News

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Rental Image

Demand for rental property in the USA remained strong in March, the last month for which figures are available, according to the National Association of Realtors (NAR).  48% of the organization’s members who are involved in lettings reported higher residential rents compared to 12 months ago, an increase from 46% in February.

That’s backed up by real estate firm Trulia, whose figures show average increases in the 3.9% year-on-year area.  That means rental increases are outpacing economic growth and food price rises – to say nothing of wages – and have become a driver of inflation.

Discussing the implications of the figures, the NAR said that rising rents may make home ownership more attractive, but may also slow the ability of those who are currently renting to save up for deposits.

‘The March data indicates a more upbeat confidence concerning market conditions compared to February,’ said the NAR’s chief economist, Lawrence Yun.

‘The improvement may represent the seasonal uptick in demand with the onset of Spring,’ suggests Mr. Yun.  ‘Confidence about the next six months also showed a slight improvement in March compared to February,’ he went on, an effect that’s unlikely to be down to seasonal changes.

The problems estate agents were reporting were low inventories of available housing stock, and difficulties in obtaining mortgage financing.  It’s therefore possible that some of the increased rental demand is coming from would-be buyers who aren’t able to move up.

Stronger rental demand is usually a good sign in a housing market where sales and prices are rising, since some purchasers are investors or landlords, and a market where people pay higher and higher prices for properties nobody wants to rent, or whose rents don’t make a profit, is obviously unsustainable.

In the USA, though, that’s not the story.  Instead it’s a market where many people would like to be purchasers, but can’t afford to make the capital outlay.  It’s also a market where the benefits of buying or renting are split geographically, with buying a better financial bet than renting in about half of US metro areas.

NAR members reported that the Qualifying Mortgage regulations and the increases in mortgage insurance premiums had adversely affected buyers’ ability to purchase property.

However, there’s good evidence that the rental upswing is powered by recovery in some places just as surely as it’s a symptom of a weak jobs market and high insurance costs in other places. One area of America where rentals are a sign of growth is Detroit, where median house prices in the metro area rose by double digits.  In January of this year, a BuzzFeed contributor named Drew Philp bought a Detroit house for $500.  But that illustrates an outlier, not the general trend.  As the motor industry picks up, jobs become more stable and secure and the rental market expands, purchase prices in Detroit have risen 38% year-on-year since January 2013, according to Realcomp.  Inventory and sales shrank as prices rose.

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Eileen Battisti

Image: http://www.nydailynews.com/

Eileen Battisti’s $280, 000 home was sold at a tax auction in Beaver County, Pennsylvania, in September 2011; taking the view, as she told newspapers, that ‘for the house to be sod just because of $6.30 is crazy,’ Ms. Battisti took the matter to court.  And many of use would agree with her – especially since she ‘didn’t even know about the $6.30.’

But the case didn’t come down to what was crazy: it came down to the law (by the time you’ve red this, you might think they’re the same thing) – and the judge was clear that the county tax claim bureau followed the letter of the law when it came to notifying Ms. Battisti of her outstanding debt.

That debt came to just $235.00, made up mostly of interest and fees on the original $6.30.  It isn’t owing now – the house sale generated about $116, 000 and most of that money is due to go to Ms. Battisti, who still lives in the house.

Looked at more closely, Ms. Battitsti’s story isn’t an uncommon one, especially for women of her generation: her husband handled all the finances, and he had recently passed away, dying in 2004.  Ms. Battisti says he never informed her of any $6.30 owing.

An attorney for the buyer was unavailable for comment, but the chief solicitor of Beaver County, Joe Askar, said the judge got the decision right, reading straight from the law books.

The judge, Beaver County Common Pleas Judge Gus Kwidis, wrote that the county tax claim bureau had complied with notification requirements in state law.  ‘There is no doubt,’ Judge Kwidis wrote, ‘that [Ms. Battista] had actual receipt of the notification of the tax upset scale on July 7, 2011, and Aug. 16, 2011.  Moreover, on Aug. 12, 2011, a notice of sale was sent by first class mail and was not returned.’

‘The court never wants to see anybody lose their home,’ Mr. Askar said, ‘ but at the same time the tax sale law, the tax real estate law, doesn’t give a whole lot of room for error, either.’

Addressing the question of whether Ms. Battisti knew about the $6.30, Mr. Askar said, ‘it’s bad – she had some hard times, I guess her husband kind of took care of a lot of that stuff.  It seemed that she was having a hard time coping with the loss of her husband – that just made it set in a little more.’

