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July 24, 2011

Dubai Landlords Cut Rents for Summer

Landlords in Dubai are offering potential tenants incentives such as discounts on deposits and rent free months in an effort to beat the quiet summer months. In addition, some are offering discounts of up to 30% on rents, and are even agreeing to no deposits in an effort to fill properties.

July is always a very quiet months as it’s the holiday season, with both landlords and potential tenants wishing to go away. Things are particularly difficult at the moment, as the global economic crisis has left Dubai with a huge percentage of empty buildings, which some estimates put as high as 40%. In May, Nakheel, the developer of Dubai’s Discovery Gardens and International City announced it would give tenants up to two months’ rent free in some of its units in lower priced developments. Rents at International City have fallen below AED15,000 annually for the first time.

While its not a great time for landlords, it does give renters far more bargaining power, especially with landlords of older properties which are more difficult to lease. Tenants are also becoming cannier, especially those looking to relocate form other emirates, and are willing to spend the summer months hunting around for the right deal, and with more homes coming on the market there is likely to be even greater competition amongst landlords.

Some analysts are predicting that residential property prices could fall by a further 10% in the emirate, but this hasn’t stopped increasing numbers of people remortgaging in order to access capital in their homes. In spite of prices having fallen by as much as 60% since their peak, there are still many homeowners who have substantial amounts of equity in their homes, and it looks as if they are releasing capital in order to be able to buy high quality assets, something which wasn’t predicted to happen until next year.

July 24, 2011

Luxury Homes in the Hamptons Proving Popular with Buyers

Prices of property in New York’s Hamptons increased by 4.2% during the second quarter, compared to the same period a year earlier. These Long Island resort towns are popular with people escaping the summer heat of Manhattan.

The median price of a property in this area increased from $900,000 to $937,500 during this period according to a report by broker Prudential Douglas Eliman and New York appraiser Miller Samuel Inc. Just over a third of all sales in Long Island’s North Fork and the Hamptons were for property costing over $1 million.

According to the president of Miller Samuel, Jonathan Miller, this indicates the market is stabilised, but there are clear indications that luxury property is attracting Wall Street executives as employment conditions improve and bonuses return. The financial industry in New York gained 10,400 jobs in May year-on-year, and the overall jobless rate for the city was 8.6%, down 1% on a year earlier.

Luxury property is defined as being in the top 10% price range, and the median price for such property in the Hamptons and North Fork increased by 7.9% to $4.4 million, with 24 homes in these areas being sold for more than $5 million during the second quarter, compared with 22 year ago. The most expensive property sold during the second quarter was a beachfront 10 bedroom, 12 bathroom house in Southampton costing $32.5 million.

The average time on the market for property in the Hamptons increased by 44% to 188 days, however property costing $3.3 million or more spent just 98 days on the market, a decrease of 32% compared to a year earlier.

July 9, 2011

US government working at cross purposes towards housing recovery

It looks as if the US government is working at cross purposes in its efforts to revive the housing market. Although large numbers of Americans would love to buy their own homes, they cannot get finance. The government controlled Freddie Mac and Fannie Mae have raised their criteria for lending so high that people who would normally have been considered prime borrowers now cannot get finance.

There is also the continuing problem of the attorneys general probe into foreclosure practises, and the loan modification program implemented by the Obama administration hasn’t been nearly as successful as expected.

Experts such as Joseph Stiglitz, who is a Nobel prize winning economist and professor at Columbia University in New York, think that lenders may now be overreacting and imposing ridiculously high standards on would be borrowers.

Fannie Mae and Freddie Mac were originally seized by the government in 2008, and since then they have tightened over twelve different lending criteria, including deposits and credit scores. While they were imposing restrictions the government was busy handing out $16.2 billion in homebuyer credits to boost the property market. The Federal Reserve bought over $1 trillion of mortgage bonds to try to keep borrowing costs low.

Major banks tend to look towards Fannie Mae and Freddie Mac for lending standards. During the first quarter of this year, 90% of mortgages bought by Fannie Mae were held by borrowers who had credit scores over 700. In 2003, this figure was just 68%. These higher lending standards mean that around one third of people who may have previously qualified for mortgages are now unable to do so.

July 2, 2011

Turkey Now the Fastest Growing Economy in the World

After a roaring 8.9% growth in 2010, Turkey has not only continued its strong growth into this year, but has surpassed it. Turkey is now the world’s fastest growing economy, its GDP growth of 11% year on year far above that of second-fastest Argentina with 9.9%, leaving China in third place with 9.7% growth.

