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 rest of the world is just starting to see a real estate recovery, but China is way ahead. According to Bloomberg, four of the country’s top banks have stopped lending to real estate developers to tame surging home prices. The Industrial & Commercial Bank of China, China Construction Bank Corp, Bank of China and the Agricultural Bank of China have all met their allotted government lending targets for the year.

According to the Chinese Statistics Bureau, property development is up over 36.5% year on year, with lending in the first 10 months of the year topping 3.81 trillion Yuan (about 574 billion US dollars). All four state owned banks have denied the report, saying they are still lending to developers at a normal pace. Two of the banks have reported they are still lending if the projects are of high quality, but did not give further details on what that might mean.

Fueled by stimulus spending last year, the Chinese economy has gone into overdrive. China aimed to lend 7.5 trillion Yuan this year, but had lent over 6.9 trillion Yuan before November. Regulators are starting to worry that the surge in credit could drive the Real Estate boom into a bust, and have begun working to reign back the real estate industry.  In April, the Chinese government raised minimum mortgage down payments and interest rates, and tightening lending controls. On Monday, the country announced new limits on foreign real estate investment. Foreigners will be limited to owning a single residence, and companies will only be allowed to purchase properties they intend to use. 

Overall, China’s rapid growth has predictably lead to some rapid inflation. Food prices have seen double digit jumps, and inflation is sitting at 4.4% right now, and the government is battling to keep it from spreading to other sectors.

Sources: Bloomberg, Business Week, Market Watch

Photo: Peter Morgan

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The NYC Real Estate Expo is back for it's second year on Friday, November 5, and Realestock will be there – are you attending? Hosted at the New York Marriott Marquis in Times Square, the expo is the premiere venue for real estate experts in New York.

Over 160 vendors will be exhibiting and dozens of industry leaders will be giving talks and seminars. Realestock CEO Tim Vasko will be speaking at 2:00 pm in the Carnegie Room, leading a discussion titled: The Rest of your REAL Estate Career:  How the REAL impacts of the economy, social networks and technology will affect you and real estate in the next 20 Years. Seating is limited, so be sure to come early.

"The NYC Real Estate Expo is a great opportunity to learn from the stories and tested methods of our hugely successful speakers as they cover the most relevant topics affecting the real estate market today," said Executive Director of the Expo, Anthony Kazazis.  "Though many debate about the current state and future of our real estate market, one thing remains clear, it is imperative for industry professionals to keep abreast of the latest trends and changes, and stay on top of the best products and services that our area businesses have to offer.

"Pre-registration for the event is only $30 online ($50 at the door.)  For more information on registration, exhibiting or for our seminar schedule, please visit www.nycrealestateexpo.com.  "The NYC Real Estate Expo will be the must-attend real estate event in New York City,” said Kazazis "Come join us for this dynamic real estate shopping, information gathering and networking opportunity."

Photo: Ross2085, Flickr

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Want to get in on a hot market? Look no further than New York City.

In the third quarter of 2010, real estate sales in the city surged in a big way. Sales were 26% percent higher than at this time in 2009, and 11% higher than they were in the second quarter of the year. Bolstered mainly by strong condominium sales across the city, Manhattan lead the way with a sales increase of 25% above the second quarter of the year. Brooklyn was not far behind, with condo sales doubling in that borough. 

“The entire market is improving,” said Michael Slattery, Senior Vice President at the Real Estate Board of New York (REBNY). “There is generally an improving mood out there… Interest rates are low and prices are stabilizing.” According to figures provided by REBNY, NYC real estate prices rose considerably in 2010.  Across NYC the average increase was 7% over 2009 prices - the average price of a home in NYC is now a jaw dropping $854,000.

On the commercial front, the news was even better. Despite falling rents, the market is strongly up. During the first nine months of the year, commercial property investments in Manhattan totaled $9.4 billion dollars, an incredible 168% increase over the $3.5 billion in commercial property transactions completed in all of 2009. Although the overall vacancy rate edged up to 10.9% new retailers are eagerly picking up leases, particularly as discount retailers like TJ Maxx, Forever 21 and Syms are aggressively expanding to take advantage of current market conditions. 

While experts like Slattery have noted that sales and transactions tend to dip in the fourth quarter due to holidays and cold weather, the rapidly growing market and historic low rates may continue to fuel the NYC real estate market’s return to normalcy.

Photo: Jose Wolff, Flickr

Sources: The New York Times, HousingWatch.com, Crain's New York Business, MarketWire, NuWireInvestor

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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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Selling real estate can be a big headache. Finding a realtor, showing the house, entertaining offers… then worrying about taxes, fees and other administrative details can make the process seem far more complicated than it needs to be.  So, if you want to sell your home, doing your homework before you get onto the real estate listings can save you a lot of hard work and sleepless nights.

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Property is at a top premium in Washington DC, so for those wanting to live closer to where the political action is happening, an apartment in Dupont Circle, part of the “Old City” would be more to most people’s liking. Dupont Circle is home to numerous Embassies, countless historic residences, and the Capital Pride LGBT pride Festival.
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Real Estate investment has taken a real beating in the past two years. With sluggish markets just beginning to claw their way back, the question the smartest investors are asking is not, “what properties are for sale” but “where is it worth buying?”

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