Property Industry News

2006 has been another formative year for property investment markets, with the likes of Bulgaria and Dubai dominating media coverage and experiencing phenomenal popularity. However, as they edge ever closer to their saturation peaks and 2006 draws to a close, investors are setting their sights on new property markets. With the number of budget airlines escalating, an increasingly wealthy ageing population and an escalating number of first time buyers attempting to get their foot on the ladder abroad, sales and growth in international property investment are likely to soar in 2007. Property Frontiers expect that 2007 will also see the market segment between lifestyle and pure investment purchases.

As previously mentioned, we predict that next year may pose substantial risks to the popular locations of 2006. The final quarter of next year will see a large proportion of Dubai’s off-plan properties complete, adding substantial stock to Dubai’s rental market. The current imbalance with limited supply and extensive demand may begin to equalise or even reverse. Much depends on the Emirate’s ability to continue attracting expatriate workers and other visitors over the next year. It is possible that the market will absorb the increase in property stock, but equally, the Dubai dream may begin to falter. Investors considering buying in this Arab Emirate should therefore be especially prudent before purchasing.

Similarly, Bulgaria’s exclusivity has been somewhat exhausted in the last 12 months. According to A Place in the Sun’s Hot Property Index, Bulgaria is now the number one place to invest ahead of both Spain and France. However, questions must be raised about whether Bulgaria has been overdeveloped and how much longer its investment bubble can withstand the market’s mounting pressure. We seriously question the market fundamentals in Bulgaria as prices have been pushed excessively high over the last 6 months of 2006. 2007 could well be the year in which a substantial and painful correction occurs.

The investment fever which swamped Bulgaria has however highlighted a region which continues to promise great investment potential – Eastern Europe. Its relative underdevelopment, low property prices, rapid GDP growth and increasing employment figures mean property values in countries such as Poland are set to rise rapidly over the next few years. Since joining the EU in 2004, FDI in Polish cities has risen continually and a palpable urbanisation ensued. The country currently attracts $6.5 bn of foreign investment per year and, as a result, is now ranked 5th in the World FDI Confidence Index. The rise in FDI is indicative of the country’s growing popularity, the confidence investors have in the market and intimates the future strength of Poland’s investment market.

Similar trends are likely to occur in Slovakia, Slovenia and the Baltic states. Slovakia, ideally located in Central Europe has one of the fastest-growing economies in the region and was nominated by the World Bank in 2004 as having the most rapidly improving investment climate globally. Real Estate investments in the capital Bratislava are stable and predictable and growth and demand are greater than the national and regional averages. Equally, the Tatras mountain regions offer excellent conditions for growth although at present the letting market is limited to ski resorts. Demand is set to stay higher than supply due to Slovakia’s strict protection rules for national park areas which cover much of the country’s ski zones

Another area likely to gain increased credibility as an investment hub is Asia. China‘s status as one of the World’s fastest growing economy (economic growth is expected to grow at around 10% per year in the near future) is having a huge knock on affect on various countries around it  namely Thailand and Malaysia with their rapidly growing middle classes. New areas to watch include Japan which is set to continue on its expansion voyage due to increased investment from small firms which should result in job growth, despite lagging consumption and Vietnam. Vietnam is considered by some to be the new ‘emerging China’ and will join the WTO on the 11th January next year.

As the third largest economy in the world we expect foreign investment in Germany to flourish next year. Relatively few Germans are home owners and as a result, consistently high rental yields can be counted on especially in the major cities. The full growth potential of the German economy may soon be realised as structural reforms such as Hartz IV are implemented. Germany’s GDP should reach 2.5% this year and the OECD estimates that this economic rebound will continue well into 2008 making Germany one of Europe’s hottest long-term investment hotspots.

Home to Panama, Costa Rica and Brazil, Central America boasts more of the world’s key emerging markets. Brazil especially is of significant interest for investors looking to take advantage of a relatively young market. Goldman Sachs predicts that it will be the world’ s fifth largest economy by 2035 and with increasingly frequent direct flights and extensive coastland available for development, Brazil is a very promising investment destination. What is more, the country, now home to a million millionaires, clearly has an increasingly affluent population which is another fact which should appeal to potential investors.

