Foreign Investors Test U.S. Markets

From 2005 through 2008, foreign buyers claimed at least $100 billion of US commercial property, a significant sum, according to Real Capital Analytics as noted in an AFIRE News article. In recent years, foreign investment in United States real has accounted for less than 10 percent of all property acquisitions. However, foreign investors are starting to take interest in the U.S. again though origins of the capital are changing and actual acquisitions so far have trended on the low side.

Through third quarter of 2009, acquisitions by non-U.S. investors have totaled just $2.1 billion. However, the market share of foreign buyers is up slightly overall, as a percentage of all U.S. acquisitions, and with notably higher investment for office, hotel and apartment sectors.

Foreign Investment into U.S.

Israel’s Increased Interest Rate Raises Economic Concerns

Israel‘s recent increase in the mortgage interest rates has the market concerned that the higher rates will discourage borrowers and lead to a drop in property purchases. Israel has been the world’s top performer in residential real estate. Two key factors have helped Israel defy the worldwide real estate slump: lack of available land for development and tax breaks for investors. Prices rose 12.5% in the second quarter from a year earlier, double the increase for Switzerland, the second best performer among countries tracked by London-based property consultants Knight Frank.

Israel is one of the first countries to raise interest rates since the start of the global recession. In August, the Bank of Israel raised the interest rate to 0.75 percent to combat rising inflation. Some economists are predicting that interest rates will go up to 2.5%, according to propertywire.com.

While some predict increased interest rates will cause property prices to plunge, others forecast it will stabilize the market.

Prices will probably ‘stabilize’  rather than plunge, said Ayelet Nir, chief economist at IBI Ltd.  However, in some locations in Jerusalem, Tel Aviv and the coastal city of Netanya, prices are likely to remain high due to a constant demand from Jews from the US, France and the UK, according to Bernard Raskin, regional director of Re/Max Israel, the country’s largest property broker.

Global Housing Market on the Mend

The world’s housing markets show signs of hope. Sixteen of the 27 countries that have published their third quarter results with GlobalPropertyGuide.com experienced rising prices. Only 11 countries reported falling prices. After being negatively affected during the economic slump, the UK, Canada, Germany, Singapore and South Africa are finally noting positive price changes quarter-on-quarter.

The world seems polarized between economies of Asia and those of Eastern Europe and the UAE. Except for Thailand, the Asian economies are enjoying strong economic growth and high residential property price rises. In contrast, growth in Eastern Europe and the UAE has stalled and property markets have crashed.

On the global scale, while some markets’ increases are more modest than others, the over-arching trend is toward recovery.

Dubai Real Estate Bubble Bursts

The Dubai government has admitted to a debt of $80 billion that it cannot repay. Of that debt, Dubai World, which is the flagship of the Emirate and the company behind such iconic developments as The World and Palm Jumeirah, owes $60 billion. Just a year ago, the Dubai government was proudly announcing its resilience against the global market downturn. And Dubai World was considered one of the key drivers of the economic boom in the region.

As a result of this revelation, an estimated 400 projects worth more than $300 billion have been canceled, shut down or ordered to move slowly as developers try to cope with property prices that are still on a downward spiral. Dubai World has announced a six month stand still and said it will not be able to pay creditors until at least May 2010. The debts are frozen until at least May 2010, with accountants at Deloitte working to draw up a restructuring plan.

Tips for Buying Property Abroad

No matter how appealing a Tuscan villa or English cottage may be, purchasing property in another country needs to be fueled by wise decision making, not impulse buying. You can help your clients turn purchases into a great deal with 12 basic tips offered by Property Investment.  Key tips include:

  • Never sign a contract that you do not understand. (For example, contracts written in a foreign language).
  • Always get advice from independent specialists who are proficient in the chosen country’s laws, processes and specifics of buying property there.
  • Ensure you do not inherit a debt on the property before you purchase
  • Always give yourself a cooling off period if you see a must-have property and are tempted to put down a deposit right then.
  • Arrange your mortgage in the currency that you earn in where possible, unless you are going to receive rental income from that property in the local currency.

Help your international property clients by giving them a list of these tips, customized with your company logo and details about your international real estate service offerings.

Asian Homeownership in U.S. Declines

The 13 million Asians living in the U.S. have historically tended to earn more and have less debt than other minority groups. A recent census report, however, shows that Asians suffered a greater drop in homeownership last year than whites, blacks and Hispanics. The 2008 American Community Survey (ACS) of the U.S. Census found that the overall U.S. homeownership rate fell to the lowest in six years—66.6 percent. The rate of home ownership for Asians fell even lower to 59.4 percent. This is a reversal after the housing boom years when minorities in the U.S. took advantage of easy access to financing to purchase homes.

The Asian population is largely concentrated in west and east coast states and Illinois, with about one-third of Asians living in California. The sharp drop in their home ownership in 2008 may be due in part to California’s plummeting home values and skyrocketing foreclosure rates. The rate of home ownership may drop even more in 2009, according to the Population Reference Bureau.

Blue Aisle Special: Commercial Real Estate

If you are an investor who is looking for a great bargain, you might want to set your sights upon commercial real estate. According to experts, an increasing number of investors are deciding to move their capital into real estate. Furthermore, they expect this trend to continue over the next couple of years as the economy continues to take its toll on the commercial real estate sector.

