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US Homeownership Rate Slipping, Could Slip Back to 1960 Low

by Overseas Property Mall on Wednesday, September 1st, 2010 in Foreclosures, United States Property

Homeownership in the US threatens to fall to its lowest percentage since 1960, because of the volume of foreclosures which has continued to increase into 2010. The latest data showed that 66.9% of Americans owned their home in the second quarter of this year, down from 69.4% in 2004.

“Anybody who knows anything about housing thought it would be flat in the second quarter,” said John Burns, CEO of John Burns Real Estate Consulting, a national housing market analyst based in Irvine, Calif. “Homeownership fell during the quarter when government was offering a tax credit (to first-time homebuyers). What do you think is going to happen now that there’s no tax credit?”

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Vietnam to Build Second Tallest Tower in Asia

by Overseas Property Mall on Tuesday, August 31st, 2010 in Vietnam Property

Hanoi, the Vietnamese capital is to become home to the second largest tower in Asia, material proof of the growing economic prowess of Asia’s brightest emerging markets.

The design of Nikkei Sekkei, a Japanese architectural firm was chosen for the 102 storey, 528 meter tower to be built in the Me Tri commune in Hanoi’s outlying district of Tu Liem. The est. 1.2 billion dollar tower, financed by the Petro Vietnam Construction Joint Stock Corporation (PVC), the Vietnam National Oil and Gas Group, the Ocean Group and the real estate developer SSG Group, will comprise trade centres, offices for lease and apartments.

The tower is phase 2 of a massive complex being built by the corporation, with phase 1 comprising 3 150m hotel and apartment towers. Construction of phase 2 is due to start in 2011 and take 30 to 36 months to complete. When complete, the tower will be second only to the Burj Dubai Tower in the United Arab Emirates.

This is a big deal for Vietnam. As China and India become global economic superpowers, one would expect them to be coming out with towers like this, for Vietnam the structure will be a symbol of how far the nation has come, and something that all Vietnamese citizens can be proud of.

During the recent global construction and property market boom, Vietnam became known as one of the hottest emerging markets in the world. As the recession crossed from America to the UK and rumours of a global crisis began to emerged, Vietnam was talked about as one of the few markets with a chance of escaping recession.

Unfortunately it suffered a recession, but is thought to be rebounding strongly. The International Monetary Fund is forecasting growth of 6% this year, and 6.5% next year.

There is also undeniably a great deal of wealth in Vietnamese corporations like PVC, and developments like this will not only bolster economic growth, by providing jobs from the lowest level to the highest, but also by growing merchant companies who supply materials for its construction. We will be watching this development very closely and keeping our readers apprised of its progress.

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Ikea Joins Tesco in UK Property Development – Good or Bad News?

by Overseas Property Mall on Monday, August 30th, 2010 in London Property, New Development Alert, UK Property

The latest in the saga of retail giants turning house developer is that Inter IKEA has bought a 13 acre site on Sugar House Lane, in what will become the site of the London Olympics — right next to the Olympic Stadium to be precise — to build a mixed use development of retail and office space and 1500 residential housing units. Contentious as they may be; new players are entering the housing market, is it good or bad news?

News of the IKEA plan follows the recent approval of a Tesco housing scheme in Bromley-by-Bow, consisting of 450 residential units, a primary school, shops and a hotel, which is Tesco’s fifth development after those in Dartford, Kent, Streatham and Woolwich.

The Tesco story went national for obvious reasons, while IKEA’s previous developments were completed with much less fuss. Yes, that’s right; this isn’t IKEA’s first foray into property development in the UK. The company has built a development of prefabricated houses in Gateshead, which, despite all the jokes about flat-packed housing are fully occupied, and “honestly modern” according to the Telegraph. The firm had a proposal to build a 19 story apartment block across from Hillingdon station refused.

The system used to build the Gateshead houses was called BokLok, similar to the kit-houses being made and sold by UK firms.

