Global Property Guide - News and Discussions
Australian banks restrict lending amid housing bubble fears
Australia's major banks have tightened underwriting rules for property investors amid growing fears of a housing bubble, after the Australian Prudential Regulatory Authority warned that Sydney's housing bubble could destabilise the financial system.
Paying heed to the warning, Australia's four major banks - Commonwealth Bank of Australia, Westpac Banking Corp, ANZ Banking Group and National Australia Bank - have raised the minimum down payment to 20% of the purchase price, having previously required only 5% money down. Stricter mortgage approval criteria have been introduced, and the banks are either not providing interest rate discounts on mortgages to property investors, or discouraging discounts.
Australia's regulators still want the banks to take more steps to check the country's runaway property price rises, particularly in Sydney, asking them to set aside more capital against mortgages. Sydney's house prices have risen 40% over the past three years.
Treasury secretary John Fraser warned last month that Sydney is 'unequivocally' in a housing bubble, due to interest rates at historically low levels. 'When you look at the housing price bubble evidence, it's unequivocally the case in Sydney. Unequivocally,' he said.
Dubai-based developer to promote 37,000 properties to Chinese buyers
Dubai-based prominent real estate developer Damac Properties has inked a deal with a Chinese property broker to promote its 37,000 properties in Dubai to Chinese investors.
Beijing-based property broker 5i5j employs nearly 30,000 real estate sales professionals and boasts of "selling a unit every four minutes".
The deal underlines how Chinese investor interest in Dubai real estate is growing.
In fact, there have been many signs of this phenomenon. Dubai has seen a surge in the number of Chinese visitors in the recent past, many of them exploring real estate investment opportunities, experts believe.
In 2014, a total of 344,329 Chinese visited Dubai, an increase of 25% over 2013, according to data released by the Dubai Corporation for Tourism and Commerce Marketing (DTCM). Dubai is home to about 200,000 Chinese expatriates.
Wealthy Chinese visitors nominated Dubai as their third most preferred luxury travel destination in the world follow Australia and France in 2014, according to a luxury travel report.
Bilateral trade is also flourishing between the two countries. China has become Dubai's biggest Asian trading partner, overtaking India. The Dubai government is also trying to increase acceptance of China's currency - the renminbi - within the emirate.
Damac is targeting Chinese for both its hotels and real estate projects, said Ziad El Chaar, Damac's managing director. The company is focusing on buyers from Beijing, Shanghai and Guangzhou, as well as the northern city of Urumqi, home to China's largest Muslim population.
"[The Chinese Muslims] on their way to Makkah, pass through Dubai, so they're a growing, important part of the tourism in Dubai," El Chaar said.
He added that the tourism industry required far more flights between the UAE and China in order to grow it further.
"One of the main things that has to happen so we can get more Chinese tourists to Dubai is we need more flights from China because the demand for hospitality is always related to the number of seats you have on planes coming from that country," he said.
Spain relaxes residency permit norms for non-EU property investors
Encouraged by the recent surge in foreign investment in real estate, Spain has relaxed norms for issuing residency permits to non-EU nationals. Now a foreigner investing more than ?500,000 ($560,855) will automatically qualify for permanent residency. Moreover, residency permits will be granted not only to the investor, but also to his or her parents and children, adults as well as minors. Until now, only the spouse and minor children could qualify for residency permits. Over 350 residency permits were issued to non-EU investors during the year since the scheme was launched in February last year. The residency permits are also open to those investing in public debt, and businesses in Spain. Spain is one of the several European countries to have introduced schemes by which residency permits are granted to wealthy foreign real estate investors, in return for buying prime properties. Other countries are Portugal, Greece, Hungry, and Cyprus. The investor has to retain the property in order to continue enjoying residency benefits. In Greece and Hungary, the minimum value of the property has to be ?250,000 ($280,481). In Spain and Portugal, the minimum investment is ?500,000 ($560,855), while it is ?300,000 ($336,577) in Cyprus. Investors, mainly from China, Russia, Brazil, Angola, South Africa, and India, are applying for Golden Visas in Spain, with Chinese topping the chart by a big margin.
