Global Property Guide - News and Discussions
Will France's dramatic financial measures spur housing market recovery?
To revive France's housing market, the French government will soon offer tax breaks to property owners, the second set of market-boosting reforms in three months. The government is responding to widespread concern over the impact of housing sector's poor performance on the French economy.
French housing starts in May dropped to their lowest level since 1998.
The government is offering massive capital gains incentives to encourage landowners to sell land for new home building. Landowners who sell before the end of next year will get a whopping 30% tax break on capital gains.
The government is also scaling back a new law, introduced only in March, which capped rents in expensive Paris neighborhoods. Objectors complained that the law discouraged investors from entering the property market. Now rent caps will now only be tried in Paris on an experimental basis. Another new law increasing the number of documents that had to be provided by sellers, leading to a decline in home sales and longer transaction times, has been scaled back.
Earlier in June, the government decided to continue providing interest-free loans to first time home buyers with low incomes. The scheme, already in existence, was to have been stopped by year-end. Now it has been extended for at least three years. Access to interest free loans will also be widened.
About 50 new measures will simplify France's building regulations, reducing bureaucratic hurdles developers face when launching housing projects. The government has also decided to relax parking space requirements in new apartment buildings.
A record drop in the number of households buying residential real estate has amplified the sense of crisis. The number fell by 2.6% in the first quarter of this year, the biggest drop since the 2008 financial crisis.
The most expensive house in the world
An ultra-luxury house in Hong Kong has set a new record for its per square foot price. It is the most expensive house ever sold in the world, per square foot that is. The asking price for the property, which is on Victoria Peak, one of Hong Kong's most sought-after neighbourhoods, is HK$175,735 (US$ 22,675) per square foot. If the house is sold at the asking price it will be the world's most expensive home ever sold, on a per square foot basis. The property has been listed by Sun Hung Kai Properties. With an area of 433 square meters or 4,661 square feet, the asking price is nearly 819.1 million Hong Kong dollars (US$ 105.7 million). Needless to say, the house boasts all the ultra-modern facilities with a terrace offering breathtaking views of the mountains and a huge swimming pool. The record was previously set in 2011, when a Hong Kong mansion also located on the Peak was sold for US$ 103 million. Victoria Peak, commonly called the Peak, is a mountain on the western half of Hong Kong with panoramic views of Victoria Harbour. It is a prominent tourist destination and super exclusive residential area. Property prices climbed steeply on Victoria Peak between 2009 and 2011 like many other exclusive neighbourhoods in Hong Kong. Mainland Chinese buyers snapped up properties, driving up the prices. The listing has come at a time when the Hong Kong government is trying to contain runaway home prices by imposing restrictions. The government imposed cooling measures in stages in 2012 and 2013. Cooling measures include a 15% levy on 'non-permanent residents' and corporate property buyers, an expansion of stamp duties on quick resales of property and a doubling of duties on all properties costing more than HK$2 million (US$258,054), with exemptions for permanent residents who are first-time buyers or sell their only home to buy another.