In the first quarter of 2010 Turkish GDP grew 11.7% compared to the previous year. But the fact that the country was entering recession in the first quarter of 2009 made it easy to pour water on the strong growth figure. The same can be said of the 10.3% growth recorded in the second quarter of last year. But no such thing can be said for this now the second strong opening in a row.

The European Union and the Organisation for Economic Cooperation and Development are both predicting growth of around 6% in Turkish GDP this year. However, given the exceptional start to the year analysts are now thinking that this will possibly be raised very soon.

Turkey is still battling trade and current account deficits, but according to the same Turkstat data, manufacturing led the first quarter growth, with a 21.4% increase in output over the year. It is hoped that such a strong performance in the manufacturing sector will generate further increases in exports, which have recently been growing at record levels anyway. This will eventually bring down the trade and current account deficits.

June 25, 2011

Brazilians Searching for Florida Homes

Incredible bargains in Florida and a strong Brazilian currency is attracting many to search South Florida for property investments and holiday homes. The Brazilian currency has gained 45% against the US dollar since 2008, and while property prices in Brazil have increased dramatically during this time period, but the reverse is true of Florida.

Now Brazilians are helping to bolster the condo market in Miami as sales have increased by 92% during the first four months of this year.

In the 12 months from March 2010, Brazilians bought 9% of the properties sold to foreign buyers, coming in behind the Canadians and Venezuelans, but there are signs that this percentage has increased significantly in the last few months.

Craig Studnicky, president of International Sales Group LLC estimates that up to 50% of the downtown Miami condos sold since January 2011, and costing more than $500,000 have been bought by Brazilians. They have also been buying much more expensive property, and are responsible for around half the sales of more than $1 million in Miami Beach.

The performance of the Brazilian real against the dollar is the best out of 25 emerging market currencies tracked by Bloomberg, and the economy grew by 4.2% compared with growth of just 2.3% in the US.

However this incredible economic growth has accelerated inflation, so now the cities of Rio de Janeiro, Brasilia and São Paulo are more expensive than any city in the US. Property prices in the country have increased by an amazing 25% during the last year, compared to US housing prices which have fallen to 2003 levels.

June 18, 2011

Californian Home Prices Still in the Doldrums

Prices in southern California are continuing to drop, with May seeing the largest year-on-year fall in 20 months due to continuing credit restrictions and buyer uncertainty. The median price over the six counties is now $280,000, compared to $305,000 in May 2010, which is a decrease of 8.2%. The number of home sales has also fallen 17.4% to May year-on-year, to just 18,394, marking 11 consecutive months of sales declines, according to figures from the San Diego-based DataQuick.

The president of the DataQuick, John Walsh attributes this decline to the expiration of the federal homebuyer tax credit in 2010, as house purchases rose in May 2010 as home buyers rushed to take advantage. Now sales are at a three-year low with potential homebuyers being concerned that prices may have further to fall.

Richard Green, of the University of Southern California is Lusk Centre for Real Estate says sales are depressed due to the lack of financing for mid to high priced homes. This statement is borne out by statistics from DataQuick which show that sales of property costing less than $200,000 accounted for 30.6% of sales figures for May, up from 26.8% in May 2010.

Properties priced between $300,000 and $800,000 made up 38.9% of all sales, down from 44.4% the previous year. More than 50% of sales were from distressed property with foreclosures accounting for 33.4% of sales in May, while short sales made up 18% of existing home sales. This figure at least is down from 20.1% per year earlier.

June 12, 2011

US Home Prices Could Fall a Further 25% Says Leading Analyst

US house prices falling a further 10 – 25 percent “wouldn’t surprise me at all”. Those are not my words, but the words of — one of the most prominent analysts on the US housing market — Robert Shiller, co-founder of the S&P//Case-Shiller US house price index.

“There’s no precedent for this statistically, so no way to predict,” Shiller said today at a conference hosted by Standard & Poor’s in New York.

According to the Case-Shiller index for March, house prices in 20 cities were down 33 percent on average from their 2006 peak. The index is held in high regard by the industry as one of the top measures of US house prices. According to Case-Shiller the drop signalled a “double dip” as the index fell below its previous post-housing-bubble low set in April 2009. Although this does follow a period of strong growth that saw prices double in the previous six years.