UK home prices to rise 25% over next five years: RICS
Reeling under the problem of acute shortage of homes, the UK's home prices will rise 25% over the next five years, according to the Royal Institution of Chartered Surveyors (RICS). New buyers are entering the market at the fastest pace in a year. Yet the supply of homes has gone down alarmingly, causing property prices to go up faster in May compared to April. The supply of homes for sales has dropped by 12% since the start of this year, said RICS. Their data is based on the average number of homes for sale on chartered surveyor estate agents' books. RICS said that the average stock of houses per surveyor has now fallen to 52, the lowest level since records began in January, 1978. Earlier it was believed that the supply of homes would rise after the general election. "There had been some hope that the removal of political uncertainty would encourage more properties on to the market, but the initial indications are that this is not proving to be the case. As a result, it is hardly surprising that prices across much of the country are continuing to be squeezed higher, with property set to become ever more unaffordable," said Simon Rubinsohn, chief economist at RICS. Rubinsohn added that the feedback RICS was receiving from its members "points to prices at a headline level rising by another 25% over the next five years". He added that there was no real confidence among members that effective measures to provide a major boost to new supply would be delivered by the government any time soon. The North West and London saw the sharpest drop in new homes coming onto the market compared with April, RICS said. "More ominously, U.K.-wide listings have now failed to see any meaningful growth since the middle of 2013," he said.
Berlin implements rent control legislation, more cities likely to follow
Landlords have been barred from increasing rents by more than 10% above the average for a locality in Berlin as legislation enacted in Germany three months ago, has come into force.
Berlin is first city to implement the rent control legislation, a move considered by many a necessity to rein in rent growth. The rate of rent rise in many areas of Berlin is the fastest in Europe.
There is already a 10% increase cap existing tenancy contracts, but new contracts will also now come under this legislation's ambit.
"The rent cap already applied to existing tenants, meaning the difference between what was charged for existing contacts and new contracts was high. The other problem is that we have 40,000 more inhabitants per year," said Reiner Wild, the managing director of the Berlin Tenants' Association.'
"We don't want a situation like in London or Paris," he added. "The reality in Paris or London is that people with low income have to live in the further-out districts of the city."
Rent control may be introduced in more German cities in the near future.
Berlin has witnessed gentrification at a very fast pace over the past one decade. Migration into the city increased, so did rents and property prices.
Rents have risen more than 30% in the past three years, according to a Jones Lang LaSalle report.
Rent control legislation was enacted in Germany in March. "We're creating a fair balance between the interests of landlords and tenants," German Justice Minister Heiko Maas said in a statement. "We want to foster and maintain the high appetite for investment in the residential market."
Foreigners buying properties in Australia illegally face jail term and fines
Stepping up pressure on foreigners suspected to have bought properties illegally, the Australian government has told buyers to come forward and disclose their unlawful transactions by November, or face three year jail terms plus whopping fines.
Under the new rules, foreigners who have bought properties illegally in Australia face fines of A$127,500 (US$100,050) and up to three years jail for individuals, and fines of more than A$637,500 (US$499,000) for companies.
Third parties such as real estate agents who knowingly assist a foreigner to breach the rules will be fined up to $42,500 (US$33,254) for individuals and $212,500 ($US166,230) for companies.
Abbott said foreigners were illegally buying into the existing residential property market and driving up prices.
"We want to ensure that locals are getting a fair go, that the playing field is at least level and, if possible, slightly tilted towards the locals," he told reporters in Sydney recently.
Foreigners need to seek permission from Australia's Foreign Investment Review Board (FIRB) before buying. They are not allowed to buy an established (previously occupied) house. They may buy an unoccupied new dwelling, but only if the FIRB feels that the purchase will not add to the shortage of properties available to native Australians. However, many foreigners are believed to have flouted these restrictions. Abbott said foreigners were illegally buying into the existing residential property market and driving up prices.
Treasurer Joe Hockey said the government was already investigating some 100 cases of illegal purchases. The Australian government has asked 55-year-old Hong Kong property developer Hui Ka Yan - the 15th wealthiest person in China - to sell a Point Piper mansion in Sydney within 90 days or face having it repossessed by the Commonwealth Department of Public Prosecutions.