UK home prices likely to fall 30% over four years
House prices in the UK are likely to drop by 30% over the next four years, spelling trouble for home owners due to shrinking equity values, according to Capital Economics. The UK's current housing boom has priced the majority of middle-class buyers out of the housing market. Prices need to fall by at least 22% to bring housing back to an affordable level, says the research house. "The message is clear. Houses are now so over-valued that a prolonged period of falling prices is on the cards," says Roger Bootle, managing director of Capital Economics. Bootle is a former advisor to the Tory government and also a former chief economist at HSBC. Housing prices have risen steeply in the UK over the past couple of years. However, several London districts have reported a correction in the last few weeks. The fundamental problem is that many buyers have taken on bigger mortgages, at higher loan-to-income ratios, than would be affordable in case of a rise in interest rates. Median home prices are currently 5.7 times the average salary, according to Capital Economics, and the ratio is significantly higher in London. "History tells us that such a high ratio cannot be sustained. We should therefore expect a period when house price inflation either slows, or turns negative," Capital Economics said. It wouldn't take much for housing price to slump, the report says. "All it would take is for households to be unwilling to pay the price asked...In fact, there are already signs that the housing market boom is over in London ... history suggests that it cannot be long before the rest of the UK follows." The report predicts that such a huge fall in home equity will have substantial entomic and social impacts: Young families would be forced to stay in cramped houses and home owners would be unable to move in search of new jobs. The Bank of England recently introduced new mortgage controls, effective from October 1, limiting loans to 4.5 times income. Currently 19% of London new mortgage loans are above this level. Banco Santander has already capped loan-to-income ratios at five times income for all residential applicants, while Nationwide has introduced a limit of 4.75 times income. Both Lloyds Banking Group and Royal Bank of Scotland have capped multiples at four times income for loans above £500,000. This follows the Mortgage Market Review (MMR) measures introduced by the Financial Conduct Authority (FCA) in April, which brought in a wide range of affordability checks. Customers now need to satisfy lenders that they can afford their mortgage, and must provide evidence of income in all cases. The MMR contains a requirement for lenders to stress-test borrowers with lock-in periods of fewer than five years against the standard variable rate plus an additional percentage, and requires lenders to assume at least a 1 per cent increase in base rate. The vast majority of borrowers must take formal advice, either from the lender, a mortgage broker or a financial adviser. These measures are already slowing lending. Banks and building societies are understaffed because advisers must have specialist qualifications. Already there are long delays for appointments in some areas of the UK, particularly London and the South East where the property market is booming. Brokers and financial advisers are seeing an increase in inquiries as a result, adding to their own wait times. Some borrowers who already know exactly which mortgage they want may be able to apply directly online or by post without taking advice; however, they must be able to provide full details of the deal without any input from an adviser. In addition "high net worth borrowers", with an annual income of more than £300,000 or assets worth more than £3m, will be able to take out a loan without advice.
35% jump in foreign purchases of homes in America
U.S. real estate markets are now attracting foreigners in droves. Nearly $92 billion worth of American homes were bought by foreigners during the year ending March 2014, according to a National Association of Realtors survey - an increase of 35% on the previous year. Nearly 7% of all homes on the market are being bought by foreigners.
Favourable exchange rates and affordable home prices are the top reasons, the survey concluded.
Florida remains the top choice, with 23% of all international home sales. California, Arizona and Texas represented 14%, 12% and 6% respectively. The top five cities searched online by international buyers in 2014 were Los Angeles; Miami; Las Vegas; Orlando, Fla.; and New York City.
'We live in an international marketplace; so while all real estate is local, that does not mean that all property buyers are,' says Steve Brown, president of NAR, in a statement. 'Foreign buyers are being enticed to U.S. real estate because of what they recognize as attractive prices, economic stability, and an incredible opportunity for investment in their future.'
Chinese buyers led the way by spending $22 billion on American real estate, followed by buyers from Canada with $13.8 billion. Buyers from United Kingdom and India spend $5.8 billion each. California was the favourite destination for Chinese buyers.
Foreign buyers have some unique characteristics:Nearly 60% of international transactions were all cash in 2014, compared to only one-third of domestic purchases. Only 42% of international buyers will use their U.S. home as their primary residence. Chinese buyers in the U.S. spend an average of $590,826 to buy a home.
South Africa to bar foreigners from buying land
The South African government plans to impose restrictions on foreign investment in real estate by introducing a bill which would allow a foreigner to lease land, but not buy it.
The bill will limit the period of lease to 30 years only, according to Minister of Rural Development and Land Reform Gugile Nkwinti.
However the Regulations of Land Holdings Bill, which is likely to be submitted to parliament in November, may take another five years to become law as the administration will need to conduct a land audit to ascertain the race, gender and nationality of current owners.
South Africa has been attracting overseas buyers for a long time. Nearly 7% of land is currently owned by foreigners.
The ruling African National Congress party has faced flak for not introducing land reforms. These restrictions on foreign ownership are being touted as part of the reforms.
