UK Farthest into the Downturn Cycle (Partners Group)

A new report out from Partners Group clearly outlines where along the economic cycle they perceive the worlds largest economies.  The report (available in PDF here) separates out three phases of declining economic activity:  early downturn, when the market is deteriorating and indicators do not yet show widespread distress;  advanced downturn, when participants know the market is in a correction and credit is scarce; and late downturn, when the transaction market shows signs of life and many uncertainties about price levels are eliminated.

The only economy in the "late downturn" category is the UK, where cap rates are at historical highs and many opportunities to purchase relatively safe properties are available.  In the "advanced downturn" category, they place the USA, France, India and Japan.  Ireland and Spain, however, are in the "early downturn" phase, indicating that much more distress may be around the corner for these economies. 

According to the report, identifying the stage of downturn should help investors select the appropriate strategy.  In the early downturn stage, investors should sell their assets (if possible) or position their portfolio to avoid a distressed sale later.  In the advanced downturn stage, investors are likely to find the best opportunities in the debt and secondary equity markets.  Only when an economy reaches the late downturn stage should investors consider making pure equity investments in properties.

Comments

[Ahutosh Ranjan]

Good post on property investments. I like very much