A short journey north from Central America takes us to another large growth market ” The Caribbean. Seen by many as the ultimate lifestyle second home destination, the spice islands are also an exciting investment hotspot with numerous new 5-star hotel and villa complexes being built on previously undeveloped islands such as Grenada and St Lucia.

Despite the complexities and considerations that must be taken into account when investing abroad, the number of opportunities continue to increase. And if investment is all about timing, then this greater choice means that 2007 will offer many opportunities to get your timing just right.

Source: Property Frontiers

Morgan Stanley, the largest real estate investor among Wall Street banks, is raising as much as $8 billion for its sixth international property fund in what would be the biggest-ever high-yield real estate fund.

“We continue to see significant investment opportunities outside the U.S., dominated by activity in Japan,” Jay Mantz, global co-head of Morgan Stanley Real Estate, told the Washington State Investment Board’s private markets committee during a fund- raising presentation in Olympia yesterday. The committee recommended an investment of $440 million in the fund.

Real estate firms are raising record amounts from institutional investors such as pension funds that are seeking higher returns than stocks and bonds. Morgan Stanley is raising an opportunity fund, a type that seeks annual returns of about 20 percent or more. The fund will be invested outside the U.S., with 75 percent in developed markets such as Japan and Germany and 25 percent in emerging markets led by China and India.

Morgan Stanley increased its fees with the new fund, Morgan Stanley Real Estate Fund VI International, which would surpass the $5.25-billion Blackstone Real Estate Partners V fund raised by New York-based Blackstone Group LP in June.

Morgan Stanley Real Estate has acquired about $62.3 billion of property assets worldwide, including Canary Wharf in London, that city’s second financial district. The firm in July made its first real estate in Russia, buying a stake in a local developer, and plans to increase investment in China and India, where fast economic growth is creating more demand for housing and retailers.

`Matched by Few’

“This platform for international real estate investment is matched by few firms,” Michael Humphrey of Courtland Partners, a real estate consultant to Washington State, told the pension trustees. “They have a great deal of skill.”

So-called real estate opportunity funds, many of which got their start buying troubled mortgages from the U.S. government during the early 1990s savings and loan debacle, aim for returns of 20 percent or more. They invest in areas deemed higher risk such as nonperforming loans rather than traditional stable income- producing assets.

Morgan Stanley for the first time plans to charge an acquisition fee of 25 basis points on new investments, Humphrey told the panel. The firm also increased its share of profits after certain return targets are met to 20 percent from 17 percent. These terms would apply to large investors such as Washington, Humphrey said.

“They’ve got the Cadillac vehicle and they’re charging for it,” Humphrey said. “There’s that much capital in the marketplace.”

$30 Billion to Invest

Based on a standard management fee of 1.5 percent of capital committed, the new Morgan Stanley fund would generate $120 million annually in management fees alone. The actual fee on the fund wasn’t disclosed.

Adding borrowings to the fund’s equity of $8 billion could give Morgan Stanley as much as $30 billion to invest, Humphrey said.

“That is a level we haven’t seen before,” he said. “The immediate question that comes to mind is can they access investments at a pace that’s reasonable, given that level of capital,” he said. “Are they simply ramping up the dollar amount of the fund to enhance the level of fees?”

Yields, or capitalization rates, on real estate probably won’t fall much further, said Sonny Kalsi, global head of investing for Morgan Stanley Real Estate. “As we look at things globally, we think cap rates are more likely to go up,” Kalsi told the committee. Economic conditions remain favorable for property income growth in cities such as Tokyo, London and Shanghai,” he said.

Morgan Stanley already has invested about $900 million of equity for the new fund as of Sept. 30 and expects that total could double by the time the fund is closed, Kalsi said. He didn’t specify when a final close would occur.

Source: Bloomberg

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The 2006 Coldwell Banker HPCI evaluated home prices in a total of 384 markets, including, for the first time, 42 international markets outside of North America. The study found that home prices (all figures in U.S. dollars) in Amsterdam, the Netherlands ($483,513) are comparable to those in Bend, Ore. ($482,750); Dubai, United Arab Emirates ($374,332) matches up to Portland, Maine ($375,500); prices in Warsaw, Poland ($317,586) are similar to those in Atlanta, Ga. ($322,210); and Sydney, Australia ($683,109) is on par with Bellevue, Wash. ($658,000). Interestingly, Vancouver ($887,762) is the most expensive city in Canada just as the West Coast leads the U.S. charts.