The government has clarified that existing foreign land owners don't need to worry. "Applying the law retrospectively would be unconstitutional. We cannot act in an arbitrary manner," said minister Nkwinti.
The proposed bill will be a fair way of ensuring that the property market stays favourable to the purchasing power of local buyers, he added.
Nkwinti said the government would use the legal definitions currently applied by the Department of Home Affairs to determine who was a foreigner.
'We don't have to reinvent the wheel, we will just use the definition of what a foreign national is in the country,' he said.
President Jacob Zuma's government will try to make the bill a law by the end of his term in office in 2019.
French government introduces slew of measures to spur housing recovery
Reeling under a housing slump, the French government has promised several new measures to make loans easier for home buyers and to simplify building regulations. The government has decided to continue providing interest-free loans to first time home buyers with low incomes. The scheme, which is already in existence, was to be stopped by the year-end, but the deadline will now be extended for at least next three years. Access to these interest free loans will also be widened. Currently, nearly 45,000 first time buyers avail of these mortgages. The government aims to boost this to at least 70,000 within a year. Other measures include increasing eligible income limits for home borrowers. About 50 new measures will also be introduced to simplify the building regulations. Many of these regulations are aimed at clearing bureaucratic hurdles which developers face while launching housing projects in France. The government has also decided to relax parking space requirements in new apartment buildings. President Francois Hollande had promised to build 500,000 new homes a year during his election campaign before taking office in 2012, but only 350,000 homes are actually being built, not enough to meet demand. There are widespread concerns over the impact of housing sector's poor performance on the French economy. Housing starts in May dropped to their lowest level since 1998. A record drop in the number of households buying residential real estate has amplified the sense of crisis. The number fell by 2.6% in the first quarter of this year, the biggest drop since the 2008 financial crisis.
Canadian housing price correction would have huge consequences, warns BoC
The housing sector is the key point of vulnerability for Canada's otherwise stabilizing economy, the Bank of Canada (BoC) has warned, noting that the consequences of a correction in housing prices would likely be huge. Steep housing price rises in cities like Toronto, Quebec, Winnipeg and Hamilton were singled out as risks by the recent half-yearly BoC's Financial System Review. 'Our analysis shows that household imbalances remain the most important vulnerability and could amplify the impact of external shocks,' said BoC governor Stephen Poloz in a statement accompanying the review. Lower mortgage interest rates have caused households to take on bigger mortgages, putting them at risk in case of rate rises, or unemployment, the bank noted. "Many smaller entities, including some mortgage investment corporations and smaller credit unions, cater specifically to borrowers who do not qualify for insured mortgages. These may include low-income individuals, recent immigrants, rural residents whose income tends to be more volatile." The bank, however, doesn't see any immediate threat of a price-correction. "The probability of this risk is low given signs that the housing market is still headed for a soft landing, but the impact on the economy and financial system would be severe should it materialize." Apart from housing, another risk is financial stress emanating from China and other emerging-market economies. The BoC sees a sharp increase in global long term interest rates as another risk to Canada's economy.
Spain's housing market on road to recovery
Mortgage loan approvals increased for the first time in four years in Spain, in yet another sign that the housing market is stabilizing after six years of slump. Home loan approvals increased 2% year-on-year in March, the Madrid-based National Statistics Institute said recently, noting that it was the first rise since April 2010. The total amount lent by banks also went up by 16%, the first increase since 2007. Housing prices are still declining in Spain, but at a slower rate. They fell 3.5% from a year earlier in the first quarter, according to the latest data from the Public Works Ministry, the lowest decline in the past three years. Lower unemployment and a gradual economic recovery are key reasons buyers, especially first- time buyers, are getting into the property market. Housing sales increased 48% in the first quarter from a year earlier. "Spain has turned the corner,' says the International Monetary Fund's (IMF) latest report. 'The recovery started in the second half of 2013 and gained strength in the first quarter of this year, with the economy growing at the fastest pace since 2008... All signs point to the end of the downward adjustment," the IMF report said. Foreign investment in Spain's housing market in 2013 was the highest for nine years, at ?6.45 billion (US$8.95 billion), up 16% on the previous year, according to the Bank of Spain. British nationals were the biggest buyers with 15.1% of total foreign residential property purchases. The French bought 9.84%, the Russians 8.58%, and Belgians with 7.26%. Spain, Europe's fifth-largest economy, has seen a drop of up to 40% in home prices since 2007.
