2007 saw some major changes in the World’s property markets.
The U.S subprime crash bought about massive drops in property values and increases in foreclosures in certain markets and states notably Florida, California and Nevada. Latest statistics show a national foreclosure rate of one foreclosure for every 555 households and Realty Trac, a U.S based online market place is claiming over a million listings as of November 29th. The crash does not seem to be affecting the high end condominium market which continues to flourish, particularly in Manhattan.
Western Europe saw a swift slowdown particularly in Ireland, the U.K and Spain, although, as with the U.S, the high end markets in major cities such as London are also flourishing with record prices being seen for both residential and commercial properties, and the U.K still managed a 9% increase in prices. London is still the most expensive office market in the World for 2007 thanks to the West End, followed by Mumbai, India.
The Baltic markets in general saw a slow down in price growth, with one major exception being Bulgaria, knocking previous success story Latvia well back in the rankings and Estonia falling behind also.
Top performers world wide for the year were Bulgaria, China and Singapore, with Bulgaria showing a stunning 30.59% increase in residential house prices.
Top performers for 2007 percentage increase (- decrease) in local currency
- Bulgaria 30.59
- China (Shanghai) 27.85
- Singapore 27.59
- Estonia (Tallinn) 23.38
- Lithuania 13.64
- Philippines 13.04
- Colombia 12.82
- South Africa 12.52
- Norway 11.56
- Hong Kong 11.25
- Australia 10.63
- Latvia 10.22
- Sweden 9.86
- UK 9.68
- South Korea 9.01
- Poland 8.38
- France (Paris) 8.27
- Japan (6 cities) 7.75
- New Zealand 6.67
- Canada 6.13
- Finland 5.88
- Italy 5.60
- Spain 5.31
- Indonesia 5.24
- Greece 4.18
- Denmark 3.95
- Netherlands 3.77
- Malaysia 3.20
- Switzerland 2.56
- Germany 2.04
- Portugal 0.49
- Israel -0.51
- Thailand -0.78
The Asian Pacific market was generally strong through out 2007, with particularly good results from Singapore, Hong Kong and Shanghai. The Japanese market is the weakest performer in the region and has seen a strong slowdown, even in the luxury condo sector. Singapore’s recovery after the Asian crisis has been remarkable and the residential property price index nearly returned to ’96 levels in 2007.
According to Global Property Guide, rental yields in Singapore have not been able to keep pace with property prices and Singapore only offered a 2.80% return during 2007. Top of the rental yield list as far as condominiums went was Cairo, offering 11.35% for 2007.
Cost of living
Mercer Human Resource Consulting’s annual cost of living report put Moscow at the top of the list as the most expensive city in the world, followed closely by London and in descending order, Seoul, Tokyo and Hong Kong. Europe dominated the list, largely thanks to a strong currency and the U.S managed only 2 cities in the top 50 – New York in 15th place and Los Angeles in 42nd, thanks to the weak dollar.
Predictions for 2008
Expect the slowdown to continue throughout 2008. Most of the major cities are already at extremely high levels and the credit crunch is likely to slow things further. A few exceptions to this rule include Paris, Lille and Brussels since the introduction of a new high speed train route from London.
Poland is implementing a massive infrastructure improvement program, capital gains tax is still at 0% after five years and Poland attracted over $6.5 billion in foreign investment last year.Slovakia is due to adopt the Euro in 2009, and this will likely boost property values more in line with the rest of the continent. Interest rates are low and the flat rate tax of 19% makes it an interesting opportunity. Top of the potential list is Kosice, the second largest city.
Our recent article, Five Top South American Investment Opportunities, looks more in-depth at the opportunities in South America particularly Chile, Brazil, Uruguay, Nicaragua and Peru. Another market to consider is Argentina. Argentina currently has all the ear marks of a property market on the edge of a boom: The government is encouraging lending to the middle classes; tourism has been growing steadily year on year; 0% capital gains tax. Combined with a currency pegged to the dollar, a simple purchase process and far lower prices compared to the rest of the world, 2008 could be Argentina’s year.
The American property market has seen some reverses in 2007, but one man’s meat is another man’s poison and, while we feel the crunch is not yet over, there are many opportunities in the U.S, especially if you have pounds to spend. The markets hardest hit during 2007 are now offering what can only be described as bargains. Some Florida developments have been selling for as much as 50% lower prices and when the dollar price is taken into consideration, this is a massive drop. Look at Florida, Las Vegas and California.
Canada has seen strong growth and largely avoided the problems seen in the U.S. One interesting area for investors is Fort McMurray in Northern Alberta. Some experts are predicting a continuing gap between supply and demand meaning high rental yields combined with high capital growth throughout 2008.
Kuala Lumpur is investing heavily in itself and has seen some remarkable progress over recent years. The recent abolition of capital gains tax makes this an extremely attractive proposition. Low unemployment, extremely high levels of development and a shortage of quality housing (some estimates put supply at only 44% of current demand) put KL high up the list of attractive investment markets.
Vietnam recently changed the law allowing foreigners to lease land for 70 years, prompting a massive increase in interest both from developers and private individuals.
Kazakhstan seems to hold the most potential for 2008. Kazakhstan has one of the fastest growing economies in the World and is attracting large amounts of foreign investment. Two cities in particular ear marked for spectacular growth in 2008 are Astana, the capital and Aqtau, a relatively new city built in 1961 to service the oil industry.
Mumbai, despite some social issues to deal with is our pick in India for 2008. Mumbai is now the second most expensive office market in the world and soon to be the location of one of the most expensive personal residences ever built.
United Arab Emirates
Dubai continues to attract substantial amounts of foreign investments and as the Palms and Island developments come online expect more in 2008. Brad Pitt and Angelina Jolie even invested recently. Abu Dhabi is attempting to increase their cultural profile by building a variety of museum satellites. Whether this will have any effect on property values remains to be seen.
Bahrain is another region to watch in 2008. Bahrain’s Ithmaar Bank announced plans to develop a $1.6 billion “health island” development off the coast of Muharraq that is poised to turn Bahrain into a regional hub for health tourism.