Plans have not been released for the Sugar House Lane development, all we have is statements from Inter IKEA saying that they won’t look like the BokLok housing, and a statement from Peter Andrews, the chief executive of the London Thames Gateway Development Corporation (LTGDC). Andrews said that he expects the units to display “the ethics of IKEA”.

“From what I’ve seen, they’re going to be different to the high-rise-dominated plans that were up before,” he said.

Andrews also said that he fully expects the development to become “a Covent Garden in the East End”. A retail, housing and leisure hub abutting the Olympic Park, this IKEA village will be one of the things making the new East End a place in which people will be proud to live, as well as a tourist destination to die for.

The question of whether this is good or bad depends on your viewpoint. From the viewpoint of outward facing business in the east end this is a good thing, because UK developers and investors are often prejudicial to the industrial east end, whereas those from outside are coming in with an open mind. Inter IKEA are currently joined by Australian developers Westfield and Lend Lease.

From a first-time buyer’s perspective this could also be good, because it is expected the 35% of the 1500 units will be affordable housing, and affordable by IKEA’s standards may be more affordable than that of Barratts.

For the residential property industry, agents, surveyors, architects, and for the wider economy, companies with substantial capital entering the market can only be perceived as a good thing.

On the whole though, time will reveal whether retail big-shots have a place in the creation of residential housing in the UK or not. One thing is certain; most developers care about the bottom line more than whether housing is affordable to core society, and it is unlikely that Tesco, IKEA, Inter IKEA or any big retail chain will have different priorities.

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Conservative Asian Buyers Snapping Up Distressed US Property

by Overseas Property Mall on Tuesday, August 3rd, 2010 in California, United States Property

A survey by a US realtors group has highlighted a remarkable rise in the number of Asian and Asian-Americans buying houses in the US. The consensus is that the demographic primarily avoided being caught in the housing crash, because they tend to be conservative towards property purchases, and that now they are capitalising on the fact that they have the cash and the credit to get good deals on homes.

According to the California Association of Realtors Annual Housing Market Survey, the proportion of ethnically Asian — most commonly Asian Indian, Japanese, Chinese or Filipino — buyers rose 3.8% between 2007 and 2008 and a further 2.3% between 2008 and 2009. This left the total proportion at 18.1 percent in 2009, up from 12% in 2007. The surveys also tell us that the proportion of Asian buyers never went higher than 12% even at the height of the boom (2003-2006).

Leslie Appleton-Young, chief economist for the California Association of Realtors (CAR), said the change in the proportion over time was noteworthy.

“They’re buying in distressed markets and utilizing (government incentive) programs,” she said.

The trend has also been noted by local realtors in San Diego and Southwest Riverside counties, who said that Asian’s tend to be uncomfortable taking on too much debt, and have preferred to invest in their small business rather than buy property during the boom.

“Asians are very conservative when it comes to buying,” said Scripps Ranch realtor and president of the San Diego chapter of the Asian Real Estate Association of America, Shonee Henry, “We don’t go out there and buy, and forget about what’s going to happen tomorrow. We tend to make sure we have enough money to support ourselves and everyday expenses.”

Henry mused that homes being too expensive was also a reason for Asians holding off buying during the boom:

“They might have had the down payment, but the monthly payments were too high,” she said.

Now that average house prices are down 35% the conservative Asians are in the fortunate position of having sizeable down-payments.

The CAR survey said Asian buyers put down an average down-payment of $90,000 in 2009, triple that of non-Asians. This was mostly in the form of 20% of the purchase price, compared to the 10% stumped up by non-Asian buyers. Appleton-Young said Asians may be avoiding low-down-payment programs such as those offered by the Federal Housing Administration.

This is one trend that is not echoed however; Ric Manalo, a Realtor with offices in Temecula and Chula Vista, said that Asian buyers in Southwest Riverside were making use of low-down-payment programs.

“The margin between what it costs to rent a home and what it costs to buy a home is so small, most of these are FHA and VA (Department of Veterans Affairs) deals they can get in for very little money,” he said.

Henry pointed out variations between the different nationalities; she said that her Filipino buyers went with low down-payment programs, while Chinese buyers tended to have cash for big down payments.

