If the last few years are like the first, the 2020s will not go down in history for peace of mind. The pandemic, the cost of living and the war in Ukraine have been adding stress to an economy that was already getting used to unforeseen events such as Brexit or the election of Donald Trump. 2023 has contributed an extra ingredient, uncertainty in the banking sector, the scope of which is not yet clear.
The trigger for the latest crisis has been the fall of Silicon Valley Bank (SVB). Despite the imposing name, it is a relatively small entity with specific characteristics. In fact, the SVB stood out more than anything for its clientele: startups technological companies that raise a lot of money in financing rounds. In the last two years, the entity decided to invest a lot of that capital -more than necessary- in bonds.
But at startups They haven’t been doing well recently, as the loss of market capitalization has been compounded by the need for funding. With no investors to back new rounds, they had to turn to their own funds: the money they had in SVB. The bank was forced to sell bonds, thereby losing 1.8 billion euros. It wasn’t much, but mistrust spread and SVB lost 40 billion euros in deposits… in one day.
Investors take note
Mistrust is the watchword and although the authorities have acted quickly, the memory of Lehman Brothers’ collapse in 2008 still weighs heavily on the market. Not surprisingly, investors have already spoken: the capitalization of American banks has fallen by more than 200,000 million in the last month. And perhaps you have also wondered if you should save your money.
In addition to stocks and bonds, which are in a bit of a mess, the everyday investor should focus on another asset class: real estate. It is the recommendation of two of the most reputable investors, Charles Ellis and Burton Malkiel. Invest in brick through, for example, the crowdfunding real estatepresents two key advantages in current times: little correlation with financial markets and protection against inflation.
Although the forecasts for this year point to moderation, the truth is that the real estate sector is in good health in Spain. The main reason is simple: there is more demand for housing than supply, a situation opposite to that experienced during the bubble. The rise in mortgage prices will mean that fewer flats are sold this year, but prices will remain fairly stable… because more are needed than there are.
Thus, while in 2022 returns were generally low, the results of Urbanitae yielded an average annual return of more than 16%. As a whole, the platform, which finances real estate projects with the contribution of many investors, has exceeded 17% average annualized return (IRR) in the projects that it has returned to its investors -19 to date-.
Urbanitae’s secret to success is simple: be cautious and invest in something, like real estate development, that commonly offers double-digit returns. The caution is in choosing these promotions very well. the platform of crowdfunding real estate is specialized in new construction housing, developed by first line developers, such as Inmobiliaria Espacio or Gestilar. It starts from conservative business assumptions and sets demanding guarantees to protect investors’ money.
The banks, safe… but not from inflation
In theory, that money is also safe in banks. After all, there should be no contagion or financial panic. SVB’s profile is almost unique, and the authorities have moved quickly to rescue him. The Fed has already announced an injection of liquidity to banks of more than 150,000 million euros. And several entities have managed to stop the fall of First Republic Bank.
In Europe, the news about Credit Suisse – whose problems, very different from those of SVB, began in 2014 – have not helped to calm the spirits. But the rescue of 50.700 million euros of the Swiss entity has counteracted the worst omens. European banks are safe places for savers… but deposits still do not offer sufficient protection against inflation, which is still a major problem.
So low-risk alternatives, like the brick of a lifetime, offer relief for depositors. And a good way to diversify investments. Con Urbanitythe minimum investment is only 500 euros. A participation that turns the investor into a shareholder -or financier- of large real estate projects throughout Spain. And without costs or commissions of any kind. It seems like an ideal time to give it a try…
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