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Les Calvert

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Les Calvert is the owner an CEO of many internet property and travel related websites including this one and he regularly writes news and articles for his websites, trade magazines and newspapers.

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Costa Del Sol

Spanish House Prices Rise – And Foreign Buyers in Spain Face Regulations That Give With One Hand, Take With the Other

House prices in Spain are rising again. In the second quarter of this year, prices in the country, one of the worst affected by the financial crash of 2008, have risen for the first time in six years, according to the Instituto Nacional de Aestidiscica (INE).

The annual variation in the property price index (IPV) increased more than two points in the second quarter of 2014, rising to 0.8%, the first positive rise since 2008. The price indicator of new houses showed an increase of 1.9%, three points higher than the first quarter of this year and the first positive increase since the last quarter of 2008.

These positive indicators have provoked analysis out of all proportion to the tiny 0.8% rise in prices, exactly because it is a rise. What it isn’t is a sustained long-term growth in a housing market powered by a real economy. In fact, Spain’s unemployment rate has actually risen slightly. Construction industry data is unpromising, and credit availability is an ongoing bone of contention in Spain.

Further price adjustment could be around the corner, and there is the danger that a modest rise in prices might trigger vendors, both institutional and private, to act to shed properties which they have been eager to offload for some time. A major obstacle to the development of fluidity in the Spanish market has been the unwillingness of vendors to drop prices any lower: the current slight rise might trigger a fresh round of sales.

As with many national statistics, the figures hid major regional variation. What’s really happening in Spain isn’t a timid recovery: in some areas it looks like full recovery, while in others the nosedive continues. In Valenciana, sales rose by 4.3%, a respectable increase. In Murcia, they fell by 11.8% year on year. The big winner is Malaga province, location of the Costa del Sol, where prices have jumped by 24% year on year – as against 10.7% nationally.

For British buyers, the ground in Spain is shifting in other ways too.

Plans to axe the tax allowance for retirees are mooted right now, meaning that British expatriates living on pensions could face a tax rate of 20% on their income, losing up to €4, 000 a year. The move would be wildly unpopular: expats, and those who would like to become expats, can look to better news from elsewhere on Spanish taxes though.

The European Union’s top court in Luxembourg recently ruled that Spain’s tax system is against EU law, and that accordingly, the Spanish government will have to alter inheritance tax laws which disproportionately privilege Spanish over non-Spanish people. Spain’s government has yet to be clear on when this will happen, but it does have to comply with the instructions from the EU.

What does this mean for British and other overseas buyers? If your income is mostly from a fixed source like a pension you probably stand to lose out financially. Others stand to gain from the changing tax rules. And the market remains uncertain: there are bargains to be had, and growth in some areas is already well underway, while others remain depressed, meaning the potential for rental is reduced. Some Spanish locations will always be popular – witness the revival of the Costa del Sol.

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holiday home in provence

Selling your holiday home? Do it up first, or risk getting a far lower price. That’s the word form the iProperty Company, an online property portal. iProperty carried out a survey this year, asking 2, 000 British holiday home owners what their approach to décor and upkeep was. The results may surprise you – or perhaps not.

The survey found that 53% of British holiday home owners have an attitude to property upkeep and maintenance that’s most-politely described as ‘laid-back’ – when it comes to their holiday home. Often this attitude is at odds with the way they approach their main residence.

iProperty’s CEO, John Candia, remarked that ‘the allure of time spent away from the grind for the quarter of a million Brits who own holiday homes abroad… means the usual keeping up with the Joneses behaviour is abandoned, and household snags that would usually irritate at home, are overlooked.’

Unsurprisingly, respondents had had every intention of looking after their holiday home when they bought it – in fact, 100% of respondents said they had intended to improve the property when they bought it. But for most, that wasn’t how things really worked out, and 79% admitted that they hadn’t so much as touched a paintbrush since their first holiday stay there – even though they’d often go more than once a year, with 58% of respondents saying they visited their holiday home at least four times a year, sometimes going as often as once a month.

