US Housing Market Thought to