Singapore's rents fall, as property prices stabilize
Singapore tops the chart of the world's most expensive cities, with high living and education costs and strict foreign labour policies. However, renters are heaving a sigh of relief as the country's rental housing markets cool. Rents have fallen to their lowest level since 2011, due to stabilizing property prices and increasing inventory. The first three months of this year saw a steep drop in rentals, causing them to plummet to the lowest level since the first quarter of 2011. Rents have been continuously falling since February, 2014, according to Singapore Real Estate Exchange (SRX) Property Index. SRX index showed that private condominium and apartment rents fell for the 11th month in a row in December last year. They dropped 0.8% in December compared to the previous month. Rents in prime central areas saw the steepest drop - 1.2% - while those in the city fringe fell by 0.6% and those in the suburban areas dipped 0.3%. Savills Research and Consultancy research suggests that average monthly rents of high-end condominiums tracked fell 5.8% year on year to S$4.57 ($3) per square foot in the fourth quarter of 2014. The luxury housing segment has witnessed the steepest drop in rents. Property prices have stabilized due to a slew of cooling measure undertaken by the government over the past few years, but the rental housing market is also cooling. These cooling measures have had a major impact. Sales of new private homes dropped in 2014 to their lowest level for six years, according to Urban Redevelopment Authority data. Another reason behind dropping rents is the increasing vacancy in the luxury property segment. The country's housing stock is also increasing, providing people with more choices and bargaining power in the rental market. The Singaporean government has already imposed several restrictions on home buyers. Debt is capped at 60% of a borrower's income. Real estate taxes have also been increased. The government recently raised the minimum cash down payment for individuals applying for a second housing loan to 25%, from the previous 10%. The government increased the additional buyer's stamp duty (ABSD) on private and public housing for foreign real estate investors from 10% to 15% in January, 2013. Foreign buyers pay ABSD, introduced for the first time in December, 2011, in addition to the standard stamp duty rates. These rules are also applicable foreigners on long-term passes (called 'permanent residents'), but they pay at a lower rate of 5%. Singapore residents have also been brought under ABSD's ambit, having to pay 7% ABSD when buying their second home. The government also introduced a Seller's Stamp Duty on industrial properties for the first time, to discourage speculative activity in the industrial market.
Global real estate boom spreading to Africa
African real estate markets are increasingly attracting overseas property investors, but the focus of buyers is shifting from South Africa to real estate markets in the continent's other countries. The result is that continent is set for a property boom, argues a recent Knight Frank report.
A fast-growing population is the key reason why international investors are eyeing residential properties in Africa. The continent is expected to be home to four billion people by 2021, nearly 40% of the world's total population.
Until recently, Africa has been a hot destination for Chinese property developers, but the continent is now attracting property investment from other Asian countries, and also from Middle East.
Nigeria's Lagos, Tanzania's Dar Es Salaam and Angola's Luanda are among the fastest developing cities in the world, with strong prospects of a property boom, according to the Knight Frank research. The report notes that apart from the demographic growth, strong economic growth is another reason why buyers are taking notice of African real estate markets.
The firm estimates that Nigeria is likely to be one of the continent's strongest property markets, stronger even than South Africa as it will be home to a quarter of the total African population. Nigeria's economy has also rebounded and grew to nearly US$892 billion in 2014.
As affordability levels in South Africa have deteriorated in the recent years, developers from South Africa are eyeing real estate markets in neighbouring countries. Xenophobic attacks in Durban recently may also deter foreign investment in South Africa's property markets in the short term, if not the long term, experts believe.
"We have seen rising interest in Africa from an increasingly diverse range of international investors, developers and occupiers in recent years,' said Tony Galetti, Joint CEO and Co-Founder of Galetti Knight Frank.
'The inflow of investment from China into Africa has been well publicized, but there is also growing activity involving investors from elsewhere, including the rest of Asia and the Middle East. Meanwhile, an increasingly significant flow of capital has emerged from South Africa into other African markets."