Despite visiting often, though, householders didn’t find the time to fix a litany of decrepitude that included broken toilets, ugly floral carpets, mismatched sofas, leaking taps, tacky avocado bathroom suites that had seen better years (the 1970s) and more. The décor faux pas included net curtains, novelty crockery and flocked wallpaper, while many of the holiday home owners surveyed admitted to having cupboards containing out-of-date tinned foods. Basic maintenance tasks like washing up, mowing the lawn and dusting were often left too late – or never done.

But the decay went further than long grass and old tins, or even avocado bathroom suites. In their holiday homes, respondents said that they often overlooked dead lightbulbs and two thirds even admitted to ‘forgetting’ missing doorknobs on doors, cupboards and drawers.

Mr. Candia pointed out that all these issues could significantly lower the sales price of otherwise highly desirable properties. ‘Obviously relaxation is important whilst on holiday,’ he observed, ‘but owners should be warned that continual neglect of their homes could seriously devalue the property when it comes to selling.’

Unfashionable décor, at one end of the scale, is likely to have a smaller effect on potential buyers than long term neglect that can lead to structural damage or degradation, though you should probably do the washing up before the viewing.

Mr. Candia also pointed to an emerging trend: while the holiday home owners surveyed owned holiday homes in the UK and abroad, the number of people who regard the UK as a desirable location for a holiday home has risen to 46% of the nation, with the most desirable areas being the South West, London and Wales.

Mr. Candia’s recommendation? If you’re selling your holiday home, look at it through the buyer’s eyes. Have it professionally cleaned if you can’t face doing a really deep clean yourself – it will pay for itself in added sales value. And face the fact that holiday homes tend to accumulate unwanted trinkets, momentoes, and unwanted household items, as well as avocado baths. Be ruthless, and you’ll be rewarded.

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San Francisco

The number of US homeowners underwater on their mortgages is falling, but not as fast as prices are rising. That’s the news from real estate firm Zillow, who released data showing that around 8.7m homeowners were holding negative equity. That’s about 17% of US homeowners, but the trend is encouraging in that it’s down from 18.8% in the first quarter of 2014 and 23.8% a year ago.

The data also showed that the ‘effective negative equity rate,’ defined as the number of homeowners who have less that 20% equity in their home, fell to 34.8% in the second quarter, down from 36.9% in the first quarter of this year and 41.9% last year.

‘Effective negative equity’ is a term that covers people who technically don’t have negative equity, but who have to deal with many of its consequences, since they have so little equity they struggle to afford to move house or cover the costs of purchasing a new property.

The cycle of negative equity, failure to keep up with payments and risk of repossession brings undervalued properties onto the market, depressing prices and damaging the industry, apart from the human cost. But right now the trend seems to be in the opposite direction: prices are rising, and have risen steadily this year.

In future, the national negative equity rate is expected to fall to 14.9% by the end of the second quarter of 2015, according to Zillow’s Negative Equity Forecast.

However that’s likely to look a little different on the ground as, like prices, growth and sales, it can be expected to vary city to city.

Right now, Atlanta has 28.9% of its homeowners underwater, and Las Vegas has 27.4%. In Chicago, 27.1% of homeowners were facing negative equity at the end of the second quarter. Beating the odds at the other end of the scale, San Jose has 4.6% homeowner negative equity, 8.2% of San Francisco homeowners and 8.3% of Austin homeowners are underwater. These figures probably reflect long term trends.

There are key generational differences as well as geographical ones. Approximately 42.6% of ‘generation X’ (35-49 year-olds) homeowners are underwater; compare that with 15.3% of millennial homeowners, an age group considered to mean about 20 to 34, and 31.1% of ‘Baby Boomers’ aged 50 to 64.

Zillow’s chief economist Stan Humphries says, ‘on the surface, the housing recession did not overtly impact millenials’ housing wealth to the degree it did generation X and the Baby Boomers, as most millenials were too young to have purchased a home during the bubble years. But as this generation begins to consider buying homes, they’re entering a market still very much in recovery and far from anyone’s definition of normal.’

Traditionally, you’d expect homeowners in different age groups to be essentially on different steps of an escalator: get a little older, make a little more, move to a nicer house. But if the age group above you is mired in negative equity, they can’t afford to put their homes on the market. That means that millenials will struggle to step up until gen-X homeowners move on – and they can’t afford to. This effect partly explains the low figure for negative equity among millenials, who can’t move into the affordable starter homes that gen-Xers can’t afford to move out of.

