Global Property Guide - News and Discussions
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%.
Grosvenor sells off prime London properties amid bubble fears
Super-prime properties worth £240 million have been sold in central London by the UK's largest landlord, Grosvenor Estates.
The company, which is controlled by the Duke of Westminster, admitted that it was concerned over London's surging prices.
'There is a risk that a bubble is developing and that when inevitable interest rate rises occur andhellip; equity flows will reverse, placing values at risk..." said Grosvenor Group's finance director Nicholas Scarfe. "We do not know when a correction will occur, but our own analysis indicates the prospect of a correction is becoming more likely.'
Grosvenor Estates, which traces its roots back to the 17th century, sold the properties during 2013, postingrecord profits for a third successive year. 11-15 Grosvenor Crescent was one of its last major sell-offs, sold for £114m in December to private developer Wainbridge.
The latest warning from the Bank of England about the condition of the U.K. property markets corroboratesGrosvenor Estate's fears.
BoE's deputy governor for financial stability Sir Jon Cunliffe was very candid about his views on the U.K. property markets in a speech he delivered in London recently. It was probably the toughest warning yet from the BoE.
Cunliffe said, "it would be dangerous to ignore the momentum that has built up in the UK housing market since the spring of last year".
Cunliffe expressed his concerns over the fact thatmortgage borrowing by home buyers in the UK hasreached a record high. He said that borrowers are taking bigger mortgages when there is a possibility of a sharp rise in interest rates.
'The growing momentum in the market is now in my view the brightest light on that dashboard...It has not yet been accompanied by a substantial increase in aggregate mortgage debt, though gross mortgage lending is growing and there are signs that debts are becoming more concentrated," Cunliffe 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.
The Office of National Statistics revealed in March that the average UK home is now priced at £254,000 (USD$422,780). London prices are now 23% above their pre-2008 peak, while prime areas have appreciated considerably more.
Property flipping a cause for concern in UAE
Property flipping is back in the UAE's real estate markets - but this time there's a concerted move to suppress it. When the property market crashed in Dubai in 2008, speculative flippers were said to be a major reason why prices slumped by 65%. The problem has again reared its ugly head, but developers and the government are taking steps to deal with the situation. Aldar Properties, Abu Dhabi's largest publicly-listed developer, recently prohibited investors from reselling their units before they have paid 50% of the property's price. "We need to learn from the mistakes of the pastandhellip; We need to be concerned about flipping," said Mohammed Alabbar, chairman of Dubai's largest developer Emaar Properties, speaking at the company's annual general meeting recently. Investors must have paid 40% of the price before reselling an Emaar property. Emaar last year banned real estate agents from re-selling off-plan properties purchased under their name, until handover. The developer also keeps a computer database of investors. If any investor is found involved in violating the rules related to flipping, the erring investor is barred from making another purchase from the company. Developers however say that many investors circumvent the regulations, finding people to purchase property on their behalf. The Dubai Land Department increased property registration fees from 2% to 4% of the property value to control flipping.
Foreign purchases of Spanish properties highest in nine years
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%. Foreign investment helped the rate of house-price falls slow to 7.8% last year, compared to a price decline of 15.1% in 2102. Spanish home prices are now declining by only 4.1% per annum. But sales of new housing units fell by 37.4% year-on-year to February, according to the National Institute of Statistics. Spain, Europe's fifth-largest economy, has witnessed a drop of up to 40% in home prices since 2007. Due to restricted credit, withdrawal of tax benefits, and rising unemployment, it is becoming increasingly difficult for locals to buy properties. Half of all households in Spain have some sort of debt, the average 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. About 584,000 dwellings are vacant in Spain, waiting to be sold. While domestic buyers are bearing the brunt of the slowdown, the Spanish government is promoting inward foreign investment. Spain started issuing residency permits to non-EU nationals in February, in return for real estate investments of ?500,000 ($670,000) or more.
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).