Vietnam to relax foreign property ownership rules, boosting overseas investment
A change in policy is set to boost overseas investment in Vietnamese real estate. The new policy, effective from July 1, will allow foreigners with a valid residential visa, plus foreign companies and international organizations, to buy residential real estate in Vietnam. Currently only foreigners married to Vietnamese are allowed to buy houses. Special permission to buy property is also granted to those considered to be making significant contributions to the nation's development. Vietnam's property markets are already booming. Causes include low interest rates, speedy urbanization and the government's focus on improving infrastructure. Besides, Vietnam's economy grew at 5.8% last year. During this year's first quarter there were over 8,000 property transactions, triple the number in the same period last year, according to the Ministry of Construction. The new rules will pave the way for a fresh wave of foreign investment in Vietnamese property markets, experts believe. Foreigners will be permitted to own 30% of all dwellings in an apartment building and 250 independent houses in a ward - an administrative area that can contain thousands of properties - with a 50-year lease. The relaxation of the rules is in accordance with similar laws in other countries in the region. In Thailand, for example, where foreigners are limited to 49% ownership of condos. Ho Chi Minh City and Dan Nang in particular will see a spurt in foreign investment due to availability of high-end apartments and luxury houses, experts say. Nearly 80,000 foreigners now live in Vietnam, but just 800 of them own residential properties, according to the Ministry of Natural Resources and Environment.
Foreign investment tumbles in Cyprus amid booming real estate markets
Most Cyprus districts saw exponential growth in the sale of residential as well as commercial properties this year. The demand for properties in Cyprus has, however, been driven by domestic buyers. Overseas investment has tumbled drastically, due to a number of factors. Land Registry offices in Cyprus received 452 contracts for the sale of commercial and residential properties and plots of land in March, up 31% compared to the same month last year. Of the 452 properties, 91% were purchased by Cyprus residents (a jump of 71% compared to the same month last year), while foreigners bought the remaining 9% (60% down). Nicosia is the only district in Cyprus where foreign investment in properties went up in March, with a 71% increase. The number of properties being purchased by overseas buyers dropped in all other districts. Only one property was sold to a foreigner in March this year in Famagusta, one of the popular districts among overseas buyers, compared to14 properties in March last year. The drop appears to be highly related to negative publicity, rather than economic factors, though the weak rouble is also a factor. Up until 2013, Chinese buyers were everywhere in Cyprus, but their number dwindled recently because allegedly they were duped by brokers and sold properties at exorbitant rates. Dubious real-estate brokers also duped Lebanese nationals into purchasing property in Cyprus on the promise that they would get them residency permits, even when they didn't fulfill the various criteria. Like some EU countries including Portugal and Spain, Cyprus also offers residency permits to foreign property investors. An overseas buyer has to spend at least ?300,000 (US$388,000) to get the residency permit.
U.S. interest rate hike may hurt Turkish residential property market: SandP
Residential property prices in Turkey will see a strong growth in 2015, but a possible rate hike by the U.S. Federal Reserve Bank will hurt the housing markets as it will discourage foreign capital flows, Standard and Poor's (SandP) said in a report released recently. Turkey's housing markets rely heavily on foreign investment. The U.S. Fed is all set to increase interest rates later this year. The U.S. central bank has kept overnight interest rates near zero since December 2008, but a number of officials have said recently an increase will likely be considered at its June policy-setting meeting. On the other hand, the European Central Bank recently launched eurozone "quantitative easing". The combined effect of both developments may discourage foreign capital flows to Turkey. The SandP report titled "Housing Markets in Israel, Russia, South Africa and Turkey Show Resilience to Weaker Economic Conditions," said that Turkish residential market gained more than 16% in nominal terms in 2014 in a sign of strong growth. "The market softened temporarily in the first half of 2014 amid slowing economic growth and interest rate hikes, but rebounded strongly as monetary conditions loosened and confidence returned," it said. "We expect domestic demand to rebound in 2015, supported by more accommodative monetary conditions and a boost to real incomes due to falling headline inflation on the back of lower oil prices, supporting demand for residential properties this year... 'Funding conditions are likely to remain supportive for the housing market in the near term. Overseas buyers' interest in Turkish real estate will continue to support the market, but strong structural demand from Turkey's young and growing population will remain the key driver of housing market activity," it added. So even though the expected rate hike by the U.S. Federal Reserve Bank is creating an uncertain environment for foreign capital flows to Turkey that could ultimately hurt the housing industry, domestic and overseas demand is rebounding, according to the SandP report. "Residential property prices in Turkey had risen strongly in 2014, gaining more than 16 percent in nominal terms. Real price gains exceeded 7 percent, up from 6 percent recorded last year," said the report. According to the research, the Turkish population is expected to grow by about 11 to 12 percent between 2012 and 2023, according to the Turkish Statistical Institute (TandUuml;and#304;K). Istanbul's population is projected to increase by 20 percent over this period, to 16.6 million by 2023.