As Mr. Humphries says, ‘Because so many homes are still in negative equity or are effectively underwater, the inventory of homes for sale is severely constrained,… and millennials don’t have the resources to compete with cash offers or engage in bidding wars.’

America’s housing market is still struggling to right itself, but while so many homeowners are underwater that return to normality is still some distance off.

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Condo Apartment Building in Miami

The Miami real estate market, long one of the USA’s most robust, continued to see rising prices in the second quarter of 2014, according to the latest estate agents’ report. The data, from the Miami Association of Realtors, shows a strong demand overall, but particularly good markets for single-family homes priced between $200, 000 and $400, 000.

The median sales price for a Miami-Dade County home was $245, 000 in 2014’s second quarter, showing a jump of 8.9% compared to last year. Meanwhile, the prices of condominiums rose by 5.6% year-on-year to $190, 000.

The market has seen prices increase for ten consecutive quarters now, and performance has been strong for both single-family homes and condominiums.

What’s behind the Miami area’s booming real estate market is demand from both domestic and overseas buyers, meaning there’s always more demand.

‘While supply is growing and creating more balance between buyers and sellers, inventory in certain price points and market segments remains tight, particularly of single family homes,’ observed Liza Mendez, chairwoman of the board of MAR.

Across Florida, prices are rising and the real estate market is robust. The median sales price for a single family home across Florida rose by 5.3% year-on-year to $180, 000, while for condos it rose 10.1% to $142, 000.

In Miami-Dade county, meanwhile, the focus on Ms. Mendez’ price points is clear. While the increase in inventory sold in the second quarter of 2014 was negligible at 0.9%, that is in comparison with Q2 2013 which showed record sales activity. Zoom in, and the figures tell a slightly different story.

Sales that don’t appear to have moved much actually shifted in two opposite directions simultaneously. Sales of single family homes rose significantly – by 4.9% – while sales of condominiums decreased by 5.2%, despite rising condominium prices. That trade-off – rising prices, falling sales, or vice versa – is what you’d expect to see in a stable market. By contrast, prices and sales rising at once shows strong growth. It’s the market in single family homes that’s really booming in Miami.

‘As the Miami real estate market continues to normalize and perform in a healthy manner, there are increased opportunities for all types of buyers. While inventory is still limited depending on the area and price range, buyers generally have more to choose from and prices remain at affordable 2003 levels,’ says Francisco Angulo, residential president of MAR.

At the current pace of sales, inventory for single family homes stands at 5.5 months and that or condominiums at 7.8 months. Compared to the second quarter of 2013, inventory has risen by significant amounts – 13.5% for single family homes, 33.6% for condominiums. When inventory, sales and prices rise at the same time, that’s a sure sign of boom times; meanwhile some of the additional increase in condominium inventory may be a result of falling sales in that sector, traditionally one of Miami’s strongest.

Sales that were all cash fell slightly, indicating an increase in purchases that stretched the buyer’s finances – homes or living in, not investments. That’s another good sign for the Miami real estate market.

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Denmark has finally been able to break out from the debt trap. With the improvement of amortization rates, the world’s most severely indebted households have been saved from the buildup of further debts.

According to the Danish Mortgage Bankers’ Federation, issuing of interest-only loans is now in its highest point. Echoing a similar view, Danske Bank A/S, Denmark’s largest lender, predicts the decline of non-amortizing loans. Jan Oestergaard, senior analyst at Danske from Copenhagen, said in an interview that the share of interest-only loans will most probably see a decrease, but it all depends on the interest rates in the following months.

Loans that are interest-only provide users with a grace period of up to 10 years for the returning of the borrowed sum. The mortgage market of Denmark, which is valued at almost 500 billion dollars, comprises of almost 50 to 55 percent of the interest-only loans. This has had a destabilizing effect on Denmark’s home finance market, which has also got the largest per capita income in the world. Denmark has been urged by the Organization for Economic Cooperation and Development to create a policy that will help in the reduction of the gross household debt, which has been at a record high.

As of now, the government of Denmark is struggling to come up with ways to reduce the number of interest-only loans issued by lending institutions. The new set of rules, guidelines, regulations, and limits is expected to be released and published later in the year.

