Realestock Blog

A combination of low property prices and increased overseas investment from Asian investors seems to be heating up the Japanese investment property market.

Japan was just one of the countries seriously affected by the global economic downturn in 2009, and that downturn was reflected in reduced demand and dropping real estate prices. The urban land price in Japan’s six largest cities dropped by almost 8% in 2009, reflecting the flood of Japanese real estate investment funds leaving the market in the wake of the recession and a sharp decline in building permits following the adoption of tough new building regulations at the end of 2008. In 2010, the price of residential land in Japan fell 3.4%, still dipping, but much more slowly. 2010 marks the 19th straight year of property price declines in Japan, a still-lingering after effect of the spectacular 1980s real estate bubble collapse. 

However, the Japanese economy is looking up – thanks to a combination of stimulus and tax reforms, the economy in Japan is starting to improve and has shown moderate growth. Low interest rates combined with attractive expected annual income yields of 4.5% – 5% a year have caused a new influx of foreign investors from other Asian countries. 

While still priced relatively highly, Japanese property is seen as a very stable investment despite dropping prices. Asian investors were much less hard hit by the global crisis than their American or European counterparts, giving them money to invest in assets like real estate. However, the booming Asian markets in Beijing, Singapore and Hong Kong are much more high risk, and have lower rates of return due to the volatile level of growth in those areas.  Adding in the unpredictability of possible financial policy shifts from the Chinese government to tame the extreme levels of speculation and inflation in the Chinese real estate market, and Japan’s steady and stable market becomes much more attractive.

In 2010 Asian firms made over $370 million dollars of real estate investments in Japan, almost doubling the amount of deals made in 2009.  As more middle class Chinese look to invest and diversify their assets, the prestige and safety of owning Japanese property is bringing more and more investors into the market.

Sources: Asian Investors Shop in Japan, The Wall Street Journal; House Price Falls in Japan Accelerate, Global Property Guide

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International property investment has increased significantly in 2010, with nations like Brazil and Australia leading the way.

International commercial real estate investment in 2010 is expected to reach up to $290 billion dollars – up almost 40% over 2009 levels.  In the US, surging capital markets have seen a significant pickup in activity, with gateway cities on the coast seeing the greatest gains.  In the US, transactions are predicted to total between 85 and 90 billion dollars by the end of 2010, a stunning 90% gain over the numbers for 2009.

In the residential markets, Singapore, Hong Kong and Australia are leading the way in house price increases, posting price gains of as much as 34% over 2009 numbers. Not everywhere is as rosy however. Commercial real estate is down in Europe, the Middle East and Africa, and severe house prices declines continue in Ireland, Bulgaria, Lithuania, Iceland, Russia, Poland, Croatia, Spain & Slovakia.

According to GlobalPropertyGuide.com there is still opportunity in the markets, and here are their picks about the best countries to focus on, and who to avoid:

In Latin America

• Interest rates are in long-term decline, due to better Central Bank policies
• Economies are booming
• Tourism is rising
• The residential property boom that began 3 years ago continues
• Rental yields - critical indicators of the health of property markets - are still high
• Latin currencies are rising

Selections for investors: Peru, Panama, Brazil, and Chile Possible: Colombia

In the US

• The economy is recovering
• The dollar is rising
• Residential property valuations are attractive in some states, and are already attracting investors

Selections for investors: states whose property markets fell dramatically during the crisis, beginning with Florida

In Europe

• Property markets have not sufficiently adjusted from their 15-year rise. Residential property yields are poor throughout Europe.
• The panic over the Greek and other deficits shows no side of abating
• The Euro is falling. Currency depreciation should somewhat offset increased fiscal stringency - a positive.
• There are buying opportunities for opportunities for non-Euro buyers, but of themselves residential properties are not an appetizing investment in most of Europe.

Selections for investors: Turkey, because of its young population, the opening to the East, and its competent government. Possible: Hungary, because its incompetent government may provoke a crisis which would make its low prices and excellent yields even more attractive.

In the Middle East and North Africa

• The Middle East is in a cycle, led by the Gulf. Recovery may take a while, but the underlying dynamic of petro-dollars, pegged currencies, and high domestic inflation, which tends to push property values up. As yield-oriented investors, we are more interested in the marginal markets, but we expect investors to begin to be interested again in the Gulf soon.