Photo credits: Jeff Turner via Flickr

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Chinese Market Sees Run of Growth End… Starts Run of Decline?

by Overseas Property Mall on Saturday, July 31st, 2010 in China Property

Further evidence has emerged that the Chinese government’s efforts to cool the housing market are finally bearing fruit. According to the government index of 70 cities, house prices fell 0.1% in June compared to May, the first month on month decline since March last year according to experts.

Experts believe that this is the first decline in what will become a downward trend to see out this year and possibly start next year.

“This is a turning point of the overall property price trend,” Yang Hongxu, a Shanghai-based analyst with E-House China R&D Institute, told AFP.

“The decline will continue for several months once the trend is consolidated — probably lasting into the end of this year or the beginning of next year,” he said.

One has to agree with this prediction really, because now that prices have turned investors — confidence dented — will almost certainly adopt a wait and see strategy, and there could also be a major rise in supply as those left holding the hot potatoes try to off load them before their profit evaporates.

There is no way to suggest that confidence won’t be dented, because on a run of record growth like the 16 month run just seen by China, people start to believe that it will never end. This has been especially true of China, where this belief was compounded with regular reports from realtors and supposedly impartial analysts stating that the massively rising population [Can't find a Link to a quote of analysts making such bullish statements, but I know I have read plenty of them, maybe you can have better luck] and rapidly growing affluence would sustain the growth forever more.

Maybe it would have done, but the government has worked hard to end the run of record growth, as evidenced by the fact that June prices were still almost 12% higher than June last year.

The measures started off quite small and highly targeted; things like increasing down-payments on second home purchases, and trying to loosen the relationship between realtors and mortgage brokers. Both perfectly good measures: one aimed at reducing run-away speculation and the other at reducing the likelihood of lenders giving out the level of bad-loans that crippled the US, UK and Spanish banking systems, and all aimed at cooling the market without crashing the economy.

The main target of the government’s efforts has always been the riskiest of speculators, the buyers that would see off plan properties change hands several times before they had even been built.

The first would have been immediately successful in the wider aim, because it meant that speculators would have a higher cash-to-credit ratio, assuming they didn’t scam the system, for instance using friends, family or even their prospective tenant on the mortgage document so they could get a first-timer deal*.

The prospective tenant would have been tempted into it on the basis that their rental payments would go towards the purchase of the property. In this the original speculator would still win because they tenant/buyer would pay a higher price, thus guaranteeing a profit on the property. Anyone with a poor credit rating would surely jump at such an opportunity, provided the profit was not unreasonable, though the main candidates would be close friends and family given the strict judicial system in China.

Apologies for the digression, but it is necessary to show the potential for the government measures failing to cool speculation. Not least because the measures did fail, and certainly not least because the government’s subsequent measures were also aimed at cooling speculation.

Measures that saw third home loans severely restricted to the point of near extinction, and restrictions tightened on advance sales of new developments — off plan is of course primarily the foray of the speculator, especially in a market entirely fuelled by internal buyers**.

**The Chinese property market has seen such incredible growth fuelled entirely by internal Chinese buyers; which in turn saw it fuelled by the massive growth in the Chinese economy, which continued throughout the international downturn. Part of the reason the bubble inflated was of course the fact that the government initiated stimulatory measures in a pre-emptive strike for a recession that never came. This of course caused a liquidity surge, similar to that seen in Australia and Canada, but far worse because of the level of growth the Chinese economy maintained.

In fact, it is because the growth is fuelled by internal buyers that the government’s measures have eventually worked. There is sufficient money and affluence is growing so rapidly that those fortunate enough to be a speculator in the Chinese property market needn’t risk the wrath of the government by taking the kind of shortcuts mentioned above*.

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Foreign Demand for Luxury Properties in London at an All Time High

by Overseas Property Mall on Sunday, July 18th, 2010 in London Property, Luxury Property

Research by leading London Estate Agent Knight Frank has revealed that the number of nationalities buying up prime property (£2 million+) in London has risen to 51, as buyers from far-flung destinations like Malaysia, Iran and Brazil join the traditional Russian and club-med buyers in taking advantage of the weak pound.