As "baby doomers" follow "baby boomers", young Brits face impossible housing situation
Young Brits are ready to make all sorts of sacrifices so that they can afford a deposit for a home, a poll has revealed - to give up further study, postpone marriage, endure the stress of two jobs at a time, and even undergo paid medical trials to raise a deposit. A poll of nearly 2,300 young Brits, conducted by YouGov for the National Housing Federation (NHF) suggests that with the general elections less than two months away, the issue of housing affordability is on the mind of young voters. They believe that the government's efforts to contain runaway property prices have been unsatisfactory. Almost 4% of those polled said that they were considering undergoing paid medical trials to arrange for a deposit on a home. Nearly 12% said that they were likely to take up a second job, while 15% were ready to sacrifice their plans for getting married. Nearly 5% were thinking of cancelling further study. The poll found that the housing affordability levels have dropped alarmingly over the past few decades. Property today costs 7 times the average annual salary compared to 4.5 times in the 1990s. "In contrast to the baby boomers' good fortune, our children are set to be the 'baby doomer' generation, with opportunities for a good start in life disappearing," David Orr, NHF executive, said. "Our polling of young people underlines the stark reality of their situation and how they feel like they are shouting into a void. They are just not being listened to by government and are left feeling completely ignored, especially when it comes to housing." "We are talking about where our children and grandchildren are going to live. We simply cannot afford to ignore the concerns of younger people and just accept the fact that they will be considerably worse off than previous generations. This shouldn't be the case. 'That's why we are calling on the next government to produce a long term plan within a year of taking office detailing how they will commit to end the housing crisis within a generation," he added.
Indian real estate attracts global attention
The phenomenal growth in real estate investment in India is attracting global attention. With a whopping 140% increase in real estate investment to $5 billion in 2014, according to Cushman and Wakefield, India was among the world's top three countries for increased investment. 'Increased investment' is a slightly odd category. Countries which topped the list, had mostly previously crashed. Serbia was No 1 with a 610% increase in real estate investments in 2014, Bulgaria came second with a 186.5% rise in investments. Yet India's appearance on the list heralds not recovery after a crisis, but a real transformation. Overseas buyers in India invested $1.93 billion in properties in 2014, an increase of nearly 38%. Domestic buyers purchased properties worth $3.12 billion, a 62% growth. 'The huge growth in investment volumes in real estate markets are proof that investors are already acting out on their expectations of improvements in the ease of doing business in India backed by regulatory reforms to be implemented by the Prime Minister Narendra Modi led government,' said Sanjay Dutt, executive managing director, south Asia at Cushman and Wakefield. The residential sector received more investment than the commercial sector, with investors purchased residential properties worth nearly $2.6 billion.
Would a UK building boom be good news for investors?
Opinion is unanimous: Britain needs more houses. Despite plans for three new garden cities by 2020 commentators are calling for more, suggesting that it's time to re-evaluate relaxing planning restrictions on the green belt.
This isn't just a concern from housing charities, planning officials and frustrated would-be first time buyers. The impacts ripple across the wider economy, affecting UK companies. As the majority of British investors choose to put a portion of their funds in British businesses, even those who seem to have benefitted most from the current boom could find that the inelastic housing supply and consequent high housing costs are harming them.
If a much-anticipated boom in house building occurred, would it benefit British investors?
