Global Property Guide - News and Discussions
Property prices to go up in Dubai, HSBC rules out property bubble
Residential property prices in Dubai will increase by 10-15% in 2014, according to a HSBC Global Research report. Housing sales prices increased by 6.3% in the year to February. Rents increased by 5.2%. "We forecast 10-15% growth in prices from current levels in 2014 and relatively stable net yields at 4.5%-5%andhellip; We expect this trend to continue at least for the next two years as the economy recovers and Dubai maintains its reputation as a safe haven in the region," the bank said. HSBC rules out the possibility of a property crash, as the market is sustainable and headed for healthy growth. HSBC Global Research said that there will a supply of 90,000 new units in Dubai by 2018, however, it will not result in oversupply as the new housing units will be absorbed by the growing population. "We believe that we have not yet reached the peak of the cycle, and that the market can continue to absorb the expected supply additions over the next few years, even at a population growth rate below 5 per cent. The Dubai population would need to increase by 300,000 people by 2018 in order to absorb all of the new supply," the bank said. The trend of increasing foreign investment in Dubai is likely to continue. The bank said, "We assume that 30% of this new supply will be bought by foreigners who intend to use them as second homes, which they will not rent out." The bank's estimates are along the lines of figures released by the Dubai Land Department (DLD) which suggest that Indian, British and Pakistani nationals are increasingly buying real estate in Dubai. Investment by buyers from three countries doubled in 2013 from the previous year. Real estate transactions worth Dh236 billion (US$64.25 billion) were recorded in 2013, up from Dh154 billion (US$41.93 billion) in 2012 - growth of 53%. Buyers from 140 countries invested Dh69b billion (US$18.78 billion) in real estate in Dubai in 2013. Indians bought property worth Dh18 billion (US$4.90 billion). Britons and Pakistani nationals were at second and third place, with investment worth Dh10.4 billion (US$2.83 billion) and Dh8.6 billion (US$2.34 billion).
Chinese cities to relax property restrictions
Following falls in housing prices, several mainland Chinese cities are set to relax restrictions imposed on home purchases by provincial governments four years ago. The restrictions are being relaxed to ensure stability of real estate markets and the economy, according to reports.
Since April 2010, China has imposed a slew of measures to cool property prices, amid fears of a property bubble. The measures have included 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 imposed these restrictions to various extents.
Many cities have reported home price declines over the past two years after restrictions yielded results, raising fears of a GDP growth slowdown.
To ensure that the restrictions do not negatively affect them, some cities are now relaxing.
Wenzhou in eastern China's Zhejiang province, Zhejiang's capital Hangzhou, and Changsha in central China's Hunan province are among the cities planning to relax the curbs. These cities have sought central government permission to relax, according to reports in the local media. However, curbs meant to prevent speculation will not be relaxed.
Shanghai last year told banks to stop issuing loans for third home purchases. Beijing announced that single residents would only be allowed to purchase one home. In some cities, people are not allowed to take loans worth more than 30% of the dwelling price.
China's home price rises slowed in January and February, the first slowdown in 14 months. Average new home prices in China's 70 major cities rose 9.6% year-on-year to January 2014, down from the previous month's 9.9% rise. Prices in Beijing rose 14.7% year-on-year to January, compared with a 16% increase in December, according to data released by the National Bureau of Statistics.
Mainland property stocks surged recently, amid the reports of relaxations.
New bill to boost foreign property investment in Cuba
A bill passed recently by Cuban National Assembly will allow foreign investment up to 100% in residential and commercial real estate among several other sectors in Cuba. The bill, which is likely to come into effect by the end of June, aims to boost Cuba's stagnant GDP growth. According to the bill, foreigners will be allowed to buy residential properties and real estate meant for housing, offices and tourism development in Cuba. Apart from real estate, foreigners will be able to invest in all other sectors excluding health, education and armed forces. Foreigners would be able to establish 100% foreign-owned companies on the island as well as joint ventures and operating agreements with privately-owned cooperatives, in addition to joint ventures and operating agreements with state companies, according to the details of the bill published in the local media. "The Cuban economy needs more than $2 billion in foreign investment every year in order to achieve a necessary 7% growth rate," Cuba's chief coordinator of reforms Marino Murillo told the legislature when the bill was passed recently. After the law is implemented, the government will have to dispose of a foreign investor's application within 60 days by approving or denying it. The bill will reduce the stiff government control, lower the taxes and increase flexibility, apparently with full legal protection of foreign investors. The bill also aims to do away with negative environment surrounding the existing foreign investment laws. Red-tapism, corruption, breach of agreements in joint ventures, non-payment to investors and a weak economy are some of the reasons discouraging foreign investment. Foreign investment is being allowed in order to achieve GDP targets set in 2011. Former Cuban Central Bank economist Pavel Vidal recently referred to the move as the last opportunity of the reform to move growth closer to these goals. The new law replaces a 1995 decree has been passed in the National Assembly, and will come into effect 90 days after publication in the Official Gazette.