According to the data, Russian buyers were the dominant force in the market, accounting for 14% of all purchases by foreigners. American buyers were next with 11%, followed by Italians with 9%, and Indians with 8%. Knight Frank also said that the number of Greek buyers had doubled in the last year, which they put down to their desire to bring their money out of their debt-laden country.

Knight Frank’s head of residential research Liam Bailey said: Despite the fact that prices have risen 24 per cent since last March and stand only six per cent below their March 2008 market peak, the weakness of the pound ensures that effective discounts available to foreign buyers are still very significant.

Therein lies the key, prime property prices up 24% to just six percent below the March 2008 peak. This growth is undoubtedly largely because of the foreign buyers flooding the market on the weak pound, and it is this growth that distorted the picture of the UK housing market. This is being hailed as positive by Knight Frank; the question is what happens to the market when the foreigners stop buying?

The other interesting finding of the research was that the different nationalities have a tendency to buy in the same boroughs.

For instance, the Russians tend to buy in the traditionally fashionable areas of London; Belgravia, Mayfair and Knightsbridge, Nigerians have a preference for Bishop’s Avenue in Hampstead, while the Greek, Italian and French buyers — tend to favour Chelsea, Fulham, Hampstead.

Celine Pommier, of Knight Frank’s Chelsea office, said: The Greeks and Italians see Chelsea as a stable area with a long-standing international reputation.

Photo credits: Herry via Flickr

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Could Bahrain be the Next Dubai?

by Overseas Property Mall on Monday, July 5th, 2010 in Bahrain Property

Bahrain is being noticed as one of the best property markets in the Middle East for foreign investment.

The Middle East is a surprisingly popular property investment and relocation destination because of the wealth and job opportunities. Dubai was the number one spot for this before the crash, but now people are being put off by the continued volatility in the market; with failed developments littering the landscape and property prices still faltering. Could Bahrain take its place?

Bahrain is an oil-rich country, in which oil revenues account for a domineering 25% of gross domestic product. Keen to diversify its economy, the government is very much behind the property market, and is taking every measure possible to make it easy for foreigners to buy property in Bahrain. For instance foreigners can now apply for yr residency, which allows them to buy property freehold and is easily renewable every five years.

Bahrain property prices fell by only 10% during the recent downturn, which is a solid performance compared to Dubai (300 miles east) where prices fell by closer to 50% at last count. Whereas many Dubai developments were cancelled, Bahrain’s were only suspended, and, according to reports all have now been resumed.

But that is not the only difference; developments in Bahrain are focussed on low-rise elegance rather than high-rise razzmatazz.

However, in other ways Bahrain is driving down the same roads as Dubai did, for instance walking round show apartments and villas in Bahrain you would be forgiven for thinking you were in a Marbella show house, with modern marble, granite and chrome dominant throughout.

This is not a fault though; Bahrain wants to become a global real estate destination, and is rightly taking an international outlook on all aspects of property sales in order to do so, right down to the Marks and Spencers food in the show-house refrigerators.

When you look at Bahrain now, you can see that it has the makings of being a sought after location for foreign purchasers; shops familiar to the west, i.e. BHS, M&S, Debenhams and Virgin line the streets, as well as designer boutiques by Gucci and Burberry, and the new luxury developments are being built around PGA golf courses.

Bahrain is currently playing catch-up with Dubai, which is still one of the world leaders in business infrastructure. But this is easily made up for by the better economic prospects and stability in the property market.

Bahrain is keen to avoid and hyperbole being attached to its construction industry and property market, so as not to deter foreign investment over fears of over-supply. Barring a few hiccups, like the 60 burial mounds — some 4,000 years old — razed by developers in a Buri village, which Bahraini authorities wanted to win UN designation as a world heritage site.

Hiccups aside, Bahrain could easily replace Dubai as the hottest place for foreign investment and relocation in the Middle East and therefore in the world.