Selections for investors: Egypt, Jordan. Possible: Morocco. Note: Egypt and Jordan's property markets have been hard-hit by the crisis. But in both countries' capitals, there are generous yields. Morocco has less attractive yields, but a long term tourism trend.

In Asia

• Property is over-valued in most countries in Asia, with few exceptions

Selections for investors: Malaysia Possible: Thailand. Malaysia is very stable, and has reasonable returns and Thailand has excellent yields. Prices have been falling, because of the political uncertainty. Developers want to reduce risk by unloading stock. Opportunity knocks.

In the Pacific

• Avoid. Australian residential property is quite overvalued, and interest rates are rising. In New Zealand there is less overvaluation, but less opportunity for growth as well.

Sources: NuWire Investor and GlobalPropertyGuide.com

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The price of a new house in Canada rose slightly, prompting more and more people to worry that Canadian homes may be overvalued.  According to Statistics Canada, the housing price rose 0.2% in September, greater than the originally forecast increase of 0.1%.  Rapidly increasing prices over the past decade, including the 2009 recession had  increased speculation recently that Canadian housing could be caught in a bubble.

Montreal and Calgary lead the price increases, as developments in new areas brought slightly higher construction costs, which were passed onto the consumer.

In spite of bubble fears it's important to note that housing prices rose in only 10 of 21 Canadian cities, and housing starts fell 9.2% - the lowest rate in over a year, and the sixth straight month of declines.

In a move not typical for BC prices, Vancouver and Victoria actually contributed to keep the increase down, as both cities - typically known for their white-hot, and according to some skeptics, overvalued property prices - saw a 0.4% decline in housing prices between August and September. In Victoria, home of Realestock, prices have declined slightly both month over month, and year over year - a new home costs 0.6% less now than it did 1 year ago.

Overall though, the average price of a new house in Canada is still 2.7% higher than it was in September 2009, with the strongest year on year gains the cities of Toronto, Montreal, Oshawa and Vancouver.

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Since October 25, homeowners looking to sell in Canada have a lot more options under their belt. The Canadian Real Estate Association (CREA) has approved a sweeping change to the MLS system that they’ve so tightly controlled since its inception.

Under a new agreement between the CREA and the Federal Competition Bureau, Canadian realtors can now place properties on the MLS for a flat fee – and leave all the other work of actually selling a property to homeowners. This allows for much more consumer choice than the previous commission model. Homeowners will be able to pick and choose what they want realtors to do for them – instead of ordering the set dinner, you can order your realty services from the a la carte menu.

"By allowing [a realtor] to just post and not have to represent, then you inherently give your consent for them not to be full-service. It opens up the possibility for consumers to have a clear choice of services for different prices," said Tsar Somerville, Director of the Centre of Urban Economics and Real Estate at the University of British Columbia. 

What’s the incentive to go a la carte, or just have a realtor post a listing on the MLS for you? Big savings – buyers agents fees average at 2.5% of the property, and seller’s agents fees range from anywhere between 4 and 6%. Paying a flat rate up front can save many thousands of dollars down the line and allow homeowners to undercut their competition, knowing they’ll be keeping all the profit for themselves according to Garry Marr, Financial Post Columnist. 

Whatever the outcome, not everyone believes that the real estate game will change – some people are betting most homeowners will go with the expertise of full service realtors instead of picking and choosing their services. “Quite honestly, I think [the impact] is going to be quite minimal,” said Jake Moldowan, President of the Greater Vancouver Real Estate Board.

Sources: 

Real Estate Listing Deal Opens Doors for Sellers, Sympatico.ca; Sellers Skip Realtors for Flat MLS Fee, The Province; Real Estate Renovated, The Calgary Herald

Image: TheTruthAbout

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If the constant griping by renters wishing they could get into the home ownership game hadn’t tipped you off – in many parts of the country, people think that Canadian real estate is just too expensive. But are they right? Well, the complainers have won this round - venerated magazine The Economist has decided to agree with them. 

According to a survey of global real estate markets, housing prices in Canada climbed 4.5% over prices in 2009, making the average Canadian house cost a whopping 23.9% more than it’s worth – at least according to the Economist.  The magazine determined the “fair value” of a home by comparing the ratio of current house prices to current rents with the long term price to rent ratio – ie, the purchase price is divided by the rent it could earn per year.  If it is significantly more expensive to purchase a home rather than rent one, housing may be over-valued, a situation the Economist kept finding in Canada.

