regions

Hurricane SandyL Beach 92nd Street between Shorefront Parkway & Holland Ave

Hurricane Sandy has the undesirable distinction of being one of the ten most expensive hurricanes in US history.  In the days before Sandy impacted, it was forecast to be ‘large, slow-moving and no doubt very costly.’  While it wasn’t anything like as destructive as Katrina, which cost $125bn by some estimates, Sandy is expected to cost upwards of $50bn in damage and hundreds of thousands of homeowners are expected to file insurance claims for flood and wind damage, according to the Consumer Federation of America.  Whole blocks of property were totally destroyed, the subway was knee-deep in water and even the New York Stock Exchange was in the dark, closed by the weather for two days running, for the first time ever.

The focal points of the damage done by Sandy are sadly apparent from photos and news reports that show rides from Rockaway Beach floating in the sea, beachfront housing levelled and Breezy Point, in Queens, tragically destroyed.  Joe Sitt, who owns property across New York, said in an interview for Fox News that many of his properties in New York were severely damaged.

Some analysts think Sandy will act as a drag on the American housing market.  Lawrence Yun, chief economist of the National Association of Realtors, is one of them: ‘this will definitely create a negative in the short term,’ he says.  ‘The bottom line is we clearly anticipate a slowdown, but it will be temporary.’

Yun expects a regional drop along the East Coast, a ‘noticeable, measureable impact’ large enough to pull the national sales statistics down from November onward.  Pending home sales will be delayed or in some cases collapse altogether, sellers will take damaged properties off the market and buyers will hold off making purchases.

The immediate effects on the wider economy involved the Nasdaq index falling by 0.58% and the Dow Jones losing 32.72 points during Wall Street’s closure, and there is to be some support for those whose homes have been damaged.  Two of the country’s biggest mortgage lenders €“ both bought out by the government in 2008 have pledged to offer help to those borrowers who live in designated disaster areas.  Freddie Mac and Fannie Mae said they ‘strongly encouraged’ servicers to help affected borrowers with Freddie Mac-owned homes by suspending foreclosure and eviction proceedings, as well as late fees, for up to 12 months.  The mortgage giants also asked their servicers not to report forbearance or delinquency caused by the disaster.

While some experts propose a downturn in the housing market as a result of Sandy, others point up the economic effects of the inevitable rebuilding program.  As Chris Christie told journalists that ‘we’ll rebuild it – no doubt in my mind,’ contracts for lumber futures on the Chicago Mercantile Exchange rose to their highest permitted level, and remained there for the rest of the day as investors sought to capitalise on the upcoming spike in demand for building materials.

However, the boost for the construction industry is only forecast: the property damage and weakening of infrastructure is here already, and consumer spending is lowered and likely to remain so.  As Stephen East, an analyst with International Strategy and Investment Group in Saint Charles, Missouri, remarks, ‘it will take prospects in the region a couple of weeks for home purchases to return to the forefront of buyers’ minds.’

The boom for construction might have an unexpected benefactor though; the state government, responding to descriptions of the event as a ‘wake-up call,’ is considering building flood defences or levees, bringing federal money into the state construction sector to the tune of $29bn.

0 3064

Craig McParlan

A Merseyside man was found guilty of claiming over £14,500 in benefits including Jobseekers’ Allowance and Housing Benefit, while he was co-owner of a holiday home and a block of flats.

Craig McParlan, 50, of Kestrel Court, Blundellsands, pleaded guilty to three counts of theft when he appeared before Sefton magistrates in Bootle. The court heard that McParlan had claimed Jobseeker’s Allowance and Housing Benefit despite being a co-director with his parents of a property company that owned a property on the Spanish Island of Majorca, as well as a block of flats in Crosby – one of which was occupied by Mr. McParlan.