Serving as a “snapshot” study, the Coldwell Banker HPCI evaluated average home values for select 2,200 square foot single-family dwellings with four bedrooms, two and one-half baths, a family room (or equivalent) and a two-car garage(1) in 384 total markets across the United States, Puerto Rico, Canada and also key international markets where Coldwell Banker has a presence.

A sampling of the most expensive and most affordable international markets3 (in U.S. dollars and local currency are):  

Country

Market

2006 Price in U.S. Dollars

AUSTRALIA Sydney $683,109
BAHRAIN Manama-Muharraq $196,688
BELIZE San Pedro $587,913
BERMUDA Bermuda $1,442,813
CHINA Beijing $63,994
Shanghai $65,297
Zhejing $68,268
COLOMBIA Bogota $56,522
COSTA RICA San Jose $322,999
EGYPT Sharm El Sheikh $121,619
FRANCE Paris $1,423,632
Nice $632,227
INDIA Rajkot $78,099
INDONESIA Jakarta $253,690
IRELAND Cork County $671,904
Dublin $1,406,497
Galway County $821,394
Limerick County $549,739
ITALY Milan $1,814,461
Naples $1,170,848
Rome $1,258,614
JAPAN Tokyo $785,818
MEXICO Mexico City $295,087
NETHERLANDS Amsterdam $483,513
NICARAGUA San Juan del Sur $320,328
PANAMA Panama City $174,000
POLAND Cracow $291,637
Gdansk $260,318
Warsaw $317,586
PORTUGAL Algarve $358,456
Cascais $491,872
Lisbon $983,744
SAUDI ARABIA Riyadh $100,937
SINGAPORE Singapore $758,430
SPAIN Madrid $1,061,762
Sevilla $779,682
Valencia $707,421
ST. CROIX Christiansted $872,500
ST. THOMAS St. Thomas $1,453,750
TURKS AND CAICOS Turks and Caicos $566,250
UNITED ARAB EMIRATES Dubai $374,332
VENEZUELA Caracas $113,462

Methodology – 2006 Coldwell Banker Home Price Comparison Index:
Coldwell Banker Real Estate Corporation conducted its Home Price Comparison Index study by compiling survey data from Coldwell Banker offices throughout the United States, Puerto Rico and Canada.  Companies within the Coldwell Banker system submitted data based on the average sales price of sold listings through July 2006 or a comparative market analysis of homes previously evaluated for the 2005 HPCI. The criteria for the HPCI subject home is: single-family dwelling, 2,200 square feet (approximately)2, four bedrooms, two and one-half baths, family room (or equivalent) and two-car garage in neighborhoods/zip codes within a market that is typical for corporate middle-management transferees.

About Coldwell Banker
Since 1906, the Coldwell Banker organization has been a premier provider of full-service real estate. In 2005, Franchise Times magazine’s prestigious Top 200 issue ranked the Coldwell Banker system number one in real estate and number nine among all franchisors.  The Coldwell Banker System has more than 4,000 residential and commercial real estate offices and 127,700 Sales Associates in 30 countries and territories.  The Coldwell Banker System is a leader in the industry in residential and commercial real estate, and in niche markets such as resort, new home and luxury properties through its Coldwell Banker Previews International division. It is a pioneer in consumer services with its Coldwell Banker Concierge Service Program and award-winning Web site, file://localhost/C/Temp/notesE97E9E/www.coldwellbanker.com. Coldwell Banker Mortgage is one of the largest telephone/web based lenders in the country. Coldwell Banker Real Estate Corporation is a subsidiary of Realogy Corporation (NYSE: H), the world’s largest real estate franchisor. Coldwell Banker is a registered trademark licensed to Coldwell Banker Real Estate Corporation  Each office is independently owned and operated except for offices owned and operated by NRT Incorporated.

