Safe Haven Investments During
Addressing the Question: Why are "Gold" and "Real Estate" Considered Safe Havens for Investors During the COVID-19 Crisis, Despite Their Opposing Market Movements?
During times of economic volatility or recession, investors often shift their funds into a type of asset known as a "Safe Haven" or "financial refuge." These are assets that are highly secure, less volatile, timelessly valuable, and recognized globally. Investors typically turn to these assets to protect their wealth.
Two prominent examples of Safe Havens that have garnered attention recently are gold and real estate. Recently, gold prices have surged to record highs, making it an enticing investment target and, in another sense, a Safe Haven asset that has attracted global investors. A significant amount of investment has flowed out of riskier assets, such as stocks and bonds, into gold continuously.
Although gold prices have seen some declines at times, many analysts still believe there is a possibility for gold prices in the global market to rise again this year.
Meanwhile, another interesting safe asset is real estate, which has recently seen price declines contrary to gold prices. Why, then, do both assets attract investors equally during such times, despite moving in opposite directions?
When comparing investments in gold and real estate, we find both similarities and differences. The similarity is that both are considered safe assets and tend to appreciate in the long term, even though there may be price fluctuations along the way. However, looking back at history, we see that both gold and real estate have generally appreciated, with gold prices rising every time the economy has faced a downturn.
Nonetheless, when the economy recovers, gold prices tend to drop quickly. For instance, during the subprime crisis in 2011, domestic gold prices peaked at 26,850 THB, but when the economy recovered in 2014, gold prices fell to a low of 17,750 THB, only to gradually increase each year until they surged again in 2020, reaching a new high above 30,000 THB.
Many analysts believe that gold prices will remain high for another 1-2 years because even if a vaccine for the COVID-19 outbreak is developed soon, it will still take 1-2 years for the economy to fully recover.
On the other hand, in normal circumstances, land prices typically increase by an average of 5% per year, with selling prices depending on location. However, this year, which has seen real estate affected by the economic slowdown due to the COVID-19 outbreak, many locations have not seen price declines; instead, prices have continued to grow, albeit at a slower rate than in previous years. Some high-potential locations have even seen increases above the average (5-10%).
Looking at the residential sector, particularly condominiums, which are the most popular type of housing for investors, we see that although there has been a slowdown in new project launches and existing projects have significantly reduced prices, this phenomenon has not shaken the confidence of long-term investors. We still witness many projects selling out during this period, defying the current purchasing power trends. Even if condominium prices do not rise in the next 1-2 years, investors can still rent them out to generate passive income in the long term.
Therefore, when comparing the differences between investing in gold and real estate, it can be said that real estate is more suitable for long-term investment than gold. Gold, on the other hand, has high liquidity, allowing for buying and selling within a single day. Another advantage of real estate is that it does not require cash upfront; with a minimum down payment of 10-20%, one can invest, and while waiting for the right moment to sell for profit, one can also rent out the property to generate income.
However, in the current low-interest-rate environment, both gold and real estate are assets that benefit both buyers. Low interest rates make it easier for real estate buyers to access lower financing costs, while gold buyers do not lose out due to reduced interest rates, as gold is not an asset that yields returns in the form of interest. Additionally, both types of safe assets can be passed down as inheritance to future generations. Investors can choose based on their preferences, but diversifying investments across various asset types will enhance the effectiveness of their investment portfolio.