U.S. pending home sales index steadily declining
With mortgage interest rates rising, this February the number of Americans signing home purchase contracts fell to its lowest since October, 2011, said the National Association of Realtors. The National Association of Realtors' seasonally-adjusted pending sales index fell 10.5% in the year to February, the eighth consecutive month of decline. The index measures contracts signed to purchase homes. Contracts usually take from a few weeks to two months to close. The drop is attributed to a lack of inventory, rising house prices and the increase of one percentage point in interest rates over the past year. The average 30-year fixed-interest mortgage rate was between 4.23% and 4.37% in February, having gradually risen since May last year. The harsh winter may have also impacted pending sales. "Unusually disruptive weather across large stretches of the country in December forced people indoors and prevented some buyers from looking at homes and making offers...Rising home prices are also giving pause to some potential buyers, while at the same a lack of inventory means insufficient choice," said Lawrence Yun, chief economist for the National Association of Realtors. About 5 million previously-owned homes will be sold in 2014, slightly lower from the previous year, according to the National Association of Realtors. About 5.1 million previously-owned homes were sold in 2013. Sales of new homes dropped by 3.3% in February compared to the previous month, according to the Commerce Department. Loan applications for housing purchases also fell in February. New federal rules enforced last month likely had an impact. The rules discourage mortgage lenders approving loans to people whose monthly debt repayments exceed 43% of monthly gross income, thus rendering many young adults unable to qualify for a mortgage.
BoE to toughen UK home loan underwriting standards
The Bank of England (BoE) is likely to introduce tougher home loan underwriting standards next month, after mortgage borrowing by home buyers in the UK reached a record high. UK home prices are now steeply rising, and borrowers are taking bigger mortgages. But this is happening at a time when there is a possibility of a sharp rise in interest rates. According to the BoE, the portion of borrowers' income going into paying mortgages is higher than at any time since its study began in 2005. Mortgage demand has increased by 40% in the year to January, the BoE said. The BoE's Financial Policy Committee (FPC) has also asked banks, when approving mortgages, to consider the consequences for the borrower of an increase in interest rates in the future. The BoE has kept interest rates at 0.5% for five years. However, it recently hinted that interest rates would start to rise gradually, and might go up to 3% within two or three years. After the tougher standards come into effect, the banks may ask applicants to prove that they would be able to pay their mortgages even if interest rates rise, and their repayments are higher. The Office of National Statistics last week revealed that the average UK home is now priced at £254,000 (USD$422,780). London prices are now 23% above their pre-2008 peak. 'Given the increasing momentum, the FPC will remain vigilant to emerging vulnerabilities, will continue to monitor conditions closely and will take further proportionate and graduated action if warranted.' The BoE will also make banks conduct stress tests to ascertain if they would land in trouble if there is a steep fall in housing prices and a rise in interest rates. 'A key part of the scenario would examine the resilience of the banks to a housing market shock and to a snap back in interest rates,' the bank said. There are currently about 11 million mortgages in the UK.
Malaysia property: minimum price foreigners must pay doubled
The Malaysian government has imposed new restrictions on foreigners looking to buy residential property in the federal territories of Kuala Lumpur, Putrajaya and Labuan. Foreign buyers cannot now buy a house priced lower than MYR 1 million ($304,800). The ruling is aimed at controlling property speculation and "to enable local interests to acquire quality properties", the government said. Malaysia's federal territories enforced this new ruling from March 1 in compliance with a circular issued by the Economic Planning Unit (EPU) of the Prime Minister's Department. The circular left it to the state authorities to decide the date of implementation in their respective state. Some states including Johar have announced that the ruling would be imposed from May 1, so that developers could get two months' time to sell residential properties previously offered to foreign buyers at or just above the minimum price of RM500,000 ($152,850) per unit. Some states in Malaysia have set their own minimum floor price for foreign buyers. For example the Penang state government has set its minimum floor price for foreign buyers at RM1 million ($304,800) on the mainland, and RM2 million ($609,600) on the island. The new curb has doubled minimum floor price of RM500,000 ($152,850) previously imposed in federal territories, and in most other states. 'This measure is undertaken to stabilise domestic property prices from excessive speculation activities, as well as to enable local interests to acquire quality properties valued at less than RM1 million per unit, especially residential units,' said the EPU in a statement. Rising housing prices are causing concern in Malaysia. Several measures to control property speculation have been taken by the government recently. Last month, it announced that developers would soon be required to obtain permission before making bulk sales of more than four units. Last year, the government doubled the Real Property Gains Tax (RPGT) to 30% for properties disposed of within three years of acquisition.
