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Part I: America

In the last few months, the positive data has been rolling in on the American housing market; price increases, rises in new home starts and rising transaction volumes, including a somewhat astonishing 10.1% increase in home re-sales between September and October.

However, like with every almost everywhere, everything can be put down to the low interest rates and government incentives to buy a house and generally spend money. The tax incentives for first time buyers has just been extended to April, at which point the housing market will have to stand on its own two feet — unless it is extended again. Many analysts think this could spark the end of price rises and a restart to depression.

A good sign however is in the recent data from the automobile industry. It has been doing well because of the government cash-for-clunkers scheme. The scheme ended in October, yet analysts surveyed by Bloomberg still forecast a year on year rise in automobile sales for November. The analysts surveyed by Bloomberg have not been wrong in any article I have read so far.

This will instill hope that the foundations of recovery have been laid by the stimulus, and that the slow recovery can continue after it is removed.

However, the housing market is reliant on credit conditions easing, and on employment rising, or at least stopping falling, and also on wages rising.

There are currently thousands of US homeowners falling into arrears and likely to be repossessed if they cannot find a job soon. There are many more thousands only able to continue paying their mortgage one or multiple salaries or income-flows down, because of the record low interest rates. These too will likely face repossession when the government starts putting interest rates back up.

Such major increases in supplies of cheap properties, will almost certainly turn the price rises into falls when the government stimulus ends — if not before from the first group.

The number of potential repossessions will begin to fall as soon as the labour market starts to improve.

This of course will be helped by a de-restriction of the mortgage market, so that people can refinance for better deals.

What we also need to see is a significant increase in demand, which will offset the damage done by the repossessions. This will again rely on significant increases in the availability and security of employment and the availability of finance.

Spot a pattern here? Yes; the future of the US housing market post-stimulus relies on a significant increase in the availability of finance and jobs.

The availability of finance is gradually improving as the world stock markets become more profitable. But even the availability of finance is hindered by the labour market; the amount of finance the banks will provide will always be determined by the deposits and loan repayments people are making, which will of course grow as the labour market improves.

So, really it all relies on the labour market. Unfortunately unemployment is still rising. The unemployment rate in the U.S. jumped to 10.2 percent in October, the highest level since 1983. The government is determined to turn this around as soon as possible though.

The figures prompted Obama– having recently signed a bill extending jobless benefits — to promise new measures to find jobs for some of the 15.7 million unemployed Americans.

“My economic team is looking at ideas such as additional investments in our aging roads and bridges, incentives to encourage families and business to make buildings more energy efficient,” additional tax cuts, and more steps to ease the flow of credit to small business and promote exports, he said in a recent statement from the White House.

In fact it was also the rise in unemployment in October that led to the extension of the tax incentives for first time home buyers; it wasn’t for the housing market it was for the jobs it holds and may create.

So, it is the job market we must all be watching. If the government incentives can successfully bring sufficient recovery to the economy that employment starts rising before April, then maybe the housing market will be able to hold on long enough to survive till recovery proper without any further falls.

This article written by Liam Bailey of

Around the world the recession is easing, or, at least according to economic indicators that is what is happening.

Much of Europe emerged from recession in the second quarter, including the big duo of France and Germany. Most of the rest followed in Q3 including Italy. US GDP grew 0.9% in the third quarter, and Italy’s an impressive 1%. Slovakia has also performed impressively; with growth of 1.6% in Q2 and 1.1% in Q3.

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Forking out for sunshine holiday homes has burned property investors as house price plunged in the recession, according to a damning new report.

The idea of opening up to the masses what was once a luxury exclusively available only to the wealthy has proved to be an expensive mistake for hundreds of thousands of Brits who dreamed of a place in the sun, say property consultants Savills and in their study.

They say the holiday home investment model is ‘broken’ and actually doubt the market existed.

The market took off in 2000, when UK-owned properties abroad were valued at £10bn.

By 2007, estimates put the number of UK-owned overseas holiday properties at 500,000 with a value of about £58 billion with markets in Spain, Florida, Cyprus, Bulgaria and Dubai taking the bulk of the money. For Bulgaria and Dubai, property prices have fallen through the floor by up to 75% and the banks have stopped lending to foreign investors.

With plunging prices, little hope of locals buying homes on holiday developments and lack of rental income, few investors have any hope of recouping their losses by selling at the bottom of the market when most owe more than their properties are worth.

At the start of the boom, 80% of the UK’s second-home owners financed their overseas property from their own wealth.

The research shows that by the market’s peak in 2007, cash buyers had fallen to 20%, with 80% of buyers taking advantage of overseas mortgage markets.

To make matters worse, many holiday home purchases were funded by taking equity out of UK homes, leaving the investors facing debt problems on both sides of the Channel. Under EU laws, creditors in other EU countries can pursue their losses through UK courts.

A lack of regulation in the property sales industry is also blamed.

Buyers speculated with borrowed money, believing that capital rising property prices would allow them to sell at a profit while rental income covered mortgage payments. Unfortunately, the recession has killed off the model as holidaymakers stayed at home rather than spending out on airfares and apartment or villa rental.

The market, according to the report, was fuelled by low cost airfares, too much liquidity in the mortgage market and that investors took little or no heed of professional, independent advice before signing contracts – and in some cases have not even visited the country where they bought property.

“Even where developers guarantee a gross income yield for a period of two or three years, the net yield is often swallowed by high service charges. In many instances, a net income yield of less than 2% is not uncommon,” said the report.

“There is an average price premium of 37% for property that is served by low cost airlines. Medium distance destinations from the UK, such as the Canary Islands and Cyprus, show the strongest link between house prices and the accessibility of low cost airlines. While this has opened up many new opportunities for buyers, it leaves destinations served by single carriers particularly exposed to the withdrawal of that service.”

foreclosure-home Property vultures are circling to pick the bones clean of deals as the US property clock has wound prices back to the same levels as they were in 2003, according to financial researchers Standard and Poor’s.

House prices fell 18% in April in S&P’s 10 and 20 city indices.

Commercial property has crashed alongside home prices registering a  20% decline, with market expectations of another good way to go – perhaps another 20%.

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Centaline Property Agency Ltd. in Hong Kong reported about a possibility of a home prices rebound as early as this year. According to the agency’s research there has already been an increase in pricing in four of Hong Kong’s biggest mass housing estates where prices for property are below 1.3 million. Right now the prices in these estates are above the levels we saw last year in September which is a healthy sign for a possible market rebound.

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The Q1 Knight Frank Global House Price Index 2009 hasn’t shown surprising results in the scheme of the global financial crisis. Some of the key highlights has seen Israel as the top performer with a 10.9% growth rate, followed by the Czech Republic with 9.9%.

On the contrary, the worst activities were seen in Dubai, Latvia and Singapore. Dubai recorded average price falls of 32%, Singapore 23% and Latvia 36% loss. On a quarterly basis, Dubai was the biggest loser with -40%.

In terms of best performing markets, Thailand with a 2.7% lift in values, Israel with +2.6% and Switzerland with +2.1% were showing promising results.

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The latest global rankings survey by Mercer shows that the best places to live worldwide according to their survey are Switzerland, Germany, Canada and Austria. Being featured several times in the “top 20 cities to live in” each of these countries is present not once, but several times.