Will Osborne listen? Help to Buy criticized by both EU Commission and IMF.
The UK should defuse its housing bubble by making changes to the Help to Buy scheme, by raising taxes on high value properties, and by building new houses, says the European Commission in its annual economic policy proposals for the UK. The steps taken by the UK to cool housing market are insufficient, noted the commission. It specifically criticized the UK's unfair housing taxation system, noting that low value houses pay relatively higher taxes than high value houses. "We are suggesting adjustments that would make the council tax system fairer for homeowners and more efficient in terms of government revenuesandhellip;" said the Commission. "Reforms to the taxation of land and property should be considered to alleviate distortions in the housing market. At the moment, increasing property values are not translated into higher property taxes as the property value roll has not been updated since 1991 and taxes on higher value property are lower than on lower value property in relative terms due to the regressivity of the current rates and bands within the council tax system." The Help to Buy scheme is particularly criticized by the Commission, which sees it exerting upward pressure on the housing market. "The authorities should continue to monitor house prices and mortgage indebtedness and stand ready to deploy appropriate measures, including adjusting the Help to Buy 2 (loan guarantee) scheme," the commission said. Soon after the EU issued the advisory, the International Monitory Fund (IMF) also warned that a housing bubble is likely to derail the British Economy. The IMF urged the UK to rein in risky mortgages as they are making households vulnerable to a housing bubble situation or a possible interest rate hike. "In an environment where expectations of capital gains can quickly drive up household indebtedness - and thus systemic risk for financial institutions - more policy action is warrantedandhellip;andhellip;.Macro-prudential policies should be the first line of defence against financial risks from the housing market," the IMF said. The IMF suggested modifying or even scrapping the government's Help to Buy program. "A steady increase in the size of new mortgages compared with borrower incomes suggests that households are gradually becoming more vulnerable to income and interest rate shocks," said Christine Lagarde, the IMF's managing director, presenting the IMF's annual review of the British Economy.
Canada's housing agency says halt! Condo construction mortgage insurance ended
Canada's national housing agency will no longer offer mortgage insurance for condominium construction - a further step by the agency to cool the housing market. "The changes are a business decision designed to increase market discipline in residential lending while reducing taxpayers' exposure to the housing sector through CMHC," the agency said in a statement. "They also support the government's continued efforts to adjust the housing finance framework to restrain growth of taxpayer-backed mortgage insurance." Canadian house prices have risen steeply since the 2008 financial crisis. CMHC faces the difficult task of repaying lenders in case borrowers default. CMHC has taken several steps to cut the amount of insurance in force. Earlier this year, it stopped offering mortgage insurance to second home buyers, and also to self-employed borrowers who fail to submit third-party income validation. The number of units CMHC insures annually has fallen by 67% from its peak in 2009. Two other private agencies underwriting mortgage insurance are Genworth Canada and Canada Guaranty, but both still smaller than CMHC, which has a 60% market share, down from 80% a few years ago. The Canadian government has taken several measures in the past five years to cut mortgage exposures. The maximum amortization period was reduced to 25 years, from 40 years. Government-backed mortgage insurance is available only for homes with a purchase price of less than $1 million. It is mandatory for home buyers to make a minimum down payment of 5%. If the property will not be owner-occupied, the minimum down payment is 20%.
China property sector weakens, home prices to begin plunge
China's property developers are under pressure because of slowing property sales, which could further push home prices down for the rest of the year, according to analysts from Standard and Poor's (SandP).
Price cuts are likely to be the main marketing strategy adopted by China's real estate developers to reach sales targets in the second half, SandP said in an emailed report to clients.