Housing squeezing household budgets
For years the dictum has been that, whether they're tenants or owner-occupiers, people should spend no more than a third of their disposable income on housing. In many places, this now sounds almost antiquated, as 31% of people spend more than this on housing costs - and the problem is far worse in London.
Wages simply aren't keeping up, meaning that disposable incomes are being squeezed even further. For the households on the lowest incomes this can mean a choice between heating and eating. What's more, as the cost of living in city centres rises those on lowest incomes are forced outwards, often adding expensive commutes to their already-overstrained budgets.
Those on middling incomes might not face such severe choices, but every pound being spent on rapidly rising rents is a pound that won't be spent in shops or restaurants, on services or holidays, or saved. While this might be good news for buy-to-let landlords, it's not so positive for consumer businesses.
Barrier to economic growth
Businesses don't just need customers - they need staff. In London and the South East house prices are frequently ten times the average salary, and a recent YouGov poll found that 70% of Londoners between 20 and 39 say that the cost of housing in London makes it difficult to work there.
The result is that there are fears of a 'reverse brain drain' and according to the YouGov survey 38% of businesses are concerned that expensive housing is making it harder to recruit and retain staff. This isn't just affecting small companies either. Even Vodafone is reporting difficulty attracting the best talent.
As even middle earners are forced to live in London's outer boroughs or dormitory communities, with consequent long commutes, employers need to factor the cost of this into their pay packages too. According to the CBI this is putting additional financial pressure onto businesses.
This all adds up to a significant barrier to economic growth.
Building in the wrong places
Where new housing is being built, it's being built in the wrong places, according to Paul Cheshire, Professor of Economic Geography at the LSE. Writing about recent house building programmes in City AM he says, "We have concentrated new supply where prices relative to earnings are least unaffordable and job prospects worst."
This holds true across the country. If this continues it raises the alarming possibility of tens of thousands of houses being built in places where people don't want to live and where there is low employment. This could end up doing little to reduce the cost of housing in more popular areas, or simply adding a lengthy and costly commute onto already high rents and mortgage payments.
Businesses who are struggling to recruit and retain staff owing to high local living costs need new housing to be linked to local employment prospects.
Increasing exposure to debt
Rapidly rising house prices aren't diminishing people's aspiration towards home ownership. They're just pushing buyers into taking on bigger mortgages, resulting in a population with ever greater exposure to debt. It is also creating a greater vulnerability to interest rate rises.
As the economy recovers there will come a point when raising interest rates is necessary to avoid destabilising inflation. Yet if this makes mortgage payments more unaffordable, leading to repossessions, as it did it the early 90s, the Bank of England will face an unenviable decision between tolerating inflation and squeezing home-owners.
Whatever happens the most vulnerable will bear the brunt, while neither scenario is likely to benefit businesses.
Knock-on effect on investors
We're now at a stage where the housing affordability crisis is not just affecting first time buyers, the young, low-waged or those living in London or the South East. For investors in British business the main concern has to be the damage unaffordable housing is doing to competitiveness, reducing the mobility of workers and increasing pay demands, while at the same time stoking a situation which could lead to future economic instability.
A building boom would help to alleviate these pressures while in turn bolstering the construction industry, providing jobs and contributing to overall economic growth. But this house building needs to be planned around what people - and the businesses they work for - really need.
This is housing in the areas of greatest need and least affordability, like Sutton and Preston. While recent proposals to build more garden cities in the Home Counties might help, building needs to include Greater London, the South West and Midlands too.