Photo credits: Fractal via Flickr

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Most Expensive Homes in the United States – 2010

by Overseas Property Mall on Tuesday, June 29th, 2010 in Billionaire Homes, United States Property

One thing that this global recession and accompanying housing crash has shown us is that the ultimate in prime property will hold its value, and in fact grow during such times.

We recently profiled the most expensive homes in the world, and compared it to a similar list we compiled in 2008. Not only did this show that the world’s most expensive homes were more expensive on the whole, but because several properties featured in the 2008 list were in the 2010 list with a higher price tag, it also showed that prime property prices had risen.

We will now feature the most expensive homes in the US, as some of these homes appeared on the global list for 2010, we will see what their value has done over the past few months.

The Manor – Holmby Hills, California – $150 million.

The Manor is a 56,500 square foot English-style mansion set on 4.6 acres and owned by Aarron Spelling’s widow. The property features a library, gym, bowling alley, wine cellar, gift-wrapping room and media room. The grounds feature pools, gardens, a waterfall, and parking for over 100 cars.

The Manor was the 8th most expensive home in the world in April.

Fleur de Lys – Beverly Hills, California – $125 million.

At 35,000 square feet, Fleur de Lys pales beside the Manor in terms of size. In terms of splendour however, few can match the 12 bedroom 15 bathroom mansion modelled on the Palace of Versailles. In terms of features, Fleur de Lys boasts a 50-seat screening room, as well as Italian marble and gold-embossed leather walls.

Fleur de Lys was the most expensive home in 2008 according to our list compiled in November.

Tranquility Estate – Lake Tahoe, Nevada – $100 million.

Owned by Joel Horowitz, co-founder of the Tommy Hilfiger brand, Tranquility Estate is the ultimate in luxury, set in 210 acres of Lake Tahoe wilderness. The main-home is 20,000 square feet and includes a cigar lounge, art studio and gym, and a staircase that replicates the one on the Titanic. The grounds feature a golf course and boathouse.

Tranquility Estate has been on the market for four years, and was the fourth most expensive in 2008.

Kaiser Estate – Honolulu, Hawaii – $80 million.

Among other things Kaiser Estate is rich in history, having once been home to industrialist Henry J. Kaiser. The property spans 5.5 acres, split into 3 oceanfront parcels with tropical landscaped gardens forming the grounds. The main-home is 15,000 square feet with beautiful views. The ground also feature a 12,000 square foot boathouse and a marina.

Humming Bird Nest Ranch – Simi Valley, California – $75 million.

Humming Bird Nest Ranch is a gorgeous 123 acre estate featuring a 17,000 square foot Spanish-revival-style main home, ten townhouses, parking for 200 cars, a helicopter pad and a full equestrian facility.

Former Julius Forstmann House – New York, New York – $75 million.

This really is one of the most uniquely special properties on the list; a five storey, 21,000 square foot limestone townhouse in New York’s Upper East Side, with a trendy address near Fifth Avenue. The landmarked building, which was built in 1922 for Forstmann, a German merchant, has retained many of its original features, including the marble staircase and hand-carved mouldings.

Porcupine Creek – Rancho Mirage, California – $75 million.

The owner of Porcupine Creek is selling due to bankruptcy, making this one of the few distressed sales you will ever see in this price range. The property features a 25,000 square foot main home, pool, spa, grotto, gym and a 19-hole golf course that won acclaim from Golf Digest magazine. It went on the market in early 2010.

Other luxury properties on the top ten most expensive list:

1016 Madison Avenue – New York, New York – $72 million.

Three Ponds Farm – Bridgehampton, New York – $68 million.

Robert Taylor Ranch – Brentwood, California – $65 million.

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Canadian Housing Market has Cooled Says CREA with Downgraded Forecast

by Overseas Property Mall on Monday, June 28th, 2010 in Canadian Property

Alberta Canada The Canadian Real Estate Association has downgraded its growth forecast. This is no shock in the current climate, but what is shocking is that the CREA is now predicting that Canadian property prices will be falling again in 2011.