At least a 5% cut in home prices is expected by SandP. Bigger price mark downs are expected in low-tiered cities, especially for smaller real estate firms.
Land sales, an important property market indicator in China, have fallen 38% by value year-on-year to 13.75 billion yuan ($2.2 billion). Swelling property inventories at the provincial level have dragged land sales down across 300 cities. Transactions dropped to 1,767 in May, 45% down on last year and 19% less than in April, added MarketWatch.com.
The so-called "hot season" for property in China, which usually lasts from the last week of April through May, did not happen this year, observed an analyst at Soufun, China's leading real estate website.
Chinese cities including the affluent Hangzhuo in Zhejiang province have listed no land sales since March, while the city of Jinan in the province of Shandong recorded no sales in May, said a report from Life Daily, a government-run paper.
Hong Kong-based Centaline Property, which has an important presence in China, has been letting staff go. Clement Luk, Centaline's East China chief executive told Reuters that he had been closing shops that have not met sales quotas.
Migration pressuring New Zealand housing markets
An excess of immigrants over emigrants is pressuring New Zealand's already-stressed housing sector. Many more people are arriving than leaving, so that the net immigrant inflow is likely to be 45,000 by year-end, according to Statistics New Zealand. This could mean housing prices rising by up to 12% next year, experts estimate, noting that rents rose by 10% when a similar migration-fuelled boom occurred in 2013. In April, net immigration increased by the second highest number on record, with 4,100 more people arriving than leaving New Zealand. The main reason? Fewer people are leaving for Australia, owing to a slowdown in Australia's economy. Australia's mining sector is cooling after a long boom. Besides, New Zealand now offers better opportunities in sectors like construction. Finally, New Zealanders are not entitled to unemployment benefits in Australia, so moving entails risks. Reacting to growing concerns over migration, the Reserve Bank of New Zealand recently said the issue will be taken into consideration when it decides how far and fast to push up interest rates. The government, however, has downplayed fears. In its recent budget the government removed import tariffs and duty on building materials to ease housing demand. Finance Minister Bill English noted that the increased migration inflow was not because people were moving to New Zealand, but because more "Kiwis are staying home". 'It's been a fairly sharp swing quite recently. I think you would need to see whether it's going to last for some time or be some kind of permanent shift...In any case you can't make that much of a shift through migration numbers. You can make quite a lot of difference by simply allowing a lot more houses to get started,' said the minister.
Reserve Bank of Australia downplays concern over rush of foreign residential buyers
Foreign property buyers are not to be blamed for pricing local first-time buyers out of the housing markets, says the Reserve Bank of Australia (RBA). The RBA is of the view that foreign investment may be partially responsible for pushing up home prices in some areas, but not where the first-time home buyers are "concentrated".
The RBA's observation has come at a time when the growing interest of overseas investors in the Australia's residential market sparked a debate raising fears that the expatriate buyers were making housing unaffordable for locals, especially the first-time buyers.
The debate prompted the Federal Parliament's House Economics Committee to look into the issue. The committee even held public hearings in 'real-estate hot spots'.
''andhellip;.part of any increase in foreign housing demand may spill over into higher dwelling prices, though the data suggest that this has not been into the parts of the market where Australia's first home buyers are typically concentrated,'' the RBA says.
The RBA's observations are based on data suggesting that foreign investment in residential housing are only between 5% and 10% of the total market turnover.
Australia's Foreign Investment Review Board (FIRB) gave permission for 11,668 residential property purchases by foreigners in 2012-13. Investment from outside Australia pumped AU$17 billion (US$15.79 billion) into the housing market during that period.
The RBA's observations parallel those of the Real Estate Institute of Australia (REIA). In a submission to the parliamentary committee probing foreign investment, the REIA warned that more restrictions on foreign investment would prove a drag on construction and other related sectors.
The REIA noted in its submission that the foreign investment has contributed to the supply of new dwellings, as foreigners are not allowed to buy established housing units.