1. The Coldwell Banker Home Price Comparison Index (HPCI) is not intended and should not be deemed to be a definitive determination of price for any particular real estate.  While the HPCI offers insight into housing costs, Coldwell Banker Real Estate Corporation recommends that potential homebuyers and sellers conduct additional research and work with a reputable real estate professional on their specific needs.

2.  2,200 square feet was the baseline figure used as size criteria for the HPCI subject homes.  However, it is possible that in certain markets the size of the subject homes varied.

3. Currency exchange rates were calculated as of September 5, 2006 on http://www.oanda.com/.

Article Poll:

 

Jones Lang LaSalle Inc. bought a property investment company based in Dubai to beef up its presence in the booming Middle East and North Africa region. RSP Group employs 30 people, Chicago-based Jones Lang said, without giving the price. The company said demand for its services will come from developers and investors.

Source: Chicago Tribune

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UAE property developer, Damac Holding, said it will definitely transform itself into a publicly listed company over the next three years. The company also expects to see the total number of its projects to rise from dhs15 billion, today, to a whopping dhs 50 billion by 2009. This is the first time Damac has publicly commented on its financials.

Speaking exclusively to 7DAYS, Damac chairman, Hussein Sajwani, said the company hoped to list on a Dubai exchange.“In the coming three years we definitely want to go public and get listed. We want to continue to be a premiere, high-end, quality product provider to our customers,” he said.

Sajwani effectively ruled-out any chance of listing the firm on the fledgling Dubai International Financial Exchange (DIFX), despite the fact the firm has embarked on an international level expansion plan. “I favour listing on a Dubai market,” he said. “Dubai Financial Market would be my favourite choice, but of course we are waiting for some of the rules and regulations to be amended, which are in the pipeline.”

Damac recently announced projects in Qatar and Abu Dhabi and will formally announce a development in a key area of Beirut in front of the Venezia Hotel. It also hopes to launch a project in Amman, Jordan by August. “We have been surveying markets as far as China and as far as Morocco,” Sajwani said.

“We hope to be in about 12 countries over the next three years, although our plans are for mainly the Middle East or places three or four hours flying distance.”

“Since 2001, the share of home buyers using the Internet as an integral part of the home buying process has nearly doubled to 70 per cent”, said CAR.

But while the characteristics of Internet buyers and their traditional counterparts have started to converge, the estate agents have noticed ‘important distinctions’ between the two groups. “Internet buyers were younger, wealthier, better educated and more likely to be married than traditional buyers’, said CAR. “Internet buyers also reported greater satisfaction with the home buying process compared with traditional buyers”.

The comments come in 2006 Internet versus traditional buyer survey. ‘The Internet is changing the dynamics between buyers and their agents, as well as the way business is conducted throughout the real estate industry,’ said CAR president Vince Malta.

‘More and more consumers have high speed Internet access at home, enabling them to gather information on all types of products and services both quickly and easily. This trend has carried over to the process of buying a home. As a result, home buyers are more informed, have a greater sense of control over the process, and hold high expectations concerning how quickly they receive information.’

Overseas property investors should research the area in which they are thinking of buying well before visiting the country, according to the organisers of Property Investor and Homebuyer Show North.

Their ‘top tips’ on reducing the risk involved in overseas investment include:

Know your objectives
Know why you are buying and what you are hoping to achieve with the purchase. If it’s for investment, is it for short term capital gain to provide a one off profit over a particular time, or is it to provide long term regular income?

Sort out your finances
Work out how much you can afford to buy and arrange your finances, such as your mortgage, before you travel abroad to search for your property. This will ensure that you are ready to act immediately if you find the right property. Also ensure that all finances are arranged before signing any contracts and paying over a deposit.

Do not be hasty and stay focused
Stay focused on what you originally had in mind and stick by your objectives. See your chosen area at different times of the year to ensure that you like it whatever the weather. You could also give yourself a cooling off period to help ensure you are making the right choice.

Check the transport links and local facilities
Make sure there is a choice of airline routes and access points to your chosen area. People who rent property will want somewhere that is easy to get to and will often gravitate to those places with a nearby airport served by low cost airlines. People will also want to be near basic facilities such as restaurants and shops. Proximity to areas of natural outstanding beauty or tourist attractions, for example, will add to the property’s rental attraction.