Contributed by Terri Engels
Image by DennisM2
Foreign owners in Spain to be compensated before their illegal homes are bulldozed
The Spanish government has passed a law to make it mandatory to compensate foreign buyers before their illegally built homes in Spain are demolished. The law will benefit thousands of foreign buyers, particular British, who were duped into buying illegal homes by property promoters during Spain's housing boom. Thousands of homes were built without planning permit. International buyers who bought in good faith were shocked to find that their homes were illegal. The courts often ordered homes demolished despite the fact that they had been sold. Buyers were given no compensation. Even if the homes were not bulldozed, many buyers were unable to get electricity or water because they didn't have proper documentation. When the courts ordered property promoters to compensate the buyers, the promoters often declared themselves bankrupt. However, the Spanish government recently introduced a law banning demolition of these homes without the owners being compensated. The owners will have to prove that they bought the property in good faith. The majority of these buyers were British retirees who bought homes in Spain after investing all their savings and retirement funds. They have been campaigning against demolitions for several years. One group which has raised awareness of demolitions, AUAN, was established in Almanzora, where there are 12,697 illegal constructions. The new law, passed by the ruling Mariano Rajoy-led government, dictates judges must ensure that property owners who purchased an illegally built house in good faith are compensated before any demolition order is passed. AUAN's campaigning, which inspired other groups across Spain, could see more than 300,000 homeowners in southern Spain properly compensated for their loss before their property is demolished. However he pressure group has said that it will keep on campaigning until all properties currently deemed illegal are finally recognised by the law, and provided with proper water and electricity connections.
Hong Kong and Macau residents barred from buying properties in India
India's central bank has put Hong Kong and Macau on the list of countries whose residents are barred from buying property in India without prior consent. The decision reportedly aims at preventing Chinese nationals from buying Indian real estate through these independent enclaves. Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan are already prohibited from buying properties in India. Residents of these countries must obtain permission from the Reserve Bank of India to purchase an immovable property. However, they can lease properties for up to 5 years. 'It has been observed that Macau and Hong Kong are the two Special Administrative Regions of China. As they are notified separately, it has been decided, in consultation with the government of India, that citizens of Macau and Hong Kong will also be included in the list of countries which are prohibited to acquire/transfer immovable property in India in terms of Regulation 7 of Fema,' the RBI said in a statement. It is obvious that China still has an influence over Hong Kong and China. However the more immediate spur to this move is that the Indian government has come to believe that Chinese citizens may be buying real estate in India through shell companies in Hong Kong and Macau.
Indians want capital gains tax exemptions, when they buy overseas properties!
Many Indians buying properties overseas are faced with a dilemma. The government has increased the amount of money that Indians can remit overseas, prompting them to buy properties overseas in the past few months. But at the same time, the government has scraped text exemption on capital gains reinvested in overseas properties. Under the Liberalised Remittance Scheme (LRS) introduced last year, the Reserve Bank of India allowed all resident individuals to remit $250,000 overseas every financial year for purchase of property or shares, overseas education, travel, medical treatment, apart from maintenance of relatives living abroad, gifting and donations. Earlier, this remittance limit had been $125,000. Due to the increase remittance ceiling, many Indian buyers are finding it easier to invest money in properties overseas, particularly in countries like the USA and Dubai. The new limit has brought some types of properties, for example a one-bedroom apartment in Dubai, within the reach of more buyers. However the government has scrapped the capital gain tax exemption, if the gains earned from selling a property in India are reinvested in an overseas property. Sections 54 and 54F of the Income Tax Act earlier provided that, where capital gains arose from the transfer of a residential house held for three years or more, and the tax payer reinvested the capital gains in a new residential house within a certain period, the capital gains to the extent re-invested would be exempt. The act did not stipulate that the new property should not be abroad. However the Income Tax Act was amended in the 2014 Finance Act, effective from April 1, 2014, and removed the capital gains tax exemption, where the gains are reinvested in overseas property. 'With the RBI now doubling the remittance figure, and overseas property proving to be attractive, investors are hoping for a tax break. The forthcoming Budget should consider this issue and re-introduce tax breaks on reinvestment in a house property overseas,' said Naushad Panjwani, senior executive director, Knight Frank India.