All non-residents must obtain permission from the FIRB before buying residential property in Australia. They are not allowed to buy an established (previously occupied) house. They can only buy an unoccupied new dwelling, if the FIRB feels that the Australia's housing stock has increased i.e., if the purchase of houses by foreigners will not cause shortages for native Australians.
Temporarily establishing residence in Australia for the purpose of buying a house is not a viable alternative to obtaining FIRB permission, since temporary residents must sell their property if they leave Australia.
China's central bank wants lenders to fast-track housing loans!
Reacting to the housing market's slump, the People's Bank of China (PBOC) has asked banks to prioritize loans to families buying first homes, and to improve efficiency so that borrowers can access mortgages quickly. Liu Shiyu, a PBOC deputy governor, stressed the need for interest rates for first-time home buyers to be at a reasonable level. He also urged banks to expedite housing loans. The central bank's advisory comes close on the heels of several mainland Chinese cities relaxing restrictions imposed on home purchases. Both the central bank's advisory and the relaxations on home purchase are believed to be the government's reaction to the growing impact of the poor housing markets on the country's decelerating economy. Housing sales by value saw a 9.9% drop during the year's first four months, compared with a year earlier. Housing starts also dropped 24.5% over the same period. In April alone, home sales fell 18% from the previous month, according to the National Bureau of Statistics. After April 2010, China imposed a slew of measures to cool property prices, amid fears of a property bubble - higher down payments, limits on the number of houses that people can buy, the introduction of a property tax in some cities, and the construction of low-income housing. Over 40 cities in China bought in these measures to various extents. Now, the extent of the resulting slowdown is alarming the authorities.
Singapore's central bank warns residents against investing in overseas property markets
Worried about volatile housing markets across the world, Singapore's central bank, the Monetary Authority of Singapore (MAS), has warned Singapore residents to be cautious when investing in overseas properties. The bank notes that overseas property investments by Singapoe residents have surged by 43% since 2012. "MAS would like to remind potential investors to be mindful of various risks associated with overseas property purchases," the central bank said. Singapore investors should factor in foreign exchange and interest rate risks before putting money into housing markets overseas, says MAS. Stringent laws foreign governments impose on expat buyers are another concern. 'Risks are more difficult to assess or manage when investors are unfamiliar with conditions in overseas markets, such as the prospects for oversupply of properties, or of deterioration in economic conditions,' it added. MAS said the warning has been issued 'with a view to ensuring financial stability as well as financial prudence among Singaporeans'. The growing interest of Singapore investors in overseas properties, especially in Australia, the UK and New Zealand, is attributed by experts to government measures to cool Singapore's housing market. Singapore residents now have to pay the additional buyer's stamp duty (ABSD) of 7% when buying their second home. The minimum cash down payment for individuals applying for a second housing loan has been raised to 25%, up from the previous 10%. The government has also introduced a Seller's Stamp Duty on industrial properties, to discourage speculative activity in the industrial market.
Restrictions on foreign investment in housing unnecessary, says New Zealand government
Only 11% of dwellings in New Zealand are owned by people living overseas, according to the New Zealand government. The data was compiled by the Inland Revenue Department (IRD) in June last year, and recently released by Housing Minister Nick Smith. Based on this data the government argues that since foreign home ownership is lower in New Zealand than in other countries, the restrictions on foreign residential investment demanded by the Opposition are unnecessary.
'What it reinforces is that the levels of overseas ownership of homes in New Zealand is small, that it is having no substantive impact on the market, and that making changes in those areas are not going to make a material difference for Kiwi families,' Smith said.
'It's not an area that's going to make housing more affordable for Kiwis and that's why I'm focused on the issues that will make a difference in making housing more affordable,' he said.
The results were based on property owners' tax returns. Of 199,000 taxpayers making rental tax returns, 11% were non-residents and 1% were of unknown residency. The 'non-resident' category included New Zealand citizens who lived overseas and the data did not distinguish between expat New Zealanders and foreign buyers, Smith said.
A Treasury briefing based on the report says 'the available data suggests that the level of foreign ownership of New Zealand housing remains relatively low, but the limitations of the data mean that it is difficult to assess the extent to which foreign ownership rates are changing over time'.