Ms. Battisti has declined to collect on the sale and plans to take her case to the Commonwealth Court to appeal further.  She’ll be allowed to stay in her home until a final ruling is handed down.   The court will be as constrained as Judge Kwidis was by the law, though, and as he put it, ‘under tax law, even if I feel sorry for her, I can’t do a thing for her.’

Overseas Property Mall

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New Zealand

New Zealand’s housing market has seen median house prices rise by 8.64% year-on-year to February this year, according to the Real Estate Institute of New Zealand (REINZ).

New Zealand consists of 12 regions, and 11 of these saw house price rises during the same period, with the largest price rise taking place outside the country’s capital city of Auckland. Caterbury/Westland registered the biggest house price jump, of 12.4% year-on-year, while Auckland trailed in second place with a 10.7% rise. Southland came in third with an 8.3% rise.

While the Caterbury/Westland area experienced the biggest rise, Auckland housing remains the most expensive in New Zealand. Average house prices in Auckland hover at the NZ$592, 000 (US$506, 000) level, while Southland’s property is cheapest, at an average of NZ$195, 000, or US$166, 000.

With house price rises distributed more or less evenly across New Zealand, it’s clear that the cause is not the flow of international money that has driven the Hong Kong market upwards, or that has driven London prices ahead of the rest of the UK. Instead, New Zealand is riding the back of an economic uptick that has seen some of the gains of the boom years regained.

New Zealand is remote, but it’s a popular tourist destination. In the years 2001-2007, New Zealand house prices rose by 123% – 87%, adjusted for inflation – but they fell sharply as the 2008 crash bit. While the effects were serious, they were far less severe than in other countries; New Zealand house prices fell by 8.94% in 2008, but rebounded 523% in 2009, while the rest of the world had barely begun to recover and in some countries, the severity of the crisis was only just becoming apparent.

New Zealand’s economy grew by 3% in 2013, up from 2.7% in 2012, but this year the country is projected to experience the strongest economic growth for seven years, with GDP projected to grow by 3.3%, according to the Organization for Economic Cooperation and Development (OECD). Growth is led by an upswing in household spending.

Historically, New Zealand hasn’t had much of a separate housing market. House prices have risen in step with GDP, rather than housing being a site of investment, speculation or other forms of economic activity in itself. From 1992 to 2001, New Zealand Housing prices led GDP by about 0.3% yearly. Interestingly, the big jumps in house prices in the boom years were mostly concentrated in the historically remote and economically depressed South Island; tourism was at least partly behind this.

For the future, economic growth is likely to be significantly led by house prices, but the underlying economic strength of the country is a key factor in house price growth. Tourism, consumer spending and relatively low inflation are all contributors to this trend. New Zealand’s remoteness has always made it a marginal choice for expatriate Britons, who tend to prefer Australia; with its surging economy (still slightly less productive than the British, true, but growing faster) and gentle housing boom, New Zealand should be higher up the list than it is!

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Burj Khalifa Dubai, UAE - 2nd Tallest Building in the World

Experts have warned that rising rents and a lack of affordable housing in the Emirates as a whole, but especially in Dubai, could be leading to a situation that inhabitants of London, Hong Kong and Berlin would recognize: Dubai housing is too expensive for Dubai people.

That’s the forecast from CBRE Middle East, anyway. The property consultant firm’s latest report shows rents in Dubai rising by an average of 22% in the last 12 months, and the sharpest rise in the most affordable sector of the market: apartment rents rose 29% year-on-year, while villa rents showed only 15% increase.

Mat Green, Head of Research and Consultancy at CBRE Middle East, said that rentals had increased by an average of 45% over the last two years, and that there’s an increasing ‘donut’ or commuter dormitory effect, whereby people who work in Dubai but can’t afford the rents there move to Sharjah and the Northern Emirates instead; good news for their housing markets, bad news for Dubai’s workers.

John Stevens, of real estate services company Asteco, said that the rise in rents threatened to empty Dubai of workers as a ‘flight to affordability’ kicked in.  His predictions matched what’ already begun to happen, that workers from Dubai would seek homes in Sharjah and the Northern Emirates.

Meanwhile, the CBRE said the strongest sub-markets for apartments were Dubai Sports City, Downtown Dubai, JBR, International City and Dubai Silicon Oasis, all prestige projects, economic hubs or both.  The best performing markets for villas were Springs and Al Warqa.

Mr. Green points out that, ‘Dubai’s residential sector continues to experience growing demand from both occupation and transactional sources,’ referring to purchases by investors as well as those seeking to make their homes in the thriving Emirate city.  ‘Despite recent regulatory changes,’ Mr. Green went on, ‘both rental and sales prices continue to rise, albeit at a marginally slower rate than was recorded during the previous quarter.’