Sue Cain, prosecuting on behalf of Sefton council, said the fraud began in September 2008, when Mr. McParlan began claiming Jobseekers’ Allowance.  He went on to claim housing and council tax benefits in January, 2010.  In total, Mr. McParlan dishonestly obtained £6,097.82 in Jobseekers’ Allowance and £7,482.42 in housing benefit and £1133.49 in council tax benefit, for a total of £14,713.73.

‘The claim was made on the basis he had no discernible capital and Jobseekers’ Allowance was his only form of income.  The applicant signed a statement that this information was complete,’ Ms. Cain explained.  In fact Mr. McParlan had seven undeclared bank accounts in addition to the properties.  ‘These matters were dishonest from the outset,’ Ms. Cain went on.

‘When he was interviewed, McParlan said he did have an apartment in Spain registered in his name but that he was not the owner and it belonged to his father.,’ Ms. Cain continues.  In fact, ‘he owned the property in Spain and had an interest in the apartment block where he was living along with the additional bank accounts.’

David Kielty, defending, said although the properties were in McParlan’s name he had not benefitted financially from them.

Sentencing was adjourned until November 22 for probation reports.

0 4586
Opus Hong Kong – home of the most expensive apartment in Asia

The world’s second most expensive apartment isn’t in New York or Paris or Berlin, or even Tokyo.  It’s in Hong Kong, where Asia’s priciest living space and the second most costly in the world, after One Hyde Park, in London has gone on sale.  The apartment, a 6,755 square foot unit at the 12-unit Opus building in downtown Hong Kong, has sold for HK$430m – US$55m.  That’s a price of US$8, 130 per square foot.

Obviously, that’s a huge price per square foot and a huge apartment too.  But Hong Kong is an expensive place to live even if you’re not shopping for an Opus-style apartment.  The average Hong Kong apartment is 600 square feet, a much more modest proposal.  But buyers can still expect to pay HK$4.5 million for such a place – US$580, 135.  Compare that with Brooklyn heights, now one of the world’s stiffer-priced neighbourhoods, where New York centred blog Curbed.com found one couple paying US$1500 a month for a 240 square foot apartment, and it doesn’t seem so bad.  But Hong Kong’s prices are for family homes and the figure is an average across the city: New Yorkers willing to live in Ridgewood, or East Williamsburg, can hope for significantly lower rents.

But both major cities face similar pressures.  As a result of being key areas in their countries’ economies, there’s a premium on living in them.  The average Honk Kong income is HK$20, 200 pcm.  For two working Hong Kong residents to buy an apartment, then, they’d have to spend 18.6 years’ worth of salary, without spending a penny on anything else.  That’s in clear contrast to the rest of Asia, where prices are typically much lower.  Singapore households are typically looking at between three and seven years to pay off their property purchases , less than half Hong Kong levels.  Yet in the US, both would be considered out of reach: affordable’ there means three years or less.

As the housing market across Europe and American crashed hard after 2008, Hong Kong experienced the opposite.  Prices began climbing in the first quarter of 2009, quickly passed the levels of 1997, the previous market peak, and have risen quarter on quarter since then; a record every three months.  But incomes have not kept pace.  Average pay has risen by 15% in the same period as property prices have shot up 85%.  The result has been a ‘sandwich class,’ earning between HK$20, 000 and HK$30, 000; for these people to enter the property market, prices would have to fall by between 19% and 30%, according to Li Xueying Asia News Network (MCT).

Hong Kong faces a housing crisis in the making.  But it’s less like the US of 2008, where prices fell vertiginously, and more like the US now, where prices are rising but wages aren’t.  Some attribute this to mainland Chinese buying Hong Kong property: Mainlanders account for 40% of luxury home sales but only 10% of total home sales, and Hong Kong’s Chief Executive Leung Chun Ying has announced a law to bar foreigners from buying private housing, with the Hong Kong government in the process of figuring out the details.

Mr. Leung is thought to have made the move partly to deflect criticism from his rivals for having failed to combat the housing shortage since his election two months ago: however, the first result of his action has been a tumble in the Hong Kong stock market.  Meanwhile, academics have criticised the vagueness of the measure, which Mr. Leung is keeping sufficiently nebulous as to discuss neither the law itself, saying only that the government was drafting the legal framework, or its date of enactment, which he said would be ‘when necessary.’