Think that’s not scary enough? The Economist also indicated housing prices in Canada had increased 70% between 1997 and 2010. Clearly The Economist isn’t the only source finding housing overvalued in Canada – one of the graphics above shows the Google instant result when searching for Canadian real estate news – the only other suggestion? “Canadian Real Estate Bubble.” 

While Canadian real estate prices were dramatically over valued, they weren’t the worst offenders. The dubious honor of most overvalued housing in the world went to Australia. According the magazine, anyone who buys in Australia is paying 63.2% more than it is actually worth. Countries like Hong Kong, Sweden and France also led – traditionally places that have high real estate prices. 

Read the full article by The Economist here.

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It’s fall! While most people profess that their favorite season is summer, Fall has a lot of fans. Fall is my favourite season by a big margin (more sunshine than spring, less humidity than summer), and that means I always want to get into the Fall spirit by decorating my house. 

That said… I prefer a more minimalist approach to décor. All my furniture is white. Lines are clean. Clutter is forbidden. I might love fall, but I’m not going to start making Martha Stewart style pinecone bouquets and sticking them around my home, or suddenly feeling the pull of big wooly plaid blankets draped over all my furniture. First of all, who has the time for that? Secondly… just no.

So, if you’re like me, how can you feel like you’ve got a bit of fall in the home, without going full Little House on the Prairie?

Here are some fun, LOW HASSLE ideas, from my own mind and the internet:

1. White Pumpkins

They used to be rare, but nowadays they’re popping up in local grocery stores – white pumpkins, sometimes called ghost pumpkins are a neat way to get the shape of the season, but in a new way. You can:

• Line up white mini pumpkins on a mantelpiece
• Turn white mini pumpkins into votive candle holders
• Cut off the top and remove the seeds from a full sized white pumpkin. Don’t carve it though! Put a flower vase into the pumpkin and display some seasonal blooms - (note, these won’t last more than a few days inside – best done for a special occasion!)

2. Pinecones

Yes, I realized I just disparaged pinecone crafts, but this is as easy as it gets. Take a contemporary, low silver bowl or tray and then fill it with the nicest pinecones you can find. Looks seasonal, not kitchy.

3. Branches and sticks

Trees and wood grain have been big design trends for a while now, so don’t pay for artfully arranged, carefully chosen dead branches from a florist, go pick your own out. They’re plentiful this time of year, and FREE. Besides, what says fall more than a branch without leaves? The easiest way to bring the outside in. Best yet? These displays don’t need water.

Photos: Pumpkin Vase, Martha Stewart.com; Branches, Vastu Design Clique

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The Royal Bank of Canada has raised serious concerns that for most people housing is simply too expensive in Vancouver.  

On Monday, RBC released its quarterly report on housing and affordability. According to the report, on average, the typical Canadian homeowner spends 48.9 percent of their household income on servicing the mortgage on a median two-storey home – an increase of 2.1 percent overall due to rising mortgage rates.  

However, in Vancouver it’s a very different story – the proportion of income required to service the mortgage on a median two-story home or a detached bungalow (a smaller starter home anywhere else in the country) has risen to an astonishing 70 percent.  The situation is not much better for owners of apartments or condominiums – servicing the mortgage on a condo consumes 43 percent of household income.

The report singled out Vancouver’s white hot housing market, but it wasn’t to pass around congratulations: "RBC housing affordability measures are very close to their all-time high, which points to significant underlying stress and raises a red flag," said RBC Economist Robert Hogue. “Generally we have dismissed the case of housing market bubbles in Canada, but the situation in Vancouver is probably the closest to one in the country.”

This means the market could take a big hit unless the pressures ease - "very poor affordability is likely to restrain demand in the period ahead," said Hogue. According to the report, BC and Ontario saw the worst deterioration in housing affordability as prices neared the record highs seen in 2008.

Photo: Even condos in Vancouver may be out of reach for most homeowners. Credit: Beaster725, Flickr

Sources: Bank Raises Red Flag Over Housing Affordability, The Vancouver Sun; House Costs Near Record High in BC, The Province; Housing Becomes Less Affordable, The Globe and Mail.

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The Chinese real estate sector could be in for a big shakeup soon. Many pundits are predicting that the government is getting ready to introduce a property tax. 