Waiting for the rules

Henrik Sadd Larsen, the Business Minister of Denmark, has said that officials are trying to come up with a solution that lets the interest-only loan system stay without creating threats for the financial stability of the country.

Banks say that their efforts to push people to opt for amortizable loans have started to show positive results. Households have repaid approximately 2.5 billion kroner in the first part of the year itself. The same time last year, the net borrowing was estimated to be nearly 9 billion kroner.

The new approach

The Danish Mortgage Bankers’ federation Head Karsten Beltoft believes that the new regulations will allow the banks to decide on the limit of interest-only loans, which would be further subject to each household in question. He thinks that it would not work to have a standard limit of 60% across the industry.

FSA is most probably going to come up with guidelines for having a proportion of the total portfolio as interest-only loans. Beltoft also said that almost every second person opts for interest-only loans even today, and this way, the chances are to end up with approximately 50 percent.

The problem

The problem is that interest-only loans have become quite the norm with the Danes. With the interest rates as low as they are today, they do not see any incentive in moving to a amortized loan system. For them, it will directly translate into a major change in the monthly money they have at their disposal today.

IMAGE: “Christiansborg, Copenhagen” by Tim Bartel from Cologne, Germany – Christiansborg. Licensed under Creative Commons Attribution-Share Alike 2.0 via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Christiansborg,_Copenhagen.jpg#mediaviewer/File:Christiansborg,_Copenhagen.jpg

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New York USA

In the mid-20th century many of the richest Americans high-tailed it out of cities and into sprawling suburbs where they could have huge homes and a bit of insulation from rising urban crime.

But these days, some of the country’s biggest movers and shakers choose to live right in the heart of the metropolis.  And for good reason – being in the city, as opposed to the burbs, gives you a shorter work commute and easy access to the best shopping, dining and culture money can buy.

Here, we take a look at a few of the wealthiest and most interesting urban enclaves in the country’s biggest cities and explore a little about what makes them so special.

New York – Tribeca

  • Average Household Income: $173,178
  • Average Monthly Rent: $5,165 
  • Average Home List Price:  $4,250,000

This famed, lower Manhattan neighborhood got its name from its shape and location below Canal Street – Triangle Below Canal = Tribeca. Like many now fashionable urban areas, Tribeca has its roots as an industrial corridor turned hip artist mecca turned high-end residential zone.  These days it’s one of the most fashionable city neighborhoods in the world, which is quite well reflected in the fact that it’s also home to many NYC-dwelling celebrities.

 But it’s not just hip – it’s also truly a great place to live.  Tribeca claims the status as the city’s safest neighborhood and boasts wonderful schools, excellent public transportation access and impeccably rehabbed historic buildings.

San Francisco – Pacific Heights

  • Average Household Income:  $129,248
  • Average Monthly Rent: $3,992
  • Average Home List Price: $1,595,000

San Fran has the reputation of being one of the country’s most expensive cities to live, and it’s easy to see why.  Besides being the center of a new tech boom, it offers residents gorgeous Pacific views, moderate weather and diverse cultural attractions.  Pacific Heights residents enjoy some of the most scenic views in all of the city and they’re willing to pay for them.

Unlike the many apartment buildings in urban hotspots like Tribeca, this San Francisco neighborhood is characterized by homes in the Victorian, Chateau and Mission Revival style.  The area is also home to beautiful parks with panoramic views of the city and bay, high-end shopping, and neighbors like Nicholas Cage and Danielle Steel.

Chicago – The Gold Coast

  • Average Household Income:  $137,839
  • Average Monthly Rent: $3,319
  • Average Home List Price:  $2,024,940

The Windy City’s historic lakeside neighborhood was built by the wealthiest Chicago families in the late 1800s and mostly stays true to its roots even today.  After the Great Chicago Fire wiped out huge swaths of the city in 1871, men like millionaire Potter Palmer set to establishing a new enclave for the city’s high society set.