In fact one major driving force of Hong Kong’s housing shortage is the lack of housing: 5, 000 too few homes a year for the last six years and a projected shortfall of 185, 000 homes by 2017, according to Eva Lee of investment bank UBS.  The other is the Hong Kong government’s lack of control over its own interest rates.  The Hong Kong currency is pegged to the US dollar, forcing officials to follow a monetary policy tailored to a totally different situation.  The Federal Reserve’s attempts to rekindle the US economy are seriously inappropriate to a market that’s  more in danger of overheating than going out.

If home prices continue to be the political flashpoint they are already developing into, the question is whether Hong Kongers will vent their unhappiness – supposedly on the increase on mainlanders, or whether they’ll rally behind the cry -˜the rent is too damn high!’

 

chinese-property-investors
Chinese property investors does not show the same interest in the US property market as before

The stream of foreign buyers that seemed to be filling the empty reservoirs of the US property market has dried up, according to Real Estate Economy Watch.  Just a few short weeks ago, in August of this year, the foreign buyer was hailed as the saviour of the flaccid US property market.  Prices rose as incomes stagnated, but the property sector was able to actually begin giving buoyancy to the economy as a whole, by employing realtors and construction industry workers as the sector expanded, apparently in a vacuum.

In fact, the missing demand to fuel this expansion was coming from overseas.  US property is desirable as habitation as well as for investment purposes and prices and the dollar have fallen together.  As a result, Europeans, Asians and Latin Americans were inflating the US market as recently as June of this year.  A key feature of this phenomenon was the number of Asian buyers, particularly Chinese, as a newly-confident Chinese upper middle class rides the wave of Chinese economic expansion.

However, the stream of foreign buyers appears to have run dry.  According to real estate website Trulia, ‘investors want to buy when prices are at their bottom, but they’ll start to lose interest when prices rise 15%.’  Even in the key areas of focus for foreign investment, such as Florida, interest from foreign buyers has declined a bitter blow for the sunshine state that has seen interest from buyers decline over the last six years.  Foreign buyers have reduced in number over the last year, according to the National Association of Realtors: sales to foreigners went down 6% between June 2011 and June 2012.  That’s bad news for the rest of the US market, since Florida represents a significant proportion of all foreign real estate investment: 26% of all foreign buyers so far this year.

But it’s particularly bad news for Floridian sellers. The state relies heavily on tourism for its economic well-being, and foreigners were paying well over the odds and in cash.  Some 62% of all sales to foreigners were paid for in cash, and foreign buyers paid over the median price by a substantial margin.  The average US home sells for $167k, and in Florida that figure is more like $125k.  But foreign buyers of Florida properties were willing to pay an average of $195k – until they stopped.

Some experts pin the blame on the decline of the Euro against the dollar, part of a readjustment process as the effects of the financial crisis make themselves felt across the Eurozone after spreading there from the US.  However, other forces may be at work.  Chinese investors may prefer to buy closer to home, in Malaysia, where there is a large Chinese population, and in Hong Kong, where 40% of recent luxury home sales were to mainland Chinese.

Alongside the canniness of the Chinese investors whose cash made up 11% of the foreign-buyer market are the Canadian investors whose domestic market is cooling right now, and the US market in homes needs to be viewed within the economy as a whole.  There has been a slight jump in mortgage forclosures (though still fewer than a year ago) and unemployment has risen slightly over a similar period.  The rest of the US economy, in short, is suffering from a general failure to rise, and the leavening of a new Federal stimulus packaging is doing more for Hong Kong property prices than US wages and employment figures.