Of course there is still a huge backlog of foreclosed properties poised to come on to the market. The immediate consequence of this is a double whammy on prices, directly as the sale of foreclosed properties at rock bottom prices reduces the prices of surrounding homes, and indirectly because it will increase supply.

A further impact is that this keeps the lid on new construction, which affects the wider economy. With unemployment at 9.1% in May, we could do without any further impacts on the economy. What’s more we have a still-restricted mortgage market, which is depressing demand.

All in all, I don’t think anyone would be all that surprised if prices fell a lot further, if they’re honest with themselves.

May 28, 2011

Australian Property Market Slows

The Australian property market has slowed and it is thought that this is due to increased living costs and high interest rates, while the recent floods in Queensland have also had an effect.

These factors are making people more reluctant to sell, and the number of new properties being bought has decreased this year when compared to 2010, while the figures for home loan approvals have dropped to a 10 year low. Figures from the Australia Bureau of Statistics (ABS) show the number of home loans approved in March was just 44,968, the lowest since February 2001.

Ben Jarman, an economist for JP Morgan has said that the Queensland floods in January reduced approval levels by nearly 15%, and that the subsequent months have failed to point towards a recovery, indicating a longer-term effect on the market in the area. He also pointed out that borrowing rates are now above average and more interest rate increases can be expected so the market will be subdued for the foreseeable future.

Other experts feel the subdued market is partially due to increased living costs, and a recent national survey of LoanMarket’s mortgage brokers revealed that 42% of customers were affected by an increase in living costs and that this was delaying their home loan applications. They are being affected by higher food and petrol costs as well as increased utility charges.

New-home sales are continuing to increase, but are still well below the levels expected in a healthy market. Figures showed that sales increased for the third month running in March but these figures are being exaggerated by the weak level of sales achieved during the final quarter of last year. When figures for March this year compared to March last year they are down by 9%.

May 22, 2011

Australian Property Prices and Mortgage Approvals Down

Australian mortgage approvals fell to a 10 year low in March. This, according to some is proof that the interest rate rises are beginning to work. A survey of 20 economists brought the prediction for a 2% increase in mortgage approvals for March, instead they fell 1.5%. Matthew Circosta, an economist at Moody’s Analytics in Sydney now expects high interest rates to keep demand and price growth constrained.

The Australian property market filled the headlines in the early part of 2009 as it fended off the financial crisis with apparent ease and began a period of strong growth. In order to prevent a bubble the central bank began raising rates and urging banks to do the same on a unilateral basis. The Reserve Bank of Australia benchmark rate is currently holding at 4.75%.

The rate rises having the desired effect is confirmed by house price data; prices in the first quarter fell by a larger percentage than during the 2008 floods on the East Coast. Although prices in Perth and Hobart increased by 0.5% and 0.4% quarter on quarter respectively, prices in Melbourne and Brisbane fell 2.5% and prices in Sydney fell 1.8%.

Although some argue that the price falls are a positive event in the Australian property market right now, what is definitely positive is the rise of first time buyers to a market share of 16% from 14.9% in February.

May 22, 2011

Vietnamese Land Costs Rise Due to Demand for Birds Nests

Land is being bought in the Can Gio district of Ho Chi Minh City in Vietnam by investors looking to profit not only from rising land prices but also from breeding sparrows. The location is particularly suitable for breeding sparrows due to its close proximity to water and forests.

Birds’ nests are highly sought after in Vietnam and currently cost between US$1500 and US$2000 per kilo which could give investors an income of several billion Vietnamese Dong every month. However many families in the area have realised how valuable their land could be and have joined forces with the companies that market sparrow breeding technology.

The scheme has attracted outside investors as a representative of an investment group from Sydney has recently purchased to land plots totalling an area of 4000 m² in the Can Gio district which cost a total of US$485,554. A number of local families are now involved in the sparrow breeding programme and a senior official of the Can Gio district`s authorities, Pham Trong Duc, has said there are 17 households in the commune who have registered for sparrow breeding.

In addition there are another 100 households who breed sparrows spontaneously, and who breed them inside their houses. Duc has managed to persuade nine of these households to open their business model for the districts surveying as one of the households apparently connects some 30 kg of birds’ nests every month, which equates to an income of US$58,266.

At the moment sparrows are being bred on a trial basis while the impact on the environment is evaluated. If the trial is successful the area for breeding sparrows may be expanded.

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