Property Industry News

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Las Vegas

New data from the Greater Las Vegas Association of Realtors (GLVAR) indicates that the median house price in Southern Nevada increased only slightly last month as fewer homes were sold.

GLVAR reported that the median price of single-family homes sold in September this year was $202,500, up 1.3% from $200,000 in July and August, and up 12.5% from a year ago. Meanwhile, the median price of condominiums and towhouses in September went down slightly, by 0.7% from $105,000 in August to $104,250 in September. While month-on-month rises may have slowed, though, prices are still 9.7% up from a year ago.

The president of GLVAR, Heidi Kasama, said, ‘Our housing prices went up slightly last month, but they haven’t really changed much these past few months.’ Our market is entering a more stable time, with inventory levels increasing slightly and price increases moderating. Overall, I still think this is a great time for buyers to enter the market.’

Ms. Kasama also pointed out that GLVAR’s median local house price remains well below the peak for Southern Nevada property prices, in June 2006, when the median price was $315,000 – yet prices are also significantly above the rock-bottom $118,000 median of January 2012 too, meaning a more stable market. It’s also a good market for investors – median house prices rose by 24% year-on-year in 2012 and 2013.

However, stock is running down. GLVAR said the total number of existing homes, condominiums and townhouses sold in September was 2,982, down from 3,120 in August and from 3,259 in September of 2013. Kasama said local home sales are running about 12% behind last year’s figures. In fact stock is running so low that it may be destabilizing the market: there’s about enough housing stock in Southern Nevada to support current sales for four months. REALTORS® considers that a six-month supply is a sign of a balanced market.

Distressed sales have been falling for the last two years, according to GVLAR. That trend has continued in September when GLVAR reported that 10.4% of all sales were ‘short sales’ – where a lender allows the sale of a distressed property for less than is owed on the mortgage. That’s down from 11.5% in August, and straight bank-owned sales were also down, to 8.8% from August’s 8.9%.

Part of the decline in sales in Southern Nevada is a result of uncertainty in the market as to whether Congress will vote to extend the Mortgage Forgiveness Debt Relief Act of 2007, which expired on December 31, 2013. If Congress doesn’t reenact the law and make it retroactive to January 1 2014, there will be an unexpected and significant tax hit for anyone who completed a short sale in 2014, a consideration which is understandably subduing the market in that area.

Another consideration is that the real estate market in Southern Nevada appears to be shifting bases. In September, the monthly total value of real estate transactions was down 11.3% for homes – but it rose 16.8% from August on condominiums and townhouses.

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Germany is Europe’s healthiest economy and has remained relatively immune to the plague of defaults and debt that has swept across the rest of the EU.  But a different danger might be facing Germany.

Brandenburg Gate in Berlin, Germany

As the economies of Spain, Ireland, Greece and even the USA suffered, investors in property there withdrew their cash and looked for places to invest it.  Meanwhile, Germany continued to rebuild swathes of old slum and rubble left over from the days of its division.  Foreign business investors built flagship buildings in Berlin, like the €600m Sony Center, whilst local businesses spread into areas that had previously been run down and rejuvenated them driving property prices up in the process.  Prices rose about 5.5% nationwide last year, causing German Bundesbank President Jens Weidmann to describe the rate as ‘something we will need to watch’ in a statement.

Stefan Sebastian, head of the Institute for Real Estate Finance at the University of Regensburg, says prices are going up because of ‘fear of inflation and fear of currency reform.’  Kai Carstensen, an economist at the Ifo Institute in Munich, echoes Mr Sebastian’s views, saying that while Germany is in a better position to protect itself against a bubble than the US or Ireland, ‘if we learn from the US experience, we should be cautious, even if we up to now aren’t in a bubble.’  Mr Carstensen points out the commonality of the optimistic belief in being the exception, too: ‘When I talk to politicians, they always say, well, it’s different.’

Many experts think the danger signs of a bubble are in place in Germany; ironically the country could be a victim of its relative stability and prosperity.  Unemployment is at its lowest in decades, and interest rates are at rock bottom.  Germans are typically not a homeowning nation in the way Americans or English people understand the term.  Home ownership in Germany runs at about 43%, but as interest rates make savings accounts look unappealing and loans seem to beckon by contrast, that might be set to change.  Whether it indicates a long-term trend or not, Germans are buying more property.

As a result, property prices are being pushed upward by domestic demand on one side and foreign investment on the other.  And the pressure isn’t just on existing property.  There’s been an upswing in German construction too, with new housing construction permits up 9% between September 2011 and March 2012 compared with the same period a year earlier.

However these two types of purchasers are likely to have very different experiences.  German mortgage lenders typically offer much lower loan-to-value (LTV) mortgages than are on offer in the US or even the UK, where 90% or even more LTV mortgages are returning after the 2008 crash.  In Germany, a typical mortgage is more likely to require a 20% deposit and as a result these purchasers are likely to ride out a downturn more equitably.

Investments for profit, based on the belief that prices and demand will rise inexorably, are much more problematic both for their investors and for the wider economy if a bubble should burst; indeed this was the very factor that hit the Irish and Spanish economies so hard.

So are investors in trouble in Germany?  While some experts claim to see the warning signs of a bubble, others say there’s no cause for alarm just yet.  The actual price increase has some local hotspots.   In Berlin, prices have risen nearly 20% in the last year, and protests about housing costs and gentrification are common.  Overall, though, prices are only 20% higher than they were at reunification in 1990, and the recent rises make up for a long preceding period of stagnation.  Ulrich Kater, the chief economist at Deka Bank, rejected the idea of a bubble in Germany: ‘If you define a bubble as the price is only high because investors believe that prices are going to be higher in the next year’,’ he said, ‘then you have no bubble in Germany.’