Rising house prices push Australian Parliament Committee to review foreign investment laws
Australia will review the laws governing foreign investment in the residential market, amid concerns that large-scale purchases of homes by foreigners are driving up housing prices. Chinese investors, according to some studies, are purchasing up to 12% of all new residential dwellings in Australia. Victorian MP Kelly O'Dwyer will chair the Federal Parliament's House Economics Committee to investigate if young families are being priced out of the residential market due to foreign investment. The committee will hold public hearings in 'real-estate hot spots' to do a reality check. Having bought AU$24 billion (US$21.80 billion) of housing over the last seven years, Chinese buyers are likely to purchase AU$44 billion (US$39.97) worth of Australian residential property by 2020, according to a recently-released report by investment bank Credit Suisse. Although only an estimated 12% of all new properties in Australia are now being bought by Chinese investors, the ratio is higher in major cities. Chinese investors are estimated to be buying 14% and 18% of all new dwellings in Sydney and Melbourne respectively. Some apartment blocks in the two cities are believed to be having 100% ownership and occupancy by Chinese nationals. "The committee would look into the current foreign investment framework to assess how it accords with real estate and whether it's driving up prices...The great Australian dream is to own your own home and we know that's pretty difficult even with two incomes and lots of years of savings and a large mortgage so we want to make sure we're not making it even more difficult,' said O'Dwyer. She added that the original mandate for foreign investment in residential real estate was to increase dwelling stocks and add jobs in the Australian construction industry, and the inquiry will determine whether those aims are still being achieved. The Opposition has also extended its support to the government's initiative and welcomed the enquiry. Opposition leader Bill Shorten said that Labor will be 'supportive and cooperative' with the inquiry. "While we will support the inquiry, the foreign investment is not the only issue. We've got to make sure that ordinary Australians can get their deposit together, we've got to make sure that the land is released, that they have adequate infrastructure,' said Shorten. Chinese investment in Australia's residential and commercial properties increased by 42% during the last financial year. Total investment from Chinese buyers was AU$5.9 billion (US$5.3 billion) compared with AU$4.9 billion (US$4.39 billion) and AU$4.4 billion (US$3.94 billion) from Canadian and American investors respectively, according to the FIRB. Australia's Foreign Investment Review Board (FIRB) grave permission for 11,668 residential property purchases by foreigners in 2012-13, an increase of 19% on the previous financial year. All non-residents must obtain permission from the FIRB before buying residential property in Australia. They are not allowed to buy an established (previously occupied) house. They may be allowed to buy an unoccupied new dwelling, if the FIRB feels that the Australia's housing stock has increased i.e., if the purchase of houses by foreigners will not cause shortages for the natives. Temporarily establishing residence in Australia for the purpose of buying a house is not a viable alternative to obtaining FIRB permission, since temporary residents must sell their property if they leave Australia. 'We want to know though whether or not the current laws and the current framework are being properly adhered to," said O'Dwyer.