Wary of Brazil's stagnant economy and corruption, Brazilians are buying abroad
Real estate professionals have reported a surge in enquiries from Brazilians seeking to buy homes at some American locations including Miami, Orlando, New York and Boston. The increase in the number of people planning to move abroad has occured since Dilma Rousseff was re-elected as President in October. Many of these people are frustrated with increasing crime, corruption, the political atmosphere and the stagnant economy, prompting them to leave the country, according to real estate professionals. Three million Brazilians now live abroad, according to the Brazilian Foreign Ministry, and nearly 35% of those live in America. Brazilians have a strong affection for Miami, in southeastern Florida, and accounted for 51% of all tourists visiting Miami in 2013. Brazilians have been big buyers in Miami for years. However, they are now seeking long-term roots in the city, which real estate professionals say is a new trend. Alongside enquiries for homes, agents are receiving requests for advice on establishing American residency or citizenship. Most prospective buyers are rich Brazilians based in Rio de Janeiro and Sandatilde;o Paulo who want to move capital out of the country because of concerns about Brazil's current political situation, according to real estate professionals. President Rousseff's popularity has been going downhill since her re-election. In a recent poll by Datafolha, only 23% respondents rated her good or very good, the lowest level since she took office in 2011 and the worst for any Brazilian leader since Fernando Henrique Cardoso in 1999. Her rating has tumbled from 42% in December.
European property markets will continue to rebound in 2015
Europe's peripheral residential property markets have been going downhill since financial debacle seven years ago, but they will likely improve in 2015, according to a Fitch Ratings report. The outlook for the German, Dutch, Danish, Irish, and Spanish markets is particularly positive. In fact, most of these markets witnessed increase in property transactions and mortgages issued to home buyers in 2014. All of them are at various stages in recovering from pronounced house price corrections. Economic growth, low interest rates, and improved affordability are among the supporting factors for mortgage and housing markets in these eurozone peripheral markets, according to the report. The strongest outlooks are for Denmark and Germany. In both the countries, arrears are likely to be low and stable in 2015-2016, as they will in France and Belgium. However, the latter two markets will continue to experience falling house prices, due to overstretched affordability (France) and tax changes (Belgium), while Germany and Denmark will see prices rise by 3%-4%, the report says. Markets in Spain where property prices have declined by 40% in the past seven years will stabilize as further drop in prices is unlikely. Besides, the number of non-performing loans will also come down after 2015. However, high unemployment rate and persisting deflation are some of the factors which may negatively affect the recovery in Spain. Ireland witnessed a rise in property prices in 2014, but the house price growth is likely to slow down this year because of declining affordability levels. "Lending, and with that house price growth, will depend on whether and how the central bank implements proposed loan-to-value and loan-to-income caps... which we think would reduce long-term mortgage credit risk," the report says. While, the recovery of property markets in Greece will suffer as new mortgage lending has hit a new low, a persistently weak labour market and return to recession could see arrears rise modestly this year and house prices continue to fall in Italy. The UK and the Netherlands are already among Europe's largest mortgage markets and both could see increases in new mortgage lending of around 10% due to improving housing market liquidity, the report says. UK house prices will rise again, reflecting continuing demand, low rates, and the economic recovery. But deteriorating mortgage affordability means the overall rate of increase will slow sharply, to around 2%. The slowdown will be notable in the South East, while prices in the North could catch-up, narrowing the past regional discrepancy. Rate rises should be modest and gradual, limiting the impact on prime performance and continuing the trend towards fixed rate borrowing, according to the report.
Sharp correction ahead for Dubai
"Property prices in the emirates could slide by between 10% and 20% this year, depending on location and investor sentiment," say SandP regional property analysts Franck Delage and Gregg Lemos-Stein. They are one of a growing group of professionals sounding the alarm as Dubai responds to falling oil prices. International property investment agency JLL also recently predicted that prices and rents in Dubai would drop this year by an average of 10%. The value of Dubai property transactions fell 7.6% to Dh218 billion (nearly US$59.35 billion) year-on-year in 2014, according to Dubai Land Department data. Cooling measures introduced by the government have added to the pressure. The government doubled the property transaction tax and asked the United Arab Emirates central bank to restrict mortgages after Dubai's property prices soared 56% in just two years. Dubai home sales declined 3.2% by value in 2014 due to the cooling measures. Home sales by value fell to dh60 billion (US$16.3 billion) in 2014, from 62 billion dirhams (US$16.88 billion) in 2013, according to Dubai's Land Department. However few believe that the market will crash like it did in 2008 when property fell more than 50% in value. The real estate market is showing a "trend towards maturity," said Sultan Butti bin Mejrin, director general of the Dubai Land Department, adding that any drop in prices will help attract investment.