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The low interest rate environment we’re currently experiencing is causing a shift in the property landscape and opportunities available, warns a property specialist law firm.
Having experienced several low interest rate environments, Owen Hodge Lawyers has warned that investors may find themselves getting caught up in risky property schemes.
“Low interest rate environments bring with them changes to the property landscape. A characteristic of such an environment is cashed up investors, and particularly retirees, who have survived the more challenging times and are seeking attractive investment opportunities,” explained managing director of Owen Hodge Lawyers, Rolf Howard.
“In my experience this environment can have a significant impact on the property market. Firstly there is room in a low interest rate market for new products as money can circulate faster and risky products have the ability to thrive for a certain period of time. This is why economists contend prices will eventually rise because people are drawn to the many opportunities that will be on offer to them,” Mr Howard said.
He secondly pointed to new property products that will appear attractive, but in reality are not the best investment choices.
“In many instances these may offer better returns relative to other opportunities while interest rates remain low,” he said. However, he warned that the products had not been tested in a higher interest rate environment, leaving investors open to risk.
He noted that there are a number of ways to avoid risk schemes, including remembering the old adage that if something “looks too good to be true” then it probably is.
Undertaking an analysis about how the asset will manage when rates eventually go up, researching thoroughly so you understand the investment and considering diversification were also suggested as risk management steps.
Property refers to either a tangible or intangible item that an individual or business has legal rights or ownership of, such as houses, cars, stocks or bond certificates.