Where to Look

Kuala Lumpur is in a class apart as the country’s business capital and definitely the focus of most activity in residential, retail and office real estate. The city’s central business district is currently undergoing rapid change. However, KL’s long term prospects are not guaranteed despite all the activity. Singapore (pop. 4.5m) is only as far away as London is from Paris and this proximity means that Kuala Lumpur only has Malaysia (pop. 27m) as its hinterland. Given that KL and the KL ‘metropolitan region’ have populations of 1.8m and 6.9m respectively, it seems unlikely that the city can surprise by growing into a different league, either in terms of wealth or size. However, genuine friendliness and cooperation between the two countries could herald impressive new opportunities. WTW’s (CH Williams, Tahar & Wong) series of annual property reviews provides a good breakdown of developments around the country.

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There is no doubt that Edmonton, Canada has seen some spectacular increases in property value over the last ten years. 200%+ in fact. But will this continue and what is Edmonton’s future prospect as a property investment? As usual, the analysts and estate agents disagree.

What caused the real estate boom?

Oil. Oil was discovered in Alberta in 1947, much of it concentrated in central and northern Alberta, making Edmonton the base for much of the oil industry. Edmonton did see a drop in values during the 80’s, but made a full recovery very quickly thereafter. Nevertheless, Edmonton’s continuing growth is based heavily on oil extraction and processing. the Conference Board of Canada’s “Autumn 2007 Metropolitan Outlook,” forecast that Edmonton’s GDP for 2007 will be $44.1 billion (2007 dollars), a 3.6% increase over 2006. Read the rest of this entry »

Dear Overseas Property Mall,

I am a little confused about the state of the Spanish property market. I read conflicting reports and projections about Spain all the time and the newspapers are filled with doom and gloom alongside glowing projections. Should I invest in Spain or not ?

Yours sincerely,

Confused in Coventry

Dear confused in Coventry,

Your confusion is understandable. Several small and medium sized Spanish property developers have recently run into financial difficulties, some of the smaller ones taking deposits from customers with them.

The most recent casualty, Colonial, saw it’s shares plummet 40% in 2 days, seemingly for no reason other than worries that the Spanish property boom is over. The president and largest shareholder, Luis Portillo quit after this drop.

This follows on from two other medium sized casualties. Astroc saw their shares drop 85% in July last year causing the founder, Enrique Banuelos to quit and Llanera, a developer based in Valencia, filed for credit protection a few months later.

The Financial Times has a more in-depth look at these casualties here.

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We reported recently on the likely boost in French property in Paris and Lille due to the introduction of a new Eurostar train service. But Eurostar connects to more than just Paris. There is a direct service to Brussels in Belgium with connections on to Brugge, Namur, Antwerp and Ghent.

Brussels in now less than 2 hours from St Pancras station and is already seeing an increase in interest from British buyers keen to snap up a bargain before everyone jumps on the band wagon – or should that be railway carriage?

According to the Telegraph, Restored studio flats a few yards from the Grand Place can be picked up for as little as €70,000 (£50,000), and vast, contemporary loft-style duplexes in former industrial buildings go for €500,000 (£360,000).

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British property investors are taking a long, hard look at the New York property market. With the dollar at a 20-year-low, for British investors with pounds in their pocket, the Big Apple just got a whole lot cheaper. According to the Financial Times, Steven Toumbas, an equities investor from London, has always wanted to own a second home in the US. “America is the engine for the world,” he says. “Everyone wants to have a holiday home in Florida, or an asset in New York. It’s the place to be.”

Mr Toumbas began looking at potential properties in New York City in mid-June 2006, but felt the timing was not quite right. The pound at that point was trading at about $1.84. “I held back because I thought there would be further dollar weakness,” he said.

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Despite the many billionaires created by property investments in the US, the US domestic housing market is in a bad way right now – with more doom and gloom predicted, at least in the short term.

The latest Case-Schiller Index reports further drops in house prices, by as much as ten percent in some states. California and Florida are leading the price declines with prices in San Diego dropping by 8.3 % this year-to-date. House prices are at a six year low across the country and the average drop was 4.4%, with no end in sight.

“I think the housing market has got another year of very weak sales, falling construction and lower home prices. And all of that assumes that the economy holds together reasonably well and we don’t have a recession,” said Mark Zandi, chief economist at Moody’s Economy.com. The Joint Economic Committee estimates there will be 1.3 million foreclosures from mid-2007 through 2009 in subprime mortgages, loans provided to borrowers with weak credit histories, which will wipe out an estimated $71 billion in housing wealth directly and another $32 billion indirectly by lowering the values of neighboring homes, according to the report by the JEC’s Democratic staff.

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According to “Emerging Trends in Real Estate® Asia Pacific 2008,” just published by the Urban Land Institute (ULI) and PricewaterhouseCoopers LLP, Shanghai, Singapore and Tokyo rank as the three most promising Asia Pacific cities in terms of real estate investment prospects.

David Sandison, a Tax Partner with PricewaterhouseCoopers in Singapore said, “It is expected that even greater amounts of capital will be flooding Asia Pacific real estate markets in 2008. The real challenge for investors will lie in finding the right assets against the backdrop of yield compression and scrutiny by regional governments and tax authorities.”

Shanghai topped the list for investment prospects, edged up from its second-place ranking last year. Singapore received the highest rating of any of the cities included in the report in terms of overall risk.

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Rampant inflation; shaky, low interest no-deposit loans; 400 per cent stock market growth in 2 years; property values rising nearly 18 per cent over last year’s values.

Sound familiar? Followed by a tightening of lending restrictions, interest rate increases, 30-40 percent vacancy rates in new developments. Sound even more familiar? This is not the US market, this is China, which seems hell bent on following in the footsteps of the recent US sub prime crash.

The Chinese government is pulling out all the stops to prevent the same thing happening there. Interest rates have been increased five times in the last year and reserve requirements for commercial lenders increased eight-fold. The central planning agency imposed a price freeze on household essentials like cooking oil, electricity and water, in an effort to reduce inflation below 6 per cent. Securities regulators in more than one province have issued new rules banning high school and college students from buying shares to rein in speculative stock market investments.

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Even for us, it is sometimes difficult to sort the informational wheat from the chaff and we are looking at conflicting reports coming from the Indian property markets at the moment.

On the one hand, its all good news: Mumbai Billionaire Mukesh Ambani is busy creating what is likely to be the “most expensive home” in the world. The Financial Times is reporting that “property prices have soared” and the Indian Government has now allowed direct foreign investment in all construction projects without prior approval, which means foreign investors are permitted to invest in wholly owned subsidiaries or in joint ventures with Indian real estate companies. There are a few minimum requirements, such as minimum capitalization requirements must be met within six months of the commencement of operations and the capital must remain locked in for three years thereafter. Foreign-invested projects must include at least 50,000 square meters of floor space and at least half the project must be completed within five years of receiving statutory clearance.

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The Irish Independent had an article this Sunday that attracted our attention. With the massive increase in property values in Ireland recently, many Irish home-owners have jumped on the worldwide buy-to-let market abroad. Particular favourites have been the USA, Spain and Bulgaria.

All these markets are taking a beating at the moment, particularly the American market. GE Money Home Lending subsidiary “British Mortgages Abroad” recently pulled out of the Florida market and are not accepting any more mortgage applications on properties in Florida

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