CBRE’s report acknowledged that there was an increase in supply on the way as residential projects that are underway come to fruition, but that supply could be expected to exceed demand in the future, because demand had continued to rise.

‘During 2014, close to 17, 000 new units are expected to be completed with the majority of these set to be delivered in secondary location such as Dubailand, Jumeirah Village Circle and Silicon Oasis.  Over the next four years roughly 65, 000 new units are penned for completion, with 83% of these being apartments,’ Mr. Green elaborated.

According to CBRE, growth is expected to continue through the rest of this year, but it’s expected to be at lower levels than previously seen, partly because of Dubai’s attempts to restrain the market through new regulations but mostly, in Mr. Green’s view, a result of the increasing importance of affordability to the Dubai market as rents begin to bump up against the upper limit of people’s ability to pay.

And those 65,000 new units aren’t going to be enough either.  According to research by urban design consultancy Placemaking, Dubai needs 500,000 new homes over the next 6 years to keep up with demand.  That’s significantly higher than the number that can be expected to come on the market; at current rates the next 6 years will see 97,500 units come on the market: less than a fifth of the number  Placemaking calls necessary.

Placemaker’s founder, Nadine Bitar, called for a high level, multi agency government committee, similar to the one called into existence for the Dubai smart city concept, to deal with the housing shortage, which she predicted would get worse as rents rose and insufficient affordable housing was built.

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le-suquet-cannes-france

In the years since 2009, the general trend has been for luxury property to lead the recovery.  It’s been a return to health with its roots in major cities and its main support has come from wealthy individuals buying homes: the recovery may have driven up house prices in global hotspots like London and it has created a two-tier housing market, but it isn’t an investor’s market; it’s driven by purchases.

Now, though, it’s time for the recovery to take a holiday.  According to Savills’ new report, Spotlight on Prime Residential Retreats, the recovery left beachfront properties in former hotspots like the Mediterranean, Alps, South Africa and the Caribbean high and dry while the rising tide floated boats in New York, Paris, Berlin and London.

In 2013 that story began to change.  A renewed appetite for leisure property saw growth of up to 10% in some leisure property markets, with more forecast.  Savills sees recovery in this sector led by Tuscany, the Balearics and the Caribbean – places characterised by the same combination of high quality and low supply that make London’s markets glow red-hot.

A major player in the new international property market is the investor-purchaser.  He’s not looking for a property to make money from: he’s looking for somewhere secure to put his money.  Bricks and mortar has always been option number one for the cautious investor, but properties in cities with strong markets are returning to full valuation (some say, and then some), leading investor-purchasers to look elsewhere.  Regional cities in Europe have been beneficiaries of this trend already but the markets of Greece, Spain, Italy and Portugal represent too great a gamble.  Overseas prime leisure property is the answer.

Low interest rates in the Eurozone are another stimulatory factor for this market.  As the Eurozone’s governments try to make borrowing cheaper as an economic stimulant, overseas loans get cheaper and more attractive.

A final impetus is provided by the ‘Golden Visa’ schemes rolled out by various countries in the Caribbean and elsewhere with varying amounts of fanfare.  While they differ in their particulars, these schemes all operate by offering residency status to purchasers of properties above a certain value.

The French Riviera is the most desirable location for second home purchases.  The market is recovering, especially in terms of transaction volumes, though it’s starting from a low base.  An extremely limited stock, with little opportunity for new builds to match currently available quality, because of stringent French planning laws and the fact that in many cases the age of the property is part of its appeal, must be balanced against increasing demand from buyers worldwide.  Supply is inelastic, while demand is growing, making the outlook for the Riviera prices look sunny.

Currently, prices are running about a quarter below their 2007 peak, meaning that there are still some undervalued properties to be snapped up by savvy bargain hunters, though they’ll have to be starting with a solid financial base in a market where the average 4-bedroom house costs £2m and upwards.  Already got that Mayfair flat, St. John’s Wood house or Kensington mews?  The Riviera beckons…

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Dubai’s real estate market has climbed almost back to its pre-crash heyday, but the process has been dogged with setbacks including a financing crisis and a profusion of unclear real estate agreements between tenants, landlords and developers.

To combat this, the Land Department Director General of Dubai, Sultan Butti bin Mejren, announced on Wednesday, March 26 that standardized contracts would become mandatory in Dubai from May 1.  Currently standardized contracts are available but their uptake has been hampered by the fact that they are voluntary.  Now, though, they’re to become compulsory.

‘The new agreements will help us to get rid of some of the problems that may occur because of a lack of clarity,’ Sultan bin Mejren explained.