A deflating housing market could leave the US with nothing better to look forward to than Standard & Poor’s appropriately gloomy predictions of 2.2% economic growth in 2012 and 1.8% in 2013.

riyad-city-landscape

Saudi Arabia has announced that it plans to construct a women-only industrial city in the country’s Eastern province city of Hofuf. According to Saudi business paper Al Eqtisadiah, the city has been proposed by a group of Saudi businesswomen, represented by Hussa al-Aun, who told the paper, ‘The new industrial city should have a specialized training centre to help women develop their talents.’

The city is a proposed solution to an impasse in Saudi national life: women want more independence, and the economy needs their labour, but Saudi society is strictly segregated. The country is governed according to Sharia law, and one result is that women’s lives are highly controlled, to a greater degree than almost anywhere else in the world. Saudi women are, notoriously, forbidden to drive, but are also not legally permitted to travel alone with a man who is not their husband, or to pray at mosques without special female prayer sections. Women will vote in Saudi local elections for the first time in 2015, and the 2012 London Olympics were the first to feature female Saudi athletes.

Women are segregated at work, too: of the 15% of Saudi women who work, most work in female-only companies. Saudi Arabia regularly comes in for a drubbing from human rights groups for its repressive attitude toward women. However, the reason for the creation of the female employment enclave is likely to have relatively little to do with foreign pressure.

Hussa al-Aun continued her statement by saying that the special training centre should ‘train [women] to work in factories. This is essential to cut our graduate unemployment rate.’ The city in Hofuf is expected to create 5, 000 textiles, pharmaceuticals and food processing jobs – in other words, it will focus on secondary production and high added value manual work. In the process the development is expected to add 500 million riyals – about $133.3m – to the Saudi economy.women-in-suadi-arabia

The building of the female-only city has come after government pressure to increase the female workforce, and the Deputy Director General of the Saudi Industrial Property Authority, Saleh al-Rasheed, told UPI that he was ‘sure that women can demonstrate their efficiency in many aspects and clarify the industries that best suit their interests, nature and ability.’ Saudi Arabia’s female workforce employment rate languishes around the 15% mark, and a recent Gallup poll found that an increasing number of businesses were insisting that women be unmarried to qualify for employment.

In June, the country unsuccessfully attempted to persuade fellow OPEC members to allow a higher production ceiling. With a growth in oil revenue out of its government’s control, maybe Saudi Arabia is hoping to diversify its economy into industries suited to women’s abilities and natures, such as pharma and clothing production. It certainly looks that way; even before a brick of the new city has been laid, four more similar cities have been proposed.

In addition to providing an economic boost to Saudi Arabia – if each of the five such projects meet the target income proposed for the Hofuf development, the initiative will be worth $666m to the Saudi economy – the plan might provide a safety valve for a major social pressure in Saudi society. YouGov and Bayt.com carried out a poll in July 2012 which found that 65% of Saudi women who worked wanted to increase their financial independence through their careers. In a society that restricts women’s opportunities so drastically, employment of any sort is likely to ease the frustration of Saudi women – at least in the short term.

However, increasing education – leading to that pool of unemployed graduates that worries Ms. Al-Aun – together with internet access have contributed to Saudi women’s willingness to assert themselves that the Centre for Democracy and Human Rights calls ‘a game-changer.’ Without liberalization of Saudi society in other ways, the halfway house of women-only employment zones may turn out to be too small to accommodate the aspirations of the best-educated generation of Saudi women ever.

Photo Credits: IMP1 & Wasapninworld via Flickr

0 3616

Palm Jumeirah Island Dubai UAE

Over the 16 weeks leading up to August 26, Dubai saw a bullish market driven by property. On Sunday August 12, Nakheel announced that demand was expected to remain high for properties on the island. The Dubai developer made the statement as it announced the sale of a 305,704sqft plot for Dh1,302 ($520) per square foot to an unidentified local investor.

Nakheel went on to state that the value of residential plots on the Palm – particularly on Frond N had increased by 30 per cent in the past year. ‘We have seen a very healthy demand in the first half of 2012, and this looks set to continue for the year,’ Nakheel said, quoting a spokesman.