While most people in the world regard property taxes as a way of life, in officially Communist China there’s no government taxes on the books for private property ownership because originally there was no private property ownership at all. However, things have changed dramatically in recent years - market demand and rampant speculation have fueled a huge real estate industry, and have helped push the Chinese economy into overdrive – annual growth is over 8% a year (as opposed to the 2 or 3 percent that more established economies grow at during boom year).  

So why introduce a property tax then when it could weaken one of China’s strongest economic sectors? According the Financial Time’s Geoff Dyer, there are a lot of good reasons to get the Chinese middle class acquainted with tax:

A property tax is the favored policy tool of many a reform-minded economist. It would help reduce the rampant speculation in the real estate sector by introducing a cost for holding empty property. And it would help develop a reliable source of income for cash-strapped local governments - one of the key long-term policy challenges for Beijing.

While any property tax rolled out would likely be very minimal at first, “a small annual levy on second or third homes in the luxury sector”, there are still fears that is could prompt a massive sell off and scare away speculators – one of the key factors in the ever increasing property prices.  

In April, Beijing rolled out a series of much needed measures to cool overheated home prices, and since then, speculation that a real tax is coming has intensified. "There are several plans on the table. While we don't know which one will be chosen, it is more likely to be implemented by New Year's Day," a market source said in an interview with the Hong Kong Standard. "Such a move does not require National People's Congress approval, only the State Council's, so the time frame is shorter."

Meanwhile, commercial real estate in China remains strong, even with high vacancy rates.  The Wall street journal has reported that China’s insurance regulator has just amended the rules that govern how insurance corporations invest their assets. Chinese insurance companies are now allowed to invest up to 10% of their assets into commercial real estate – a move which could introduce as much as 460 billion yuan ($68.5 billion USD) of potential demand into the commercial real estate market.

Sources: 

Does Beijing's Clampdown on Property Still have Force? - Geoff Dyer, The Financial Times

Property Tax Revisions Loom as Prices Continue to Spiral - Beth Ye, The Hong Kong Standard

Insurers are Likely to Boost China Property Demand - Aaron Back, The Wall Street Journal 

Picture:

Lensfodder, Flickr

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Maybe you live in a dreary rental that you can’t do much with. Maybe you’re dying to change something about home, but you don’t have much of a budget. Maybe you’ve got the time to embark on a weekend home improvement project, but you’re lacking inspiration. Or maybe you just like to dream?

No matter what the reason, going online can be a huge source of ideas, inspiration, daydreams and super practical advice for anyone with the decorating bug. I certainly have one... so here are a few my favourite places to find inspiration when I’m online! 

Apartment Therapy: One of the most popular online design sites, and a personal favourite of mine. Apartment Therapy works hard to be a fantastic resource - it’s constantly updating during the day with a great mix of DIY projects, design showcases from around the world, interviews with artisans and designers and even photographic tours of Apartment Therapy reader’s homes from around the world. If you like homes and design, it should be in your bookmarks folder.

Freshome: Skewing much higher in the budget range than Apartment Therapy. With plenty of pictures and information about some of the most stunning and inventive architecture in residential homes today, reading Freshome is a fantastic way to fuel your daydreams if you’re a fan of architecture. If that’s not entirely your speed, don’t be deterred - there are still plenty of great articles and inspiring ideas on the site.

Design*Sponge: This site is almost the polar opposite of Freshome. Where is the former is about offering up high end inspiration, Design*Sponge is all hands on, affordable and ever so slightly twee. There is a great focus on putting up fun, practical DIY projects - so if you read Design*Sponge, you’ll never be bored and wishing you had something to do on a dark, wet winter afternoon! Also not to miss: the period under $100 product round ups.

Ikea Hacker: Sometimes it’s good, sometimes it’s amazing, occasionally you’ll want to do it yourself, but a lot of the time, you wonder why anyone would ever do that to perfectly good furniture... It’s Ikea Hacker - the blog where readers from all over the world showcase their (occasionally misguided) efforts to improve on the products from the world’s most popular design store. Whatever the outcome, the owners of the furniture in question are happy, and usually it’s structurally sound...

And there you have it - a round up of some of my favourite websites for design inspiration. Got suggestions of your own? Share them in the comments!

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Will the bubble burst or won’t it? The Canadian Centre for Policy Alternatives is suggesting Canada’s housing markets could be poised for a big crash akin to the US housing meltdown, but the Canada Mortgage and Housing Corporation is painting a rosy picture and predicting more starts and modest price increases in 2011.

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