...estate produced solid returns--beating the U.S. domestic stock and bond markets in the last five years--is collateralized and, in the case of institutional-grade assets, typically yields a consistent income stream.

Over the past decade, a number of factors have made world markets more interesting and potentially highly profitable. These factors include deregulation, accelerating globalization, integration of financial markets, economic and political reforms, and high economic growth--especially in emerging-market countries, where growth rates typically exceed that of developed countries.

Investors who look outside the U.S. market could potentially enjoy higher returns, increased portfolio diversification, greater variety of investment vehicles and the opportunity to benefit from the growth of the global economy.

PERFORMANCE AND GLOBAL ECONOMICS CAN YIELD INCREASED RETURNS

International real estate can help boost returns by investing in international properties with prospects for better financial performance than domestic assets. For example, if U.S. investors had secured UK, Australian and Canadian office property assets between 1985 and 1995, rather than domestic assets, they would have earned significantly higher returns. During this period, the U.S. office market's average annual return was zero, but the other markets averaged 12.4 percent, 8.1 percent and 4.5 percent, respectively. (1)

Investors also can realize potential gains though currency valuation movements. The U.S. dollar has depreciated significantly against other major world currencies since mid-2001. Though it has seen some recent improvement against the euro, the dollar remains depressed by historical standards. This dynamic has boosted the value of many U.S. companies' real estate assets abroad.

For example, an asset that was worth $200 million to its U.S.-based owner as recently as early 2003, when the dollar traded near 1-to-1 with the euro, would translate to a value almost $240 million under current exchange rates. This increase in value occurs even without additional investment in the property. (2) Of course, the downside effect from foreign currency depreciation is a non-negligible risk.

Timing of transactions and knowledge of the macroeconomic situations of countries is essential. Using...

NOTE: All illustrations and photos have been removed from this article.



More articles from Real Estate Issues
Recommended reading; The Right to Buy: Analysis & Evaluation of a Hous..., December 22, 2006
Focus on the economy: inflation moderates as mid-recovery slowdown sur..., December 22, 2006

Looking for additional articles?
Search our database of over 3 million articles.

Looking for more in-depth information on this industry?
Search our complete database of Industry & Market reports by text, subject, publication name or publication date.

About Goliath
Whether you're looking for sales prospects, competitive information, company analysis or best practices in managing your organization, Goliath can help you meet your business needs.

Our extensive business information databases empower business professionals with both the breadth and depth of credible, authoritative information they need to support their business goals. Whether it be strategic planning, sales prospecting, company research or defining management best practices - Goliath is your leading source for accurate information.