To date, Nakheel has sold over 80 of the 105 plots on the Palm, which have a total sales value of over Dh657 million. Earlier this year, a single 5,574sqm plot was sold by Nakheel for Dh87 million.

In the same statement, Nakheel’s spokesman explained that the company believed that ‘land and properties on Palm Jumeirah are in big demand thanks to its unique design, location and ever-increasing range of amenities.’

Figures releases by the Dubai government showed that Indian citizens were the main buyers of luxury apartments and commercial space in the Burj Khalifa during the first half of 2012, spending $222 million, while Iranians came in second, spending $128 million.

Dubai has recovered from the collapse of a property bubble in 2008 that cut home prices by more than 60% from their peak. However, Dubai now functions as a safe haven for regional investors as London does in Europe, according to Graham Stock, strategist at frontier fund manager Insparo in London, who added that ‘we see Dubai real estate performing well over the medium term,’ and that ‘safe-haven’ investment was drinving up real estate prices. In turn, this is buoying up Dubai’s stock market.

Farouk Soussa, Middle East economist at Citgroup in Dubai, commented on August 9 that ‘perceptions are that the real estate market has bottomed out. If you are looking for a more long-term investment, the market in Dubai seems reasonable. A lot of people in the Middle East and Russia, Pakistan, the Asian sub-continent are looking for a safe haven.’

This ‘safe haven effect’ could be driving Dubai’s current property expansion in 201, real estate contributed approximately 13% of Dubai’s GDP, almost as high a contribution as manufacturing.

In July of this year, Nakheel announced its half-year financial results, declaring a net profit of Dh767 million, an increase of 36.5% over the Dh562 million it made in the same period last year. The company has also recently completed a restructuring exercise.

During Sunday, August 26, however, Dubai’s index slipped 0.9%, which Amer Khan, fund manager at Shuaa Asset Management, ascribed to Eid interfering with normal trading patterns. ‘We’re not back to post-Eid trading levels yet,’ Mr. Khan told Reuters. ‘Some of the names in Dubai were stretched from a technical point of view and were looking to correct it’s better that names like Emaar correct on low volumes rather than when people are back.’

The negative 14-day divergence at the recent high suggests that the market may flag temporarily, but will resume its upswing shortly, according to analysts.

In the real estate letting and purchase market at the apartment level, there has been a rally of over 5% in the second quarter compared with 6 months ago, according to Frank Knight estate agents.

Photo credits: Maja via Flickr

At first glance Malaysia looks like it should be the natural investment choice in South-East Asia.  The archipelago nation is one of the richest countries in Asia the result is a burgeoning middle class combined with a tourist trade that brought in over 22m tourists in 2009.

kuala lumpur city skyline

But Malaysia offers more to its potential investors.  For one thing, Malaysia is a prime target for investors from China, Singapore, Japan and South Korea, according to South-East Asian property website property-report.com.  That’s partially explained by cultural similarities and physical proximity: it’s always going to be tempting to invest in a place that’s easier to reach.

But there are other reasons too, especially for Singaporeans.  Eric Chan, who’s Deputy Manager of property developer Eastern & Oriental Berhad, explains that the MM2H’ ‘ Malaysia My Second Home ‘ program offers foreign visitors a 10-year multiple entry visa referred to as a Social Visit Pass, and this has made Malaysia particularly attractive to investors who can now be physically present at their property far more easily.  Of course, for Singaporeans this holds true doubly: Singapore City is only 196 miles from Kuala Lumpur, but the biggest buyers are from the state of Nusajaya, Johor, just across the border.

Added to this mix,’ Mr Chan continued to explain, ‘is Malaysia’s friendly lending terms’ ‘ these are extended to foreigners to and can offer finance of up to 90% ‘if certain conditions are met.’