New Zealand property market remains hot despite lending restrictions
Restrictions on high-debt lending caused a fall in home sales year-on-year to February, according to the Real Estate Institute of New Zealand (REINZ). The restrictions mostly impacted the first time buyers, experts said. But house prices rose after two months of decline, the price rise in February being attributed to an increase in sales of higher-priced properties. The median transaction price in New Zealand increased 8.6% to NZ$ 415,000 (US$ 355,406) from a year earlier, though home sale volumes fell by 7.6% year-on-year to February, with real estate agents selling 6,125 residential properties, according REINZ. Sales of higher priced properties worth NZ$ 600,000 (US$ 513,840) to $1 million (US$ 857,200) rose by 9.2%, REINZ said. Sales of properties worth less than NZ$400,000 (US$342,880) fell by 18%. The total value of residential sales rose to NZ$ 3.17 billion (US$ 2.72 billion) in February, from $3.15 (US$ 2.70 billion) a year earlier. 'While first home buyers are mostly sitting on the sidelines, the focus on the market has moved to higher price ranges, with a subsequent upward influence on the median priceandhellip; The increase in prices may be evidence of more activity taking place in higher price brackets, beyond the reach of most first-home buyers,'' said REINZ's chief executive Helen O'Sullivan. 'The results for February show further evidence that the national sales volume trend is easing, with only two of 12 regions showing an increase in sales volumes compared to February 2013,' said O'Sullivan. She added that market feedback suggests first homebuyers may be tentatively returning - with some assistance - to certain markets. "This is by no means a consistent message, with views decidedly mixed across the country; some regions are reporting increasing interest from first home buyers, while others report little in the way of activity,' she said. Continuously rising home prices had forced the Reserve Bank of New Zealand to introduce loan-to-value ratio (LVR) restrictions on mortgage lenders in October, 2013. Banks are restricted to issuing 10% of new residential loans to customers with loan to value ratios (LVR) of more than 80%, i.e., generally customers should deposit at least 20% of the home's value.
Property investment in Australia attracting more Asians, despite hurdles
Foreign investment in residential property in Australia is growing rapidly, despite restrictions. Australia's Foreign Investment Review Board (FIRB) grave permission for 11,668 residential property purchases by foreigners in 2012-13, an increase of 19% on the previous financial year, according to the FIRB. All non-residents must: Obtain permission from the FIRB before buying residential property in Australia. Are not allowed to buy an established (previously occupied) house. May be allowed to buy an unoccupied new dwelling, if the FIRB feels that the Australia's housing stock has increased i.e. purchases of houses by foreigners will not cause shortages for the natives. 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.
"Foreign investment in the Australian residential real estate sector fetched AU$17 billion (US$15.21 billion) last financial year. Investment in commercial properties was AU$35 billion (US$31.33 billion). Nearly 12,025 purchases by foreigners of commercial real estate were approved, including offices, shopping centres and hotels. Investment in commercial properties was also 19% higher than the previous financial year," according to the FIRB report.
Asian investors are widely believed to be driving up Australian housing prices, by buying homes for children studying in Australia.
Chinese citizens are now the largest group of foreign investors. Chinese investment in Australia's residential and commercial properties increased by 42% during the last financial year. Total investment from Chinese buyers was AU$5.9 billion (US$5.3 billion) compared with AU$4.9 billion (US$4.39 billion) and AU$4.4 billion (US$3.94 billion) from Canadian and American investors respectively. American investment in Australian property slumped by 85% during the latest financial year.
A recent survey by HSBC, the UK and Asian-based bank, confirms that Australia is a favourite destination for affluent Asians buying properties overseas.
Out of 7,245 affluent individuals surveyed in seven Asian nations, 18% of Indians, 9% of Chinese, 19% of Singaporeans and 26% of Malaysians had invested in Australian property.
Of affluent Asians looking to buy in Australia in the coming year, 25% are planning to buy in Queensland, 23% in the Australian Capital Territory, 20% in Victoria, 18% in New South Wales and 16% in Western Australia, the survey found.
Instead of investment, several other factors including availability of good education, better health system, comparatively cleaner environment and better living standards are believed to be attracting Affluent Asians.
China residential property "cooling" still pretty hot!
China's housing price rises slowed in January and February, the first slowdown in 14 months. This suggests that the Chinese government's efforts to cool the property market over the past four years are finally showing results. However, this 'cooling' is only a slowing of price rises - i.e., residential property prices are still rising at a rapid rate. Average new home prices in China's 70 major cities rose 9.6% in year-on-year to January, easing from the previous month's 9.9% rise. Prices in Beijing rose 14.7% year-on-year to January, compared with a 16% increase in December, according to data released by the National Bureau of Statistics. "Because of the effects of a series of government measures, including tightening curbs in some cities and an increasing supply of affordable housing, the market environment and pricing expectations were relatively stable," Liu Jianwei, a senior statistician at the National Bureau of Statistics, said in a statement accompanying the data. "Tightening credit conditions and easing pressures from housing inventories also helped home sales to drop, which in turn eased the home price rises further in some cities," the statistician added. Adding force to the NBS's data, two private surveys show similar trends for February. Prices of new homes in 288 major cities rose 9.08% year-on-year to February, down from January's annual rise of 9.39%, according to E-House China - the slowest gains for 10 months. China Real Estate Index System (CREIS)'s survey showed prices rose 10.8% in February from a year earlier, easing from 11.1% annual gains in January. Since April 2010, China has imposed a slew of measures to cool property prices, amid fears of a property bubble. The measures include higher down payments, limits on the number of houses that people can buy, the introduction of a property tax in Shanghai and Chongqing, and the construction of low-income housing. China's central government last year told local governments to take firm measures. In response, Shanghai told banks to stop issuing loans for third home purchases. Beijing announced that single residents would be allowed to purchase only one home. The easing has raised fears of a slowdown in GDP growth, as China's housing market and property lending are crucial to the national economy.
