, again, I was tempted by the weak currency and the low prices in parts of that country. I’m pursuing the idea of buying in County Waterford.

Meantime, back in Panama this month, my attention has been grabbed by the currency opportunities in Colombia, Brazil, and Chile, which are even greater than when I left this part of the world in June.

The challenge is deciding where to focus. The interesting, even once-in-a-lifetime opportunities are almost too many to keep up with. Meantime, time and available capital are limited.

Considering current opportunities in the Americas, the easiest thing for me would be to buy another apartment in Medellín. I have a personal infrastructure in that city, including a great attorney and other contacts who could help me find and follow through on a purchase efficiently. However, I’m currently generally more interested in agricultural land, and land for reforestation in parts of Colombia can be bought at today’s exchange rate for about US$150 a hectare. Of course, you then have to spend the money to plant and manage the trees, but the land opportunity is tempting.

The U.S. dollar is stronger in Brazil than it was when I first recommended buying in Rio more than a dozen years ago. Of course, prices in Rio have appreciated over the last 12 years, but the better than 50% currency discount means you can buy into this market for less in U.S. dollar prices today than at any time in the past 5 years.

On the other hand, Brazil is a complicated market that I’ve avoided for that reason. I’d say that you have other options that, though they don’t offer as dramatic a currency discount, come without the Brazil hassle factors.

Among them are Chile, another place where you could buy farmland at a nice discount thanks to the currency depreciation; New Zealand, interesting for both agriculture and rental properties (note, too, that this country imposes no capital gains taxes on real estate); and Malaysia, where you can buy at a 20% discount compared with this time last year. Kuala Lumpur offers decent rental yields.

While I never bought into the rhetoric of the “demise of the dollar” pundits, I don’t expect the dollar to stay as strong as it is right now against so many currencies forever. Eventually something will happen to strengthen the currencies of the commodity countries against the U.S. dollar. Could be increased demand for their commodity exports or could be the collapse of the U.S. dollar under the weight of government debt in America. The reason doesn’t matter.

The point is that you have a window of opportunity today to invest in many interesting markets at a discount. Great time to be a buyer.

Lief Simon

“Lief, I’m writing in response to the recent comment from LK regarding an email from Fidelity. I received the same email. The section of the Customer Agreement that is being modified starts with the Mutual Fund restrictions from 2014.

“The new part (as far as I can tell) is the section that would apply to accounts holding stock positions. Depending on the country of residence, there may be some restrictions. I called one of the reps, and he told me that, as of today, Panama, Costa Rica, and Ecuador (the countries that I am considering for retirement residence) are OK, and there are no restrictions for accounts whose addresses are there. On the other hand, Belize (which is also on my list of possibles) is a ‘no activity’ country. I didn’t inquire about other countries.

“My rep did indicate that accounts in the likes of Belize would not be closed and that dividend reinvestment would still be OK in those accounts. Any transaction to open a position would be prevented.

“The list of countries and their restrictions is apparently somewhat dynamic and is controlled by a mishmash of U.S. and foreign government agencies, and my rep was unable/unwilling to send it out. However, he did say that Fidelity was simply following government sanction rules, suggesting that other U.S. brokers would have the same (or similar) restrictions.

“And if I maintained a U.S. address (as I’m planning to do), there would be no change to the account from the current state of affairs, wherever I actually was at any time. The address on the account appears to be a controlling factor.”

N.S.

Thank you for this detailed information. This is what I believed was happening, but it’s good to have confirmation.