Realestock Blog

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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