Record rise in home loan approvals in UK
Mortgage assistance schemes for first-time home buyers caused a record rise in home loan approvals in the UK in January, the highest in six years, according to the British Banker's Association (BBA).
Mortgage lending by BBA members was 38% higher year-on-year to January. The number of approved, but not-yet-lent mortgages, saw a 57% increase.
The figures put mortgage approvals at their highest since September 2007.
"Approvals for new purchases have climbed quite significantly and are now at their highest point since September 2007. Mortgage borrowing continues to rise compared to a year earlier as mortgage assistance schemes help first time buyers and housing chains more generally," said BBA statistics director David Dooks.
The government's Help to Buy scheme makes it possible to buy a new-build or existing home priced up to £600,000 with as little as a 5% deposit. UK policy makers, including prime minister David Cameron, have dismissed concerns that Help to Buy might cause a housing bubble.
House prices continue to surge in the UK. The average price of a home was 9.4% higher year-on-year to February, the strongest rate of annual growth since May 2010, according to Nationwide.
'Demand continues to be supported by record low interest rates, improved credit availability and rising consumer confidence thanks to the healthy gains in employment recorded in recent quarters,' said Robert Gardner, Nationwide's chief economist.
'Price growth is being supported by the fact that the supply of housing remains constrained, with housing completions still well below their pre-crisis levels, which was already insufficient to keep up with the pace of household formation,' he added.
Less than 110,000 new homes were built in last year, 38% below the number built in 2007.
In January 2014, the number of houses for sale in the UK hit a new low, while potential buyer numbers continued to surge, according to the latest Royal Institution of Chartered Surveyors (RICS) report.
New immigration rules to impact Canada's housing market
The Canadian government's decision to axe a 28-year-old visa scheme for immigrants will have a substantial impact on the housing markets in Canada, especially in Vancouver and Toronto, experts say. Canada scrapped its Immigrant Investor Program earlier this month. The scheme was particularly popular with wealthy real estate investors from mainland China. Under the program, foreign investors with a minimum net worth of C$1.6 million (US$1.44 million) were granted Canadian residency in return for making an interest-free loan of C$800,000 (US$726,720) to the government for five years. The government returned the principal amount in instalments over five years. Canadian Finance Minister Jim Flaherty announced recently that the Immigrant Investor Program had been scrapped. 'For decades, it has significantly undervalued Canadian permanent residence, providing a pathway to Canadian citizenship in exchange for a guaranteed loan that is significantly less than our peer countries require. There is also little evidence that immigrant investors as a class are maintaining ties to Canada or making a positive economic contribution to the country,' the minister wrote in the 2014 budget report, adding that immigrant investors pay significantly lower taxes over a lifetime than other categories of economic immigrants. Nearly 65,000 applications for Canadian residency under the Immigrant Investor Program were pending when the scheme was axed. Of the total applications, 45,500 were from mainland Chinese. Nearly 40,000 of these investors were likely to buy residential property in Greater Vancouver over the next six years, according to a report published in the South China Morning Post. There was no direct reference to the decision's impact on the housing market in the budget report. Experts, however, said that after scrapping of the scheme, Chinese investors who were making a beeline to buy properties in Canada, particularly in Vancouver, will be attracted towards residential markets in other counties, including Australia and the U.S. Canadian Imperial Bank of Commerce's (CIBS) deputy chief economist Benjamin Tal says his own research shows there has been a "significant softening" in activity in high end home sales in Vancouver, Canada's most expensive city. 'It definitely has impacted the high end of the market. It is not that activity is going down, it is simply not rising," the economist was quoted as saying. Canada's government has been taking measures to cool down expensive housing market for the past few years. One of the factors inflating the market was large-scale investments from wealthy Chinese. The Canada Mortgage and Housing Corporation (CMHC) tightened mortgage lending in 2013 by limiting guarantees it offered to banks and other lending companies, in an attempt to control rising housing prices. Earlier tightening steps included reducing maximum amortization periods from 30 years to 25 years, and reducing the maximum loan-to-value (LTV) ratio from 85% to 80%.