Talk to fellow investors
Speak to people who have purchased in the area that you are interested in. If you are opting for a buy to let investment, you can learn a lot about rental success in your area and get a realistic idea of the likely income that will be generated.

Allow for the extras
The costs of buying a property abroad (for example, taxes, conveyancing, lawyers’ fees, agents’ fees and VAT) can be much higher than in the UK, so make sure you budget accordingly. Also ensure that you are aware of the costs charged by the legal and government authorities for purchasing a property in your chosen country.

Check the taxation and inheritance laws
Ensure you understand the tax implications for when you decide to sell in the future. You should also check the inheritance laws of the country where you are buying, as you many need to compile a separate Will.

Weigh up risk versus returns
If buying for investment, it is important to understand how comfortable you are with risk and investment accordingly. You need to be well informed and comfortable with the risk factor.

‘Property investment overseas can be hard work but the rewards are there for those who do the research and are willing to put in the effort to succeed. However, our overarching advice for overseas property investors can be applied to many things in life; use your head, do your research, seek professional advice and don’t act on impulse’, said managing director of VEF French Property Trisha Mason.

Source: fly-2let.co.uk

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The Dubai Government issued its property law yesterday which gives non-GCC expatriates the right to acquire freehold and 99-year lease property in specially designated areas. The new law will allow expatriates who have already purchased properties to register titles with the Dubai Lands and Properties Department. GCC nationals now have the right to buy property anywhere in the emirate.

Source: AME Info

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JIM MCGETTIGAN, the veteran Donegal hotelier, is planning to bring his latest hotel and property venture onto the London stock market at the age of 69. McGettigan, who started his career as a first-class waiter on the QE1, has told investors that he plans to bring Bonnington Group onto the market ‘in due course’.

This weekend McGettigan was in Dubai, where his interests include Bonnington Tower, a 40-storey apartment complex and a five-star hotel at the exclusive Jumeirah Lakes. The apartments at the complex fetch more than $1.4m (€1.2m). He was not available for comment.

Last year, McGettigan trumped retail giants Tesco among others to purchase the art deco former Gillette headquarters in west London.

He paid £32.5m for the property and is expected to lodge a planning application shortly for a four-star hotel, conference facilities, serviced apartments, a themed leisure area and office block. The group also operates an estate agency business, and has a total of 10 hotels.

According to company promotional material, Bonnington has assets of £250m, suggesting that McGettigan will be looking to float on the Alternative Investment Market. The flagship hotel in the group is the Bonnington in London which has almost 250 rooms.

McGettigan started his business empire when he returned from London with wife and co-director Patsy in 1964 and purchased a pub on Dublin’s Queen Street. The company is also sizing up opportunities in China, Bulgaria and Malaysia.

Source: Times Online

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Real estate markets are much like any other market; they operate in cycles experiencing growth, stagnation and even decline. In the case of property, these cycles tend to be slower than in other types of market, but timing is still the key. With this in mind, the question on every potential international property investor’s mind is; which countries will provide the best property investment opportunities in 2006?

The full answer to this question would involve a very long list of countries; many of which would be familiar to anyone with a passing interest in international property. Places such as Dubai have been hotspots for sometime and we expect this to continue next year due to the looming finalisation of the Freehold law and the early realisations of some of the Emirate’s commercial and leisure mega-projects. Similarly we expect the Bulgarian market to continue providing good investment opportunities. However, our advice to investors would be to concentrate on the ski resorts rather than the coasts.

Other parts of Eastern Europe are rightly attracting attention too. Certain areas of Poland, Latvia, Estonia, Romania and even the Ukraine will be worth considering in 2006. One of the most exciting opportunities within Europe is Montenegro which despite its many attractions and low prices is yet to enter in to the investment destination mainstream.

Beyond these more familiar markets, 2006 will see the rise of more far flung destinations, particularly in Asia which is experiencing high levels of growth. Possibly the biggest investment opportunity next year will be China. China has already attracted significant investment from UK buyers hoping to prosper from the effects of the rapidly growing economy and the expected revaluation of the Chinese currency. However, China remains a relatively untapped market and investors still have the opportunity to get into the market at an early stage.