The Opposition had been demanding for a long time that a system of registering foreign purchases be developed, to ascertain whether foreign investment is pushing up home prices. However, the government has refused to collect data on foreign buyers, saying the impact on house prices is negligible and the data is too difficult to collect.
Labour leader David Cunliffe does not agree with the government's conclusions. His party believes that restricting foreign owners is necessary as, according to Real Estate Institute of New Zealand and statistics provided by various banks, up to 15% of property purchases in Auckland in the past one year were made by non-resident foreign investors.
Dramatic boost to Portuguese luxury property from "golden visas"
Prices of luxury homes rose steeply in Portugal in 2013, pushed by the golden visa scheme launched by the government to attract foreign investment. Luxury home values increased 54% to around 4,266 euros ($US 5,887) per square metre last year compared with 2012, according to a survey by the Confidencial Imobiliario (CI) and the Royal Institution of Chartered Surveyors. Lisbon's Baixa and Parque das Nacoes are among the areas where many luxury home sales were reported. The median price for luxury homes in these two areas was 6,000 euros (US$ 8,227) and 6,800 euros (US$ 9,323) per square metre respectively, according to the report. In Parque das Nacoes, prices went up 78% in 2013. 'Our report saw a very quick rise in the price of luxury homes and that's good news for the market, creating positive expectations both for those already in the market and for potential buyers,' said Ricardo Guimaraes, director at the Confidencial Inmobiliario. Portugal is one of several European countries to have introduced golden visa schemes by which residency permits are granted to foreign real estate investors, in return for buying properties. Other countries are Spain, Greece, Hungry, and Cyprus. The scheme was launched in Portugal in August, 2012. In Spain and Portugal, the minimum investment is ?500,000 ($670,000), while it is ?300,000 in Cyprus. In Portugal, more than 330 visas were issued within one year of the scheme's launch, fetching ?225 million. In the first three weeks of January, 2014, Portugal granted a total of 49 fast-track golden visas and received investments of ?27 million. Investors, mainly from China, Russia, Brazil, Angola, South Africa, and India, are applying for Golden Visas in Portugal, with Chinese topping the chart by a big margin. The investor has to retain the property in order to continue enjoying residency benefits. Discontent with the current political set-up in China, the fall in real estate prices in Europe and the depreciation of the euro are some reasons behind growing Chinese interest in European property.
These 12 cities will become favourite destinations for global real estate investors
What value is there in brokers' reports praising investment destinations? Just asking. Brokers write them because they've got property they want to get off their hands. Entirely unconnected, no doubt, with their praise for places where the properties are located. That said, let us look at The Candy GPS (global prime sector) report, which ranks Tel Aviv, Chennai, Panama City and Beirut among 12 second-tier cities which will see strong residential property price growth over the next five years, providing ultra-rich investors with alternative real estate investment opportunities. The report has been prepared jointly by Candy and Candy, Savills World Research and Deutsche Asset and Wealth Management. Second tier - Tel Aviv? Haha! That's one in the eye for you guys! Beirut? Second tier? Chennai, I grant you. Anyway, according to this threesome of wise brokers, these cities are likely to "out-perform the real estate markets in prime world cities" namely London, New York, Hong Kong, Singapore and Moscow. 'They range from well-known and very well established cities such as Melbourne in Australia to little-known but interesting centres in developing economies such as Chennai in India, that have a high number of ultra-high net-worth residents,' said Yolande Barnes, director at Savills World Research. The 12 cities that our broking wizards say have strong potential for growth are Tel Aviv (Israel), Melbourne (Australia), Miami (USA), Dublin (Ireland), Panama City (Panama), Beirut (Lebanon), Istanbul (Turkey), Cape Town (South Africa), Jakarta (Indonesia), Lagos (Nigeria) and Chennai (India). Their report has listed a host of reasons which will make each of these cities favourite investment destinations for ultra-rich investors. Some of these reasons include English spoken as a first or second language, the establishment of new tech industries, abundance of green spaces or water and cultural hubs. Lagos, they