Singapore's foreign real estate investment curbs won't be relaxed anytime soon
The Singapore government's measures to cool down the property market have succeeded, but it is too early to relax them, said Finance Minister Tharman Shanmugaratnam while unveiling the 2014 national budget in the Singapore parliament recently. 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 stability of Singapore government and the country's robust economy has attracted large numbers of foreign investors. The government is not engineering a hard landing, added Shanmugaratnam, but given the increase in prices in recent years, it was too early to start relaxing. 'Our cooling measures are aimed to moderate the market and prevent the property prices from getting too far out of line with incomes...The government will continue to monitor the property market and adjust the measures when necessary,' the minister said. The government recently also raised the minimum cash down payment for individuals applying for a second housing loan to 25%, from the previous 10%. The government also introduced a Seller's Stamp Duty on industrial properties for the first time, to discourage speculative activity in the industrial market. The government's policies are partly a response to low interest rates. "The restrictions were imposed as the continued buoyancy of the property market reflects the very low interest rate environment and continued income growth in Singapore,' said the Inland Revenue Authority of Singapore. 'These factors supported a record level of housing transactions, particularly from investment demand. Housing prices have also shown signs of reaccelerating in recent months. Price increases, if not checked, will run further ahead of economic fundamentals and raise the risk of a major, destabilising correction later on.'
Mortgage applications drop in US, student debt blamed
Loan applications for housing purchases fallen alarmingly in the U.S recently, a development which experts fear will negatively affect the housing recovery and the overall economy. Mortgage applications saw a steady decline in February. The Mortgage Bankers Association reported that applications for the week ending February 14, 2014 had dropped by 4.1% from one week earlier, after falling 2% from the previous week. Mortgage originations dropped $97 billion to $452 billion from the third quarter to the fourth quarter of 2013, while student debt increased to $1.08 trillion, up $53 billion, a report prepared by the Federal Reserve Bank of New York stated. Average student debt per borrower in U.S. is nearly $24,810. Rising student debt is preventing first time buyers from purchasing houses, leading to a fall in house loan applications. "Student debt is likely to have a dampening effect on young peoples' ability to borrow for a home, and that's going to impact the housing market and the economy at large. It is a cause of concern for us," said David H. Stevens, chief executive of the Mortgage Bankers Association. Some federal rules enforced last month are also likely to have a bearing on the home loan qualification criteria. The rules discourage mortgage lenders from approving loans for people whose total monthly debt exceeds 43% of their monthly gross income, thus rendering many young adults unable to qualify for a mortgage. The housing sector has been hit hard by a recent drop in housing starts due to harsh weather conditions. The number of house starts dipped 16% in January compared to December. It was 2% lower year-on-year to January. New home starts in January were at a seasonally adjusted annual rate of 880,000, below December's revised estimate of 1,048,000. House permits - which indicate future construction of new residential buildings - also dipped by 5.4% in January compared to December.
Golden visa schemes for non-EU investors gaining momentum
Spain has started issuing residency permits to non-EU nationals in return for real estate investments of ?500,000 ($670,000) or more, almost five months after introducing a law to this effect. A businesswoman from Shanghai became one of the first foreign investors to receive this residency permit after she invested ?520,000 to buy flats in Barcelona and Madrid.
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.
These residency permits aim to bolster ailing European countries, increase employment and boost real estate.
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 ($335,000). 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.
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.
Mainland Chinese investment in Europe tripled last year as insurers, developers and private individuals joined the country's sovereign wealth funds in seeking to diversify their assets outside Asia, according to research firm Real Capital Analytics (RCA).
