38: GDP and Population Growth model confirms Ireland and Luxemberg as high potential investment areas
05-29-2005
The latest insights from a unique economic model
PropertyInvesting.net has done an analysis of GDP and population growth projections - results suggest that Ireland and Luxembourg will continue to outperform the average European property market in view of their strong underlying socio-economic fundamentals. Bosnia, Croatia, Iceland and Norway also look attractive.
% GDP growth numbers for the period 2002 to 2003 were taken in $ terms. Then population growth project was taken for the period 2002 to 2010. A hypothesis was used that countries with strong current GDP growth and strong projected population growth should generally have above average property price growth. This is particularly true with countries that have tight planning and environmental restrictions - e.g. not many new properties being built - such countries include UK, Norway, Icleland, Luxembourg, Ireland and Holland.
The results seem to confirm the current property market for period in mid 2005 - Ireland's property prices are still rising, as are Luxembourg's and Iceland's. Germany's are stagnant. The eastern European countries are developing countries and some have just joined the EU, so have a good deal of capital appreciation "catching up" - so the correlations for such eastern Eruopean countries are less meaningful, though they to highlight that the demographics are a long term problem and increase the investment risk.
Further to PropertyInvesting.net's advice in other Special Reports, the most robust investment locations are those regions with:
- high population growth
- high GDP growth
- high employment growth
- regeneration and positive change
- services industries
- far from the centre of Euroland (the low growth French/Germany/Italian economies)
- lowering inflation and lowering interest rates (with stable currency)
The model partly explains why despite Holland being in a recession, prices continue to rise. And support the theory that a house price crash in the UK is very unlikely, especially in London, which has mid 2005 GDP growth of 4% (and retail sales growth of 4% despite a retail recession in other parts of the UK).