seem to imply, is well known for its green spaces, cultural hubs, and high tech. Of these 12 cities, Tel Aviv is the most expensive with an entry-level, two-bedroom luxury apartment typically costing $1.45 million in March, whereas Chennai is the least expensive, a luxury two-bedroom dwelling costing around $160,000. "Canny investors with an already full 'trophy asset' portfolio are looking with more interest at the yields available from real estate," said Paul Tostevin, associate director of Savills World Research, in the Candy Global Prime Sector report. "Those looking for income-producing properties are more likely to find high and rising rental incomes in the places where capital values have not been driven by UHWI (ultra-high worth individuals) inward investment." What's odd about their "buy list" is that in fact, foreigners face restrictions in buying property in many of these cities. Foreigners cannot buy property in Chennai, nor landed property in Indonesia. Arabs cannot buy in Tel Aviv. Australia is increasingly restrictive. So high-net buyers are likely to be disappointed if they try to buy from Candy IPS's list. London, New York, Hong Kong, Singapore and Moscow at present account for 40% or $2.2 trillion of all global ultra-high wealth real estate investment. Candy IPS believes their second tier cities will shrink this allocation rapidly. Don't hold your breath, say I.
Weak housing market to affect US economy in 2014, warns Fed
A weak housing market is likely to affect the U.S. economy's growth in 2014, the Federal Reserve has warned. "Readings on housing activity - a sector that has been recovering since 2011 - have remained disappointing so far this year and will bear watching," said Federal Reserve chairwoman Janet Yellen in testimony to Congress recently. "The recent flattening out in housing activity could prove more protracted than currently expected, rather than resuming its earlier pace of recovery." The warning from the U.S.'s central banker lends force to data recently released by the Commerce Department, which points to underlying weakness in the housing market. Housing starts increased less than expected, and building permits fell in March. The slow recovery in housing market has disappointed economists. They were expecting a strong recovery, after the harsh winter was blamed for February's slowdown. Groundbreaking for single-family homes rose 6%, but starts for the multi-family segment fell 3.1% in March, the lowest level since October 2013. Permits to build homes fell 2.4% in March to 990,000 units. Permits for single-family homes rose 0.5%, but fell 6.4% for the multi-family sector. To help the housing sector recover, the Federal Reserve has kept short-term interest rate near zero since 2008. Low interest rates have made it easier for people to take on bigger mortgages. However, increase of one percentage point in interest rates over the past one year has had an impact. A lack of inventory, rising house prices, shortages of building lots, skilled labour shortages and rising prices for materials have also negatively affected the housing market.
Canadian mortgage insurance slashed due to overheating housing market
Canada's national housing agency will underwrite less mortgage insurance in 2014 amid fears that housing market is overheating.
The government-controlled Canada Mortgage and Housing Corporation (CMHC) said recently that the amount of insurance in force will decline to C$545 billion (US$497.15 billion) in 2014. The amount was C$557 billion (US$508.5 billion) in 2013, down from C$566 billion ($US516.75) in 2012.
Canadian house prices have risen steeply since the 2008 financial crisis. CMHC faces the difficult task of repaying lenders in case borrowers default.
The number of units CMHC insures annually has fallen 67% from its peak in 2009. Two other private agencies underwriting mortgage insurance are Genworth Canada and Canada Guaranty, but both are still a way behind CMHC which boasts a 60% market share. The CMHC's market share used to be 80% until a few years ago.
The decline in the amount of insurance in force is the second step within a month that the CMHC has taken to reduce risks.
CMHC stopped offering mortgage insurance to second home buyers, and also self-employed borrowers who fail to submit a third-party income validation.
The Canadian government has taken a slew of measures in the past five years to prevent people from taking on large mortgages. The maximum amortization period was reduced to 25 years from 40 years. Government-backed mortgage insurance is available only for homes with a purchase price of less than $1 million. It is mandatory for home buyers to make a minimum down payment of 5%, and in case the property is not occupied by the owner, the minimum down payment is 20%.