Housing

Housing, especially near a golf course, can be expensive thus making it such a factor in the golf economy. This factor is highly pertinent since many homes are adjacent to golf courses and those on them will have acquired a higher selling price. A particular example would be a local golf club, Wentworth. On this grand historic piece of real estate there are many houses, each worth in the price range of £3 million and above; the most expensive rumoured to have cost along the lines of £50 million. Usually when buying a house within close vicinity of a golf course you are not necessarily buying the house itself, but instead what it represents: luxury and vast volumes of wealth. Since Wentworth is dripping in golf history and has long been a sign of success it makes it an exclusive piece of property, meaning prestigious real estate companies like CONSERO London are moving into this area. This company single handily has a £1 billion portfolio and an estimated £300 million worth in construction. Since more expensive houses are being built it will drive local house prices up, even outside Wentworth, because it would mean living next to a notoriously affluent estate. In addition to these there are hordes of houses both in England and abroad, including holiday villas which creates tourism and revenue for local businesses. The presence of tourism means a source of revenue for local independent companies, meaning they could build more, or spend more which helps other companies as well, which consequently then engenders the cycle to start again. The Algarve is well known for it being a golfing hub of Europe and produces €7.381 billion/annum that may have predominantly come from golf related companies or will at least be affiliated with golf. Overall housing from golf has benefitted many communities, including abroad and domestic.

Positive investment in Golf

As for the first positive column of the golf economy lies at the heart of every financial industry, investment, and golf is no exception. Despite it not being the largest from a monetary standpoint, it lies at the centre of it all. For example, in 2011, $515.8 million was spent on building 75 golf courses and it’s ineluctable to oversee the gargantuan and prestigious Trump National golf club in California which cost Donald Trump $264 million to build. 

In addition, multiple acquisitions for golf clubs and companies are made by overseas buyers that are looking for a safe and secure investment outside of their own country, then to be used as an offshore asset. Another aspect that relates to business deals and acquisitions would include how many deals may be done on the course. When you play golf at a fantastic course it may be easier for potential investors to be swayed to take a certain viewpoint as well, and may be a great way to persuade the client to invest with you.   

Furthermore, investment in golf is increasing due to the changed mindset of investors and owners; instead of having a primitive and naïve frame of mind which viewed a golf club as a property for members only, alternatively they now visualise it as a business. Also, by building golf courses it will improve the house prices in that area. What also must be mentioned is how small investments matter too, a tiny local range will be a large source of income for many people due to how it provides employment for management, maintenance and selling merchandise for global companies.  

The pit falls of golf investment

Golf, to many, is a sport of a simple concept: getting a small white dimpled ball into a minuscule hole a few hundred yards away, nevertheless when mentioning names like: Tiger Woods, Severiano Ballesteros, Jack Nicklaus, and Rory McIlroy we are easily able to associate them with the bigger picture of golf. How so? It starts with the golf economy around the world which has an estimated value of $177 billion when all is included. What has happened to make this sport such an eminent part of the world’s economy, society, as well as a part of the local community. Golf courses or golf related companies are able to make, in some cases, millions of dollars, so how do they make their money? What has changed in the investors mindset that has made them so successful? Why is it one of the world’s largest sporting economies?

Golf of course has many upsides, however, I must begin with some of the pit falls. Not all investments work out in the financial world and this is especially true in golf. The reason as for why it is difficult is because the adjustment of investors and CEO’s mindsets were too late. Investments in golf courses are dangerous when looking behind it all; golf courses have high fixed costs meaning that this will be a source of constant substantial instability for many smaller enterprises. Having said that, when clubs price valuations are compared to what they were before the recession, many have gone down, showing the market’s difficulty. Investment in golf is becoming so convoluted that the 3 big players of golf investment: GE Capital, Textron and Capmark, have seen a 75% decrease in their joint portfolio between 2007-2012, starting at $2 billion decreasing to $0.5 billion. If you examine the investing side of the golf economy you deduce that since there has been overbuilding of golf courses, due to the property price’s bubble, lenders are reluctant to provide financial backing due to too much risk. Overall golf course investment has been and will be beneficial due to its implications on employment along with providing monetary help for many people. However, in the words of Larry Hirsh, President of Golf Property Analysts, when you invest in a golf club ‘They’re like new cars, they’re worthless the minute you drive off the lot.’