Today, the aptly-named Gold Coast still enjoys a prime location between The Loop and Lake Michigan.  And it still contains some of the most historic and beautiful residential structures in the city, which are a mix of high rises, row houses and mansions.  Given the fact that the whole neighborhood is on the National Registry of Historic Places and the plethora of high-end shopping and dining in the area, there’s no reason to think that Gold Coast properties will decrease in value any time soon.

Georgetown – Washington D.C.

  • Average Household Income:  $127,197
  • Average Monthly Rent: $3,350
  • Average Home List Price:  $1,195,000

For the most powerful and well-to-do residents of our nation’s capital, Georgetown is a highly desirable address.  Georgetown residents pay a premium for its position along the Potomac and for the knowledge that historic neighbors include Thomas Jefferson and JFK.  Because this now urban neighborhood was once, in fact, its own city that predated D.C. itself, there’s still a decidedly colonial vibe that draws history buffs.

Not only is it closer to downtown D.C. than many of the city’s other popular residential areas, but it’s perfectly restored row houses and cobblestone streets make it feel like a charming throwback to times gone by.  These days, though, the area is most renowned for its staggering selection of boutiques, bars and restaurants that draw admirers from all over the city.

Back Bay – Boston

  • Average Household Income: $134,605
  • Average Monthly Rent: $2,700
  • Average Home List Price:  $1,250,000

Bean Town’s Back Bay is not expensive for no reason; it’s a beautifully well-preserved 1800’s neighborhood whose planning was inspired by the mid-19th century renovation of Paris.  While much of the rest of old Boston is characterized by windy, narrow streets, Back Bay’s streets are wide, lined with trees and laid out in a neat grid.

The picturesque streets are full of 3 and 4 story Victorian brownstones that surely incite envy in residents visiting from other neighborhoods.  Many of these historic residences have been divided up into apartments, but for the truly high rollers, there are a few that remain intact and can be purchased as single-family homes.

For those who purposely seek out the crème de la crème when it comes to neighborhoods, these are excellent choices.  The best part is, unlike many wealthy suburban outposts that spring up overnight, these urban pockets offer residents a storied past and wonderfully unique character.

In the right city spot, a high rent or mortgage gets you more than nice digs – it comes with a little piece of history as well.

Author Bio:  Noah Tennant is a real estate writer and the Owner of Chicago Apartment Leasing Group, a company that helps renters find the best Chicago apartments the city has to offer. Noah is dedicated to providing both his clients and readers become more savvy renters. For more, click here and follow him on Google +.

545
French Property

Two French economists recently told the world that house prices in France are due to start falling – and will continue a gentle decline for the next decade.

Economists Jean-Luc Buchalet and Christophe Prat claim that the era of rising French house prices has come to an end, basing their claim on the idea that the most important single variable that affects house prices is household income. Until the 1990s, there was a strong link between French household income and house prices – about what you’d expect for a prosperous nation with a strong and tightly regulated housing market. But between 1998 and 2011, we saw something very different.

During that period, prices rose by an average of 161% across France – and by 278% in Paris. French household income rose by about 31% over the same period, meaning that the historic link between house prices and incomes was well and truly broken.

So how has this disparity come about? Essentially, through competition between French people who are spending money on credit. Where the London and new York markets are replete with foreign money, the French market is filled with borrowed money. Add in favourable conditions on loans, mortgages and other financial products and low interest rates, and you have the conditions for people to get while the getting was good. Interest rates have been low, banks have increased the duration of loans and the deposit required for a mortgage loan has fallen.

The authors break it down like this: 42% of the house price rise is down to increased mortgage capacity arising from low interest rates; 45% is down to increased mortgage terms; 35% is down to growth in household incomes, adding up to 122% and leaving 39% to be accounted for by fiscal incentives offered by successive governments to stimulate the housing market and encourage home ownership, and to some speculation amongst owners.

However, if this sounds like a house of cards, Messrs Buchalet and Prat say that’s because it is. They say the future holds tougher credit conditions, lower household income growth, changes ion France’s demographic profile, and a reduction in fiscal incentives.

Mortgage rates are expected to remain historically low for the foreseeable future – in many cases under 3%. However, the era of easy credit is thought by the authors to be at an end, pointing up banking reforms sweeping Europe and giving a nod to the signs that rates will increase towards the end of 2014 and into 2015. Banks have already begin to demand stricter evidence of employment, higher deposits and raised other barriers to cheap, easy credit, bolstering the economists’ case.