The Singaporean Dollar has been rising consistently against the Malaysian Ringgit ‘ 3% since January alone – and now exchanges for about 2.5 Ringgit, leaving Singaporeans in an advantageous position when it comes to buying their neighbours’ houses.  Add to this the price of Malaysian property, which is about a sixth the price of equivalent Singaporean properties, and there is a significant inducement to Singaporeans to chance their arm over the border.

The mixture of generous lending terms, government incentives and physical proximity may have made some Singaporean investors overconfident, however.  The Malaysian real estate market also comes with a lack of transparency that surprises foreigners, including those from neighbouring countries.  According to the Global Transparency Index, a proprietary index compiled by Jones Lang LaSalle, Malaysia ranks 23rd ‘ ten spots below Singapore.

This can mean that developers who default on payments can be difficult to track down, and more than one investor has been left with a second Malaysian home that they can’t pay for or sell.

Additionally, the Malaysian government is considering altering the minimum price of foreign investors’ properties.  It currently stands at RM500, 000, but is set to double to RM1m.  The move will be a bid for popularity by the Malaysian government which will receive approval from young middle-class couples currently fighting richer Singaporeans for a place on the property ladder.  However it may take less wary investors by surprise.

In fact, the same rules apply as anywhere else.  ‘Most of us fail to do any sort of research prior to investing into the properties,’ points out Michael Tan, an investment coach.  Eric Chan agrees: ‘Research is essential in buying a property,’ he says.  ‘A reputable developer and good location is the mantra in property investment and it is no different in Malaysia.’

Mr Chan explains that location with Malaysia is a major factor, with investors in the Kuala Lumpur area expecting to make up to a 30% capital appreciation on completion of their investment projects.

But in other areas of Malaysia the maths works out differently and investors who fail to consider location.  Big towns on the island of Johor, like Penang and Iskandar as well as, of course, Kuala Lumpur, offer great possibilities for investment.  Unfortunately, the very market dynamics that make it relatively easy for Singaporeans to invest in Malaysian property can also make it impossible to get a return on their investment.

David Neubronner, Head of Residential Project Sales, of Jones Lang LaSalle, explains that Malacca, for instance, is a more historic town appealing more to locals ‘ who frequently can’t afford to give a Singaporean investor a good return on his investment.

Like may other analysts, Neubronner goes on to remark that a key feature of unwise investments in Malaysia is a false sense of security and buying interest ‘based on sentiment than investment.’

Housing Bubble!

The global property markets are imploding, and fast. The strain that first found its footing in the U.S has now truly gone viral. From Dubai to Denmark, developers have been left reeling, while national exchequers struggle to hold ground. So, how did the housing market bring the greater world economy to its knees? What could have possibly happened that real estate the world over saw $5.4 trillion in losses over the course of one single year alone (2008-2009)? We here present a simple, 8-point lowdown on what really got that demolition ball rolling.

0 3187

David Cameron has finally decided to do something about Britain’s troubled housing market, but it’s not sitting pretty with analysts and investors alike. His radical new strategy (his words, not mine) includes: letting first-time buyers access mortgage funds after only putting up 5% in down payments; further pushes for the Right To Buy scheme targeted at social housing, and injecting a (deceivingly) sizable £400 million to resuscitate the country’s moribund construction sector. Also, in a bid to highlight how incredibly serious Mr. Cameron’s government is about resolving the current housing crisis, he even announced to insure lenders against any defaulting mortgages initiated under the said plan. No explanations, however, as to why none of this gloom was apparent last year while carrying out those brutal spending cuts, of which developmental housing bore the deepest gashes.

0 5043

UAE – Dubai

We already reported on how UAE’s thriving aviation industry is helping the region keep out of trouble, and now apparently it’s even flown in to revive those flat lining property markets. Rental specialists, Campaya, just cited Dubai as this holiday season’s go-to destination of choice, reporting a marked uptick in demand for rentals in the city. Thanks to the ongoing slump, prime realty is going for lowly prices. Other popular hotspots include, Egypt, the Caribbean, and Madeira so much for a white Christmas.