Property speculation forces Malaysian government to control bulk sales
The Malaysian government will soon require property developers to obtain permission before making bulk sales of more than four units. The move is aimed at curbing rising property speculation, and to give ordinary individuals an equal opportunity to buy houses. The Ministry of Urban Wellbeing, Housing and Local Government is currently formulating guidelines to this effect and likely to implement them in a month's time, minister Datuk Abdul Rahman Dahlan said. The guidelines aim to discourage big investors and property investment clubs from making bulk purchases of properties. Rising property prices fuelled by easy financing have been a cause of concern in Malaysia recently. After the guidelines are implemented, a developer will have to obtain prior approval from the Controller of Housing to make bulk sales of more than four units. "Speculators are not breaking any laws, but a check on such bulk purchases is necessary as they could create fluctuation and inflate the property market. They also deprive ordinary house-buyers of equal opportunities," said the minister, stressing that housing prices should be determined by demand and supply, not by unhealthy speculation. He said the ministry is talking to Real Estate and Housing Developers' Association of Malaysia and various other stakeholders in the industry before announcing the new guidelines by next month. "In order to curb speculative activities by 'property investors clubs', my ministry will establish a comprehensive database of house buyers so that we can identify the number of houses owned by an individual and take the necessary steps to curb unhealthy speculation," he said. Opposition leaders lauded the government's plan to curb property speculation, but stressed that any measures should not hurt the property market. The government last year doubled the Real Property Gains Tax (RPGT) to 30% for properties disposed of within three years of acquisition. It forbade banks from offering financing via Developers Interest Bearing Schemes (DIBS), where the developer paid the interest on buyers' loans during construction of a project. DIBS-financed projects have tended to be significantly more expensive than others, as their prices include financing costs and reflect future property values. According to some, the schemes distorted the market, and in any case, added to buyers' liquidity. The government announced earlier this month that it would offer financial aid of up to RM30,000 ($10,000) for each unit built under the MyHome scheme, i.e. housing units for those who earn less than RM3,000 ($1,000) a month and set aside a budget of RM300 million ($100 million) for the massive project.
UK housing shortage, first time buyers, pushing prices up
There is a shortage of homes in the UK housing market, according to the latest Royal Institution of Chartered Surveyors (RICS) report. Their evidence?In January 2014, the number of houses for sale hit its lowest point, while potential buyer numbers continued to surge across the UK. However supply may increase during the traditional spring bounce, according to some agents surveyed. Prices in the UK housing market moved 9% higher during the year to January, helped by first-time buyers. A typical home now costs £14,000 more than in the same period last year. January saw the 13th consecutive monthly price rise, while the rise during the month was 0.7 percent. The average cost of a home in January 2014 was just under £176,500. Annually, prices have risen 8.8% during the year to January, the highest rise since May 2010. There were 73,700 borrowers across the UK buying their first house during the last three months of 2013, representing a 32% increase over last year, according to the Council of Mortgage Lenders. First time buyers have increased more than any other type of buyer, note Connells, the property valuation company. This is perhaps the most important reason for spike in the housing demand. In addition, rising home prices in many parts of the country are driven by shortage of properties, according to RICS' global residential director, Peter Bolton. While increased activity in the property segment during the New Year is pretty much a norm, January 2014 was nearly a stampede, according to John Bagshaw, Connells' corporate services director. "The seasonal rebound between December and January has been significantly stronger than we usually experience," he said. An important factor is the government schemes, the Funding for Lending and Help to Buy schemes, which have been accessed by a large number of first time buyers. In addition, lenders are today more confident than during the past years, and therefore willing to target new buyers, according to Bagshaw. According to the RICS report, the level of homes sold was 21.1 per chartered surveyor over the three previous months, which represents a considerable increase over the same period in 2013, when the figure was just 16. The future outlook is appears positive with transaction numbers and future prices likely to increase over the next three months. Yet, some analysts are worried about the strong start to 2014 leading to a likely bubble. They had expected the Bank of England to take a timely action to prevent the bubble. The figures appeared worrisome to the housing charity Shelter, who look forward to "bigger, bolder" ideas from the government to provide affordable homes. However the government is focused on an election victory, hence its artificial measures to boost to the UK's already-overvalued property market. The Bank of England has also assured the government that there will be no official interest rate increase before the elections.