Lower household income growth is forecast based on high unemployment rates – about 10% for the foreseeable future and higher among the young – and falling or stagnating living standards.

Meanwhile, in common with much of the West, France is seeing a demographic shift, as older people over 60 come to predominate. As net sellers of property, this age group tends to depress prices. Household size is also expected to increase.

The final nail in the coffin of the French housing boom is the demise of government programs of fiscal incentives that, since the 1960s, have kept the French housing market on the up. These include incentives for construction; these incentives have ben slashed in recent years and are unlikely to be reinstated.

In fact, what is likely to happen is a correction, as French house prices fall to match french incomes. If you’re thinking of buying a French house, it might be best to wait.

561
Brandenburg Gate

Germany is on everyone’s lips because of the performance of the national football team. The team even made it onto the front of Newsweek, under the headline: ‘Welcome to the German Century.’ In property, though, Germany has been experiencing a quiet, steady, almost teutonically efficient housing boom.

Things have reached the point where you expect the second paragraph of an article on a housing boom top list the financial breaks, low interest rates or safe-haven status of the locale in question. But the German boom has been so uneventful and so sustained because it’s built on top of a real economy. The German housing boom owes its existence to low unemployment, rising construction rates and surging rents.  Property consultants CBRE recently held a survey to determine the most attractive property market, and the answer they got back was: Germany.

While some point to Germany’s economic successes, with exports at record highs on the back of an emphasis on midsize firms and a thriving apprentice system, others observe that during the decade when prices exploded across Europe, German prices remained level. And the signs aren’t all good for a sustainable boom either: German incomes rose about 12% over the last 5 years, not keeping pace with prices – and certainly not with rents, a source of friction in a country with low home ownership rates.

One good sign of a boom in Germany is rising rents. First, that indicates that it’s not a speculator’s market. But in a country where only 53% of residents own their own homes, rising rent is an important indicator of market health, akin to rising prices in a more buyer/owner-heavy market. And Germany’s rents have risen by 15% in the last five years, while prices have climbed by 23% over the same period, according to BulwienGesa, Germany’s leading property index.

That 23% increase in prices for apartments in Germany looks impressive already: contrast it with the rate of price change across Europe as a whole, which is -3.7%, and you see why regional German towns miles from Berlin are of interest to foreign investors, as well as to overseas and domestic purchasers.

And the desire for German property might be driving investors to the country – but it’s also driving residents. About 30,000 people are moving to Berlin alone every year, while approximately 4,000 apartments are built citywide. JP Morgan Cazenove says the result is a shortfall of 15,000 units.

The danger for Berliners – native and newly-minted – is that these rises in rents will drive out to many residents. Luxury refurbishments have been banned by several Berlin local governments for this very reason, and in some areas it’s against the law to install a fireplace or underfloor heating.

However, compared to other European capitals Germany still offers relatively low rents. Average rent in Munich is €14/m2, compared with €44/m2 in London, according to Jones Lang LaSalle.  Purchase prices compare favourably, too: €4,590 in Munich, €9,270 in London. And Munich is Germany’s most expensive city.

If you’re eying German property, the likelihood of good yields supported by a strong economy should encourage you. If you’re thinking of moving there, beware a rising market in a country with so few property owners!

727
South Africa - Johannesburg

South Africa’s Property Market Continues to Grow – Despite Economic Pressure Against It

The South African economy has given observers cause for alarm lately. After the downgrade by international ratings agencies there were waves of strikes and rumours of a looming recession.

Platinum workers staged a three-month walkout from the country’s mines and the 220,000-strong engineers’ and metalworkers’ union has voted for strike action just as the platinum strikes were being resolved. Add in rising debt and a weak currency, political uncertainty and a youth unemployment rate that’s officially 36% – but may really be 50% or higher – and you should have a recipe for a crumbling housing market. You should see housing suffer as buyers keep their money in their pockets, vendors settle down to improve, not move, and the construction industry waits it out, reducing market exposure until there’s demand for new stock again.

But data from Statistics SA’s General Household Survey 2013 shows a more positive picture, with the housing market a key component in South Africa’s economy – and looking brighter even as the clouds gather over the rest of the country.