“A lot of the investors I’m hearing about are now thinking of shifting their focus to real estate, because that’s where they see the opportunities,: said Mark Shapiro, who is the head of global restructuring and finance and Barclays, while speaking in New York at the Reuters Restructuring Summit. “That’s probably where you’re going to see capital shifting.”

Although most experts agree that the residential real estate market has likely hit bottom at this point, the commercial real estate market has not quite hit this point yet. Rather, many developers and property owners believe the majority of commercial real estate defaults will occur over the next few years as banks become increasingly less willing to provide new financing and to roll over their debts. Understandably, policymakers are concerned by the implications of a commercial real estate meltdown.

“Commercial real estate remains a very serious problem,” said Ben Bernanke, who is the Federal Reserve Chairman, while addressing the House Financial Services Committee recently. “We are concerned, both because the fundamentals are weakening and because the financing situation is bad (and) could provide a source of a lot of stress, particularly for small and regional banks that have a very heavy concentration in commercial real estate.”

Bernanke’s concerns appear to be in line with the comments that were previously made by Dennis Lockhart, who is the president of the Federal Reserve Bank of Atlanta, as he had stated that the commercial real estate market was his greatest concern when he expressed “measured optimism” for an economic recovery in the United States.

“Lots of commercial construction is still in process, and until growth of supply stops, the industry statistics will continue to deteriorate,” said Lockhart.

Although there are still many concerns surrounding the future of the commercial real estate market, the bright side is that the struggling market will provide plenty of opportunities for investors who are willing to take a risk on purchasing these properties. So, if you are looking for a great investment opportunity, it looks like you will likely have plenty of options to select from over the next couple of years.

Eric Bramlett is the broker & co-owner of One Source Realty, a boutique Austin real estate firm. Eric manages a number of websites, including his Steiner Ranch real estate site, and actively writes an Austin blog.

Asia Leads Global Recovery

Asian countries are leading recovery of the global property market, primarily through government stimulus plans, India’s Economic Times reports. The strengthening markets include China, Singapore, India and Vietnam. China appears to be the region leader. Its government-dominated, top-down economy is surging after Chinese banks issued more than $1 trillion in loans in the first half of 2009, plus a nearly $600 billion government stimulus program. Singapore, India, Vietnam and a number of other Asian markets are also strengthening.

In past recessions, the United States has led global recovery.  “The economic center of gravity has been shifting for some time, but this recession marks a turning point,” said Neal Soss, chief economist for Credit Suisse in New York. “It’s Asia that’s lifting the world, rather than the U.S., and that’s never happened before.” He adds that vigorous rebounds, particularly in East Asia, suggest U.S. imports and exports will soon improve.

Recovery and Stabilization Evident in International Commercial Markets

Many of the world’s commercial real estate markets are showing some stabilization and recovery at the mid-point 2009, CB Richard Ellis reports. One notable exception is the United States where vacancy rates in the office, industrial and retail property markets continued to rise in the second quarter of 2009. Positive developments in international commercial markets included:

  • an uptick in investment sales volume in Asia, where the market has adjusted quickly and pricing may have hit bottom in some cities in the second quarter.
  • stabilization of property markets in the Pacific region after 18 months of turmoil.
  • increased activity in the Europe, Middle East and Africa (EMEA) investment market to €13 billion from €11.6 billion in the first quarter of 2009, with expectation for further improvement in the fourth quarter.

The prospects for commercial real estate during the balance of this year remain mixed. “It is startling how much more optimism is found in Asia, compared with investor sentiment in mature economies,” said Dr. Raymond Torto, CBRE’s Global Chief Economist. “It is obvious that the countries most burdened with weak credit institutions are in for a longer recovery period than others. While the severe recession of the last year was synchronized across the globe, the recoveries will widely vary, determined mostly by the strength of a country’s banking system.” For another International real estate news source or Denver real estate trends I invite you to visit our Denver real estate website.

U.S. and France Share Property Listings

Some 300,000 U.S. Realtor® listings in Florida, California, Las Vegas and Washington, D.C. have been translated into French for display at the website of the Federation Nationale de l’Immobilier (FNAIM), NAR’s association partner in France. As of mid-September, Realtors® affiliated with participating local Realtor® Association MLSs can display at their website their choice of more than 500,000 FNAIM members’ listings from throughout France. The listings have been translated from French into English.

This global property “exchange” began as a pilot program offered by Immobel Global Listing Exchange, a provider of international real estate technology and cross language marketing services. The pilot program was tested over the past two years by two Realtor® Associations in Florida (Miami and the Beaches and Sarasota) and the Paris chapter of FNAIM. Based on its success, FNAIM is expanding the Immobel Global Listing Exchange service to include all of its members’ listings in France. NAR is exploring options to expand the service in the U.S.

When brokers use the Immobel program, they can individually determine which properties they wish to make available for display and also which to display from their foreign counterparts. You can see an example of an integrated version of Immobel’s search portal on our Denver real estate website.

The ICREA Transnational Referral Service is the basis for cooperation between agents to assist clients and earn client referral fees.

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