New Zealand banks' loan portfolio is 60% housing loans
An external shock could trigger a major correction in housing prices in New Zealand, an international rating agency's new report has warned, causing a crisis for New Zealand's banking system. House prices in New Zealand are sensitive to developments in the economies of China and Australia, its two biggest trading partners, a report prepared by Standard and Poor's has warned. "Persistent house price inflation in New Zealand could trigger the risk of a sharp property price correction sometime in the future, particularly if there is an external shock to the economy...We are of the view that a hard landing in China could potentially have a material impact on the New Zealand banking system," noting that house price corrections could trigger significant bank credit losses. A hard landing in China could result in a huge deterioration in the terms of trade, weakening the country's export earnings and business and consumer confidence, and impacting labour market and household debt-servicing ability, says the report. Residential property loans account for about 60% of total lending by the banking sector in New Zealand. Continuously rising home prices been a cause of concern in New Zealand, forcing the Reserve Bank of New Zealand to come up with loan-to-value ratio (LVR) restrictions on mortgage lenders in October, 2013. Banks have been restricted from issuing more than 10% of new residential loans to customers who have a loan to value ratio (LVR) of more than 80%, i.e., generally customers should at least deposit 20% of the home's value. The last couple of months saw a cooling of the New Zealand's housing market, with prices falling in December and January, and sales down in December, according to the Real Estate Institute of New Zealand (REINZ). Quotable Value reported last week that the nationwide residential values had increased 9.6% year-on-year to January.
Against all odds, Spanish families are wedded to home ownership
Spanish families remain enthusiastic about home ownership, despite an upsetting unemployment rate, a five-year-long housing bust, and limited means of credit.
Data recently released by the Bank of Spain suggests that Spanish families continue to hold on to their cultural legacy with 83% of them being proud owners of their own homes, a percentage that is one of the highest in the world. Nearly 27% percent of the Spanish families own a second or holiday home, according to the Bank of Spain, despite the fact 27% of them have mortgage debts due on their primary home.
Spain went through one of the worst housing crashes between 2007 and 2012. The country is yet to recover from the ramifications.
Spain, Europe's fifth-largest economy, has witnessed a drop of up to 40% in home prices since 2007. Unemployment remains high. Access to credit is restricted. So home prices are expected to fall a further 10% to 15%. Home prices inSpain fell by 16% year-on-year to November, 2013, according to the National Statistics Institute. Home prices are still declining at a rate of 4.1% on a monthly basis.
About 584000 dwellings are vacant in Spain, waiting to be sold, the government estimates.
About 90% of the Spanish families owned some sort of property in 2011, and dwellings accounted for 84% of the household wealth. Half of all households in Spain have some sort of debt to pay with the average value of debt being ?42,900.
Young families are especially burdened: 81% of young families, i.e., where the main bread earner is under 35 years old), have property-related debts.
Recent months have witnessed an improvement in foreign investment in Spanish real estate. In addition, the recovering economy is boosting sellers' confidence.
Foreign buyers and lax policy inflating London housing bubble, warns Ernst and Young
The Bank of England should consider imposing a formal limit on mortgage to income multiples to avert a possible risk of housing bubble in London, an Ernst and Young (EY) ITEM Club special report has advised the policy makers in the UK. While the housing sector in the rest of the UK is headed for healthy growth, London is beginning to show signs of 'bubble like conditions', the report prepared by a highly regarded group of economists has said. The prices of residential properties are escalating at an alarming rate amid an acute shortage of supply and strong demand in London. The average house price in London is expected to reach nearly £600,000 by 2018, over three times that in Northern Ireland and the North East, according to the report. The international interest in the London's housing sector has also contributed to rising prices. Affluent foreign investors are making a beeline to buy prime and high-end housing properties in London. The better returns on investment compared to other parts of the world and a weak pound are some of the factors attracting investors from all over the world. The report advises the Bank of England's Financial Policy Committee (FPC) to prevent people in London from borrowing more than three times their annual income as income multiples are now back to pre-financial crisis levels. Lenders in London have become very relaxed about income multiples and mortgages are usually more than three times the average salary. The report has good news for the housing sector in the rest of the UK. The report said that housing sector is riding on the back of various government support schemes, improved credit conditions, rising employment and an accelerating recovery in the wider economy. It seems to be in much better shape than before the financial crisis in 2008. The report forecasts that UK house prices will grow by 8.4% this year and 7.3% in 2015, before coming down to around 5.5% a year thereafter. Housing prices are expected to rise at an average rate of 6.5% annually over the next five years. There will be increase in the housing transactions (over 1.36 million people are predicted to move home in 2018) due to the projected growth in the house prices in UK, which will boost the confidence of house owners and improve their spending power. House price rises will also have a positive impact on the economy as related industries and businesses stand to benefit, the report has concluded.