According to those stats, the percentage of people who fully owned their own homes in South Africa, the distinction of ‘formal dwellings’ is made to distinguish them from the many temporary structures that still remain – increased from 52.9% in 2002 to 54.9% in 2013.

Meanwhile households that partially own their own homes have increased by 4% during the same period. ‘In essence, the data reveals that more South Africans now live in properly built homes than ever before, indicating that the standard of living has not only improved, but the property market has grown,’ says Bruce Swain, managing director of South Africa’s Leapfrog Property Group.

The FNB Estate Agent Survey for the second quarter of 2014 supports this, indicating that ‘first time buyers [are] a still-strengthening source of residential demand,’ despite a jump in interest rates in January this year, Mr. Swain says.

South Africa’s property market has to deal, too, with a sharp hike in electricity prices hitting potential buyers in the pocket. The increases came into effect on July this year, and they will see around 7% added to the electric bills of residents of all South Africa’s metro areas.

Weighed against this, the repossession rate has remained steady since its jump of five points earlier this year, and it’s likely to remain level into 2015, experts believe. Partly that may be due to the South African development model, which shows demand-led developments with little speculative construction and a large pool of residual demand to draw on. Further, the low yields – around 5% on prime property – offered by the South African market discourage investor activity, meaning most people who are buying a house in South Africa plan to live in it.

Mr. Swain points out that ‘our agents are reporting stock shortages as the biggest hindrance to selling, so while home owners of second properties, in coastal or country areas, may come under pressure, it seems that the market is slowly edging forward regardless of the economy and price hikes.’

724
Canadian House

The Canadian Real Estate Association (CREA) has released its 2014-15 home prices and sales forecast, and it’s confusing.

Not much is expected to change in terms of sales volumes, according to CREA but prices are set to jump by a respectable 5.7% through the rest of this year, before levelling off to a negligible 0.7% in 2015.

The CREA report says that an unusually fierce Canadian winter resulted in a slow start to 2014 national sales activity, as energy and money that might otherwise have gone into moving house went instead to repairing damage, to the Canadian house and the Canadian psyche too!

As the first quarter of 2014 ended, CREA said sales momentum was constrained by a shortage of listings in a number of local markets. However, there was a rise in newly listed properties in April and May, supporting an increase in sales activity.

There’s usually a sharp jump in house buying at the beginning of Spring, but thanks to the effects of winter and a stock shortage, this didn’t come into effect until later in the season. Overall, the sales volume from March to May was roughly in line with averages, and the deferrals from earlier in the year are likely to have been depleted by now too. That means the strength of sales momentum in the months at the beginning of summer may not offer a true picture of what the year’s going to be like either.

CREA’s forecast for sales activity in 2014 is largely unchanged from its previous forecast, issued in March. However, interest rates were then expected to rise in the second half of the year, and it’s now thought that this change won’t occur until the end of the year. That means the balance of 2014 will still be a cheap-credit period when it’s a good time to buy a house.

Sales are forecast to reach as high as 463,400 units in 2014, a 1.2% increase on 2013. Compare that with CREA’s forecast figure of 463,700 for the year, or a 1.3% increase, and it seems their forecasts are pretty reliable.

CREA also expects sales to remain in line with 10-year averages. British Columbia is forecast to post the largest year-on-year increase in activity at 8.3%, while Alberta is expected to see a 3.8% rise in sales in 2014. Nova Scotia is forecast to see a 5.1% fall, Quebec a 1.7% fall and New Brunswick and Newfoundland to see falls of 4.2% and 2.6% respectively. Labrador is forecast to see a 2.6% fall.

The changes to Canada’s housing market take place against a background of improving jobs markets and a growing economy, with a slow and gradual increase in the interest rates of fixed and variable mortgages.

In theory this should benefit markets where sales are a little softer and prices a little more affordable. In Canada as a whole, the average house price is projected to rise by 5.7% to $404,300 in 2014, on the back of general growth, a delayed spring buying season, interest rates remaining low throughout the bulk of the year, and demand-led markets in certain areas, especially Calgary and Toronto. In 2015, the average price of a home in Canada is expected to rise to $407,300.