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Hathaway Berkshire, the company owned by tycoon Warren Buffet, has bet heavily on a resurgence in the housing market.  The company has agreed to lend its trusted brand to a new venture with Brookfield Asset Management.

The conglomerate will be the majority owner of a network of franchised real estate agencies through its HomeServices of America subsidiary.  Brookfield will contribute its network of more than 53, 00 estate agents, responsible for $72 billion of residential real estate sales last year.  HomeServices of America acquired the business from Prudential Financial, but did not acqure the rights to the Prudential name.  The realtors will begin to offer services under the name Berkshire Hathaway HomeServices from next year.

The move represents a significant investment of cash and credibility in the housing market.  Mr Buffet told CNBC last month that he confidently expects the US housing market to continue ‘inching ahead.’  Mr. Buffet expressed the opinion earlier this year that the US economy was in for a ‘steady and substantial comeback,’ but told CNBC that right now there was ‘no question’ that global growth was slowing Mr. Buffet told Becky Quick on CNBC’s Squawk Box on October 24.

Mr. Buffet, who famously told shareholders in Berkshire Hathaway in 2011 that he was looking for a ‘major acquisition’ and that ‘our elephant gun has been reloaded, and my trigger finger is itchy,’ told Ms. Quick that his company wouldn’t be attempting leveraged buys, saying that ‘it doesn’t factor into our thinking… we’re buying on an all equity basis.’

Mr. Buffet has reasons to be bullish on the housing market.  After years of falling sales and decreasing economic output, the US housing market is resurging.  That’s because reduced prices and record low interest rates are tempting homebuyers back into the market.  The housing market has responded, too: housing starts rose faster in September than at any other time since July 2008, after seasonal adjustments.  And Mr. Buffet told his shareholders in February that the housing market would improve, pointing to figures that showed the number of new households being formed exceeding the number of new house starts and explaining the phenomenon: ‘people may postpone hitching up during uncertain times, but eventually hormones take over.’

Home Service is the second largest full service residential brokerage firm in the US, built up by buying up real estate brokerages from around the country following the initial acquisition with the Midwestern utility company in 1999.  It’s one of over 70 different companies forming the Hathaway Berkshire conglomerate, and only one of the ways Mr. Buffet’s companies are betting on the US housing market’s buoyant future.  Berkshire has also acquired a brickmaker and this month agreed to pay $1.5 billion for a portfolio of home loans from Residential Capital, the bankrupt mortgage lender.  The offer will need to be approved by the bankruptcy court and Residential Capital’s creditors may also challenge it.

Mr. Buffet’s attempts to have a finger in every pie the housing market can offer presumably indicates his faith that exposure to the property market can help his company achieve what he wrote his shareholders was his ‘primary objectives of redundant liquidity and unquestioned financial strength.’ Mr. Buffet has plenty of evidence on his side, from post-Sandy analysts predicting a boom in construction on the East Coast to premium realtors in California who are seeing sales and prices rise together.  But he has been wrong before.  In last year’s letter to shareholders Mr. Buffet made the same predictions and ‘I was dead wrong.’  This year, he looks more likely to be proven right.

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UK: Rise in mortgage lending ‘fuelled by remortgaging’ [Guardian]

UK government signs up builders, lenders for loan scheme [Reuters]

Donald Trump: I want Sean Connery to open my golf course [Telegraph]

Goldman Sach’s Jonathan Egol Buys Manhattan Apartment for $3.72 Million [Bloomberg]

Dubai homeowners face legal limbo over building upkeep [Arabian Business]

Malaysian-born Chong among Aussie’s richest [The Star]

Hong Kong Home Prices Have Peaked, May Drop 15% This Year [Bloomberg]

Brazil’s importance to South Florida’s economy [Business Monday]

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mipim-cannes-france

The property industry’s annual backslapper MIPIM was more about building contacts than projects this year.

Since last year’s event, property prices have gone down quicker than a bottle of bubbly in a room full of freeloaders, leaving the delegates little to do other than bask in the Cannes sunshine and title-tattle over their predictions for the coming year.

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We stumbled on this via ActiveRain; it is a mention of ways American and International property agents can market to Russian buyers (who seem to be buying up the whole world at the moment).

Moscow_International_Property_Show.jpg

Here are the top Russian International Property Exhibitions:

One of the ways to market and sell your real estate to Russian buyers, is participation in International Real Estate Exhibitions in Russia. They happen in Moscow and St. Petersburg several times a year and are getting more and more interest on the part of foreign exhibitors and Russian public.

Photo credits: International Property Show Moscow

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The ACI management team with Niki Lauda recently

ACI real estate announced yesterday that it’s investment plans for the emirates is currently standing at a stunning £2.8 billion – which is scheduled for both Dubai and Abu Dhabi prime property development. Up-to-date investments include the 3 sports legend commercial towers, known as the “Trilogy” project situated along Dubai’s high-end Business Bay and another 5 new towers soon to be launched in Abu Dhabi.

ACI Real Estate is an affiliate of Alternative Invest Capital, a forward-thinking investment house from Germany.


The U.S. Embassy in Baghdad

Despite the current political upheaval in Iraq, one area of the economy is already starting to recover – the Baghdad housing market. House prices fell through the floor last year as bombings and kidnappings increased. But as some stability begins to emerge from the rubble, the housing market has poked it’s head up from behind a parapet and said, ‘open for business.’