As the current global credit crunch takes its toll on several of the world’s most resilient economies, we have identified seven emerging regions with thriving real estate markets and economies fuelled by soaring commodity prices or booming manufacturing & services industries. With increased access to mortgage finance and a strong commodities boom, these markets are powering-on while the rest of the world powers-down.
Amidst the growing number of emerging economies, the strongest four emerging markets bracketed by Goldman Sachs as the “BRIC” countries that collectively represent the world’s economic future are Brazil, Russia, India & China. Property investors in these regions are currently capitalising on growing housing demand and rising living standards.
In a recent interview with the International Herald Tribune, the head of emerging markets strategy at Morgan Stanley Jonathan Garner, advised investors to acquire land in BRIC emerging markets and also buy real estate & construction stocks directly or through REITs.
Another emerging economy on rise, is the United Arab Emirate’s (UAE), which has its currency (AED, Dirham) pegged to the dollar. Low interest rates and a housing shortage, has propelled the UAE’s real estate market sky high.
We have done some research for promising real estate investment markets and have come up with the following seven regions.
1.) Moscow, Russia
There is a strong correlation between rising oil prices and Moscow’s soaring property prices. For Russians who are part of the savoir vivre, “The western suburbs of Rublyovka and Novorizhskoe are the Hampton’s of Moscow, very expensive, very desirable,” according to James Brooke a Moscow Realtor.
In the pasts it used to be the dachas, today it is multi million dollar houses that satisfy the need to escape on the weekend for the more trendy (and fluent) of the Muscovites.
2.) Dubai, Ajman & Abu Dhabi in the United Arab Emirates
With an overall growth of 7.4% in the UAE economy in 2007, non-oil sectors, like construction and real estate made a major impact, accounting for 65% of the Gross Domestic Product. That is aside from rising oil prices that was responsible for 35% of the UAE’s GDP last year.
According to CB Richard Ellis, the UAE is right now one of the world’s top ten expensive commercial property markets. When we look at the amount of construction that is going into this economy, then this does not come as a surprise at all. There is certainly plenty of money and interest which further attracts many new tourists.
3.) China – secondary Chinese Cities like Haikou, Ningbo and Hangzho
With Beijing and Shanghai being on a slight downturn property twist right now, it is the secondary Chinese cities that are experiencing noteworthy property booms at the moment.
Property price growth exceeded 15 percent within the last year in the following cities: Urumqi, Haikou, Ningbo, Beijing and Hangzhou, which saw growth rates of 22.8 percent, 17.6 percent, 16.6 percent, 15.7 percent and 15.2 percent, respectively.
While Beijing did have considerable growth in the second half of 2007, property investors have decided to wait and hold unto their investments at the moment, thereby slowing the market a little.
4.) Alberta, Canada
We reported on the massive growth of Alberta’s property market back in March this year. With the city of Edmonton on a clear streak of super growth, investors there have been graced with increases of over 200% over the course of the last ten years.
Being named the “oil capital of Canada”, Edmonton is at the right place in the right time. With dwindling oil reserves worldwide, this commodity is now worth more than we can put money on it really and with the large reserves lurking in the area, Edmonton will continue to grow and attract thousands of new residents over the next 5+ years.
5.) São Paulo, Brazil
São Paulo is Brazil’s most populous city and the world’s 2nd largest city accounting for 20 million inhabitants. Being Brazil’s largest economy São Paulo accounted for 30 percent of Brazil’s US$ 1.8 trillion economy that grew by 5.4% in 2007.
The Brazilian economy is almost completely self-sufficient in oil, and is a leading bio-tech and bio-fuel producing hub. With minimal trade and debt to the US, Brazil’s economy has also proved to be largely unaffected by the current credit crunch.
In the last 12 months, over 204,312 Brazilians have acquired property with the help newly available mortgage finance on 30 year terms and 12% interest. This in comparison to 53,787 loans in 2004 depicts the growth in real estate.
São Paulo’s real estate market is hugely benefiting from Brazil’s boom with a booming condo and office construction industry that is meeting a currently colossal demand.
6.) Hurghada, Egypt
Egypt’s tourist market has long been a contributing factor to its thriving economy with the Egyptian government expecting 14 million visitors a year by 2011. This is easily believable if we look at last years 20% growth.
Despite the ever present turmoil in the middle east, it is still one of the most popular tourism markets worldwide.
With favourable investment terms, its property market is on the rise as well. UK investors pay no stamp duty, no capital gains tax and no inheritance tax for investments made in Egypt.
7.) Chennai, India
Chennai’s real estate market is experiencing strong growth due growing IT and Business Process Outsourcing (BPO) companies that have taken hold of local commercial properties. Growing demand has seen a lot of new developments and as a result the real estate market has exploded.
Some 20 new shopping complexes have been planned for the next few years which will further add value to local property owners. Overseas companies are seeing Chennai as a valuable base to do business and many have taken the step and moved there for good.
In Conclusion
Investors have plenty to think about when looking at these markets. In the end, we can only apply our own judgement on whether these markets have long term sustainability or not.
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