The Canadian property market shocked the many people who thought it would be infected by the US housing crash, by turning out to be one of the least affected markets in the world, and further, one of the few markets in the world to record strong house price growth in 2009.

That run though, CREA now says, peaked in the fourth quarter of last year, at which point things started to slow.

CREA now expects 490,600 sales through the Multiple Listing Service in 2010. While this is a 5.5% jump on last year, and the second-best year on record, sales are expected to fall by 8.5% in 2011.

“The revision reflects a weaker-than-expected start to the year in British Columbia, and recent developments that pulled forward the timing as to when sales are expected to ease in other provinces,” the group said in a statement.

The reason given for the revision is factors — namely government attempts at cooling the market — which have forced buyers to act quickly, bringing sales numbers forward and leaving bigger gaps behind them.

One such factor is the new mortgage rules enacted in April. The government said that from April 18th 2010, Canadians buying homes with mortgage default insurance on mortgages of less than 5 years would have to qualify based on the benchmark rate for a five-year fixed-rate closed mortgage.

This meant that borderline borrowers would get less cash for their homes, because they must qualify based on a rate that is 6% today. On mortgages of five years and over, buyers would qualify based on their contract rate, which is as low as 4.25% for a five-year mortgage based on discounting.

The rules would force many consumers out of variable rate mortgages tied to prime, which even after yesterday’s Bank of Canada rate hike, stood at 2.5%.

“The changes prompted some homebuyers to finance their home purchase before the new regulations took effect in April, which pulled forward a number of sales that would have otherwise taken place at a later date,” said CREA.

What’s more, the Bank of Canada finally increased its key interest rate on Tuesday (June 8). Some expect this to impact on the market, but not for a long time according to CREA:

“Interest rates are expected to rise slowly and at a measured pace during a new era of government spending restraint, so home financing will remain within reach for many homebuyers,” said Georges Pahud, CREA president.

CREA now says the market peaked in the fourth quarter of 2009 and predicts that the average price of homes sold through the MLS next year will be 2.2% lower than this year at $318,300. CREA now expects a growth of just 1.6% this year compared to 2009.

CREA’s earlier forecast was for a rise of 5.4% in 2009, but the lower sales activity in British Columbia, — including Vancouver, the country’s most expensive market — drove down the national numbers. In fact, only B.C. and Ontario are not expected to post price gains in 2011.

“With interest rates soon expected to rise, Canada is widely believed to be entering a typical demand-driven downturn due to recent prices increases and rising interest rates,” said Gregory Klump, chief economist with CREA. “A downward trend in national sales activity combined with an increase in listings will result in a more balanced market. In keeping with the return of a balanced housing market and typical demand-driven housing market cycle dynamics, prices will remain stable.”

Mr. Klump emphasized that Canada’s mortgage market remains “solid,” and that conservative lending practices mean the country will not experience the same type of correction the United States has had where prices have fallen as much as 50% in some markets.

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Dubai Property Market to Recover in 2012, Because…

by Overseas Property Mall on Friday, June 11th, 2010 in Dubai Property, UAE Property

Investment Boutique has just released its report into the Dubai real estate market entitled the Dubai State of the Market report 2010. The report is very downbeat in places, but very upbeat in its forecast of a near-complete turnaround in 2012.

For instance: the firm believes that the over-supply of residential units will hit 110,000-115,000 by the end of 2012. This is one of the largest figures that have ever been put on the scale of Dubai’s residential over-supply problem.

On the other hand the report then takes a price-bottom being reached in the latter part of this year almost as a foregone conclusion, and also assumes that the “banks will slowly loosen lending criteria as they can fully understand the effects of the downturn and forecasting future results becomes easier.”

Another assumption the report makes is that confidence will return to the market in 2012. All these assumptions are made with very little reasoning behind them. On the other hand the firm predicts more project cancellations this year, as developers focus on completing those developments that are nearest completion, in order that they can collect on-completion bullet payments.

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