Chinese economic growth is also impacting real estate markets in other Asian countries. China’s strong trade links with Thailand and Malaysia are driving economic growth which in turn is pushing up property prices and increasing rental demand.

In Malaysia the main opportunity is in Kuala Lumpur where prices are currently low by international standards. During 2006 we will continue to see price rises there, fuelled by general economic growth and increased housing demand from expatriates. In Thailand, the biggest tip is Chiang Mai which is both developing as a tourist destination whilst also becoming a key trade centre on the back of a new highway connecting the city to China.

The emerging markets of South and Central America also present exciting opportunities. The two most notable from our perspective are Brazil and Grenada in the Caribbean. Both markets are experiencing massive growth in tourism and have a shortage of high quality residential and hotel properties to fulfil the demand. In these locations property on managed resorts will be a good buy.

Beyond the opportunities outlined here, there are of course many others. The world is ever shrinking and this has a very rapid and obvious impact on international property markets. The choices available to investors are expansive but care must be taken to fully understand the true investment opportunity as well as the risks. When considering market potential, it is also worth remembering that the internationalisation of property investment is removing the isolation factor that historically typified real estate markets. Today, the growth cycle of one property market can be significantly affected by the economic health of another country in which many of the active buyers are resident. Consider the impact of a UK recession on the French property market for example.

Despite the complexities and considerations that must be taken into account when investing abroad, the number of opportunities continue to increase. And if investment is all about timing, then this greater choice means that 2006 will offer many opportunities to get your timing just right.

An upmarket British estate agency says it is using its ‘establishment’ reputation to reassure buyers worried about the pitfalls of finding a cheap home abroad.

Knight Frank, one of Britain’s oldest and grandest estate agents, is best known for selling multimillion-pound country estates in the UK. But now it has opened an international new homes division aimed at buyers with budgets as low as €130,000.

The new deal for buyers is not modest prices; the innovation is that even for such cut-price properties, Knight Frank will make rigorous checks on who is building what, and where.

Knight Frank’s ‘due diligence’ checklist should in theory mean an end to the uncertainties that plague low-cost overseas purchases – no proof of land ownership, no written planning permission, non-conformity with building regulations, inadequate checks and guarantees on build quality, and worries over the financial propriety of developers.

Other upmarket British agents have occasionally marketed cheap foreign homes in territories beset with such problems (Savills in Croatia and Hamptons in Oman, for example) but Knight Frank’s initiative is the first large-scale effort by a top-notch name.

There has been a spate of stories lately of alleged land grabs in Valencia, where a poorly drafted law has been exploited by Spanish developers who reclassify land reclaimed from owners without their permission. There have also been stories of locals in eastern Europe disputing the ownership of homes apparently sold to foreign buyers. Iberian property sales have been subject to enduring allegations about money-laundering.

Wealthy purchasers could always escape such pitfalls by hiring buying agents to find the best legitimate deals, or by using UK estate agents with overseas offices selling homes at the top end of the market. Knight Frank says it is now providing such services to those with more modest budgets.

‘Put bluntly, we have our reputation to keep up. We’re approaching these sales with the same rigour as with multi-million properties in England,’ says Knight Frank’s James Price.

The firm’s portfolio will include properties in the rural Umbria region of Italy, the Whistler ski resort in Canada, golf and ski resorts in France and so-far unspecified developments in southern Spain, where particular attention will be paid to issues such as build quality.

One low-cost territory that Knight Frank will avoid, for now at least, is Dubai. There have been queries about the titles of some properties sold here, and about whether demand can be sustained for the thousands of new flats built each year. ‘A lot of units are being traded like shares before they’re even completed. We need to wait for the market to mature to see whether it’s something we want to offer,’ says Price.

Another unlikely entrant to the budget overseas property market is Thomson Holidays. Hit by a slump in package holidays, Thomson announced a link-up last month with Parador Properties that will allow it to offer homes for sale in Spain, Portugal and Cyprus from its 750 high-street shops. Villas start at around £65,000, with an average selling price of £120,000.

Both Knight Frank and Thomson hope to tap into the strong demand from Brits for buying overseas – more than 500,000 have already done so – including first-time ‘jet-to-let’ buyers.

Source: The Observer (Guardian Unlimited)