There’s also a consideration of international trade.  Although the majority of buyers in Dubai are currently from the gulf states, the city aspires to lead the region in both sales and excellence and Sultan bin Mejren believes that ‘having unified contracts between the parties not only avoids the misunderstanding and misinterpretation of articles that could previously have occurred, it also guarantees the rights of all the stakeholders involved.’  A market where every participant knows the deal right from the start is likely to be one that’s more attractive to foreign investors and buyers.

The Dubai property market is climbing in more ways than one, too.  In a city with thousands of units’ worth of new builds, competition to offer something special to landlords or tenants is fierce and developers have found a way: views.

Dubai is a visually arresting city, with views across the Gulf and the city’s increasingly illuminated and skyscraper-rich skyline.  Canny developers are taking advantage of this by offering apartments with views across the city’s best vistas – for a price.

The difference in price between an apartment with a nondescript view and one with views across the Gulf, the Dubai skyline – especially the more famous or picturesque parts – or the Burj Khalifa or the Dubai Fountain, is sometimes as much as 45%.  In a city where prices are expected to rise by 10% to 15% in the coming year and rents to rise by as much as 20%, that premium amounts to a lot of money and indicates a rising luxury real estate markets that’s floating boats across the world.

It’s thought to be partly as a result of this realization that several tall buildings are being built in Dubai right now: the 335m Damac Residences, the Dream Dubai Marina at 432m, The Address The Boulevard, 370m, or the Al Attar Tower at 342m are all aimed at what’s been dubbed ‘vista value.’

As Dubai’s market climbs, both literally and figuratively, it draws in luxury buyers from across the Gulf.  But we’ve seen a burgeoning Dubai market before: could we be headed for a bubble?

Marc Faber, known as a prophet of doom seeing bubbles in both the Chinese and American markets, doesn’t think so.  ‘I don’t think we’re yet in a bubble stage but we had a big rise in property prices already,’ he told local newspaper The National on March 26.  However, he cautioned that ‘it could become a bubble in the future.’

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naxos-greece|credits:arkntina

Falling land taxes and the introduction of residency permits have seen the market for quality holiday properties on the Greek island of Rhodes rise. The Greek property market has fluctuated over the last few years, in common with much of the rest of Europe, but since 2013 local agents Engel & Völkers has been registering a continuous rise in the number of enquiries.

Land tax has been slashed from 10% to 3% in the Greek island, and the trend to greater numbers of enquiries was reinforced when the new lower rate came into force on January 1 2014.

‘We have registered a 30% rise in the number of search customers for exclusive homes in desirable locations,’ says Georg Petras, Managing Partner at Engel & Völkers Rhodes.

The market in lower-priced homes is characterised by greater elasticity of supply – more homes can be built fairly cheaply, while the pool of potential buyers is quite small. For luxury homes the opposite is true: investors and buyers are increasingly interested from as far afield as Russia and the Middle East, but the stock of available homes is limited by Rhodes’ relatively small size and the quality of the properties themselves.

Buyers of holiday homes and luxury properties often aren’t fulltime Greek residents – they tend to be either wealthy foreigners or Greek expatriates and in many cases, they purchase property with little or no borrowed capital. The majority of international buyers hail from Germany, the UK, Austria, Switzerland, Belgium and surrounding non-EU states but there’s an increasing amount of interest from the Gulf states, Russia and Eastern Europe. That’s partly a result of the increasing number of high net worth individuals in these places, reflecting a global trend; but it’s also partly caused by economic instabilities elsewhere. With stock markets capricious and growth uncertain, investors are eager to put their money into bricks and mortar, and ‘real estate in Greece is a good investment prospect once again as the bottom of the market in terms of property prices has passed and buyers are now being rewarded with high potential for appreciation in the value of their new homes,’ points out Mr. Petras.

Another appealing aspect to buying property on Rhodes, as elsewhere in Greece, is the fact that buying a property worth over €250, 000 automatically gives you a 5-year residency permit, which can be extended an indefinite number of times. This fact hasn’t been publicised as much as the ‘Golden Visa’ schemes of Portugal, Spain and Cyprus, but buyers and investors are getting wind of it and it’s boosting Greek fortunes.

The most sought-after locations on Rhodes are the old town of Lindos and the surrounding region, with the resorts of Pefkos and Vlicha. The whole of the island’s east coast down to its southernmost tip is also sought-after. Prices are high and homes with three or more bedrooms are most in demand. Interest in villas is particularly strong, with larger properties of five bedrooms running around €1.5m, apartments often about €125, 000 and three-bedroom villas ranging between €150, 000 and €200, 000.

Greek property may no longer be a bargain-hunter’s paradise, especially at the pricier end of the scale, but the market is clearly on the up.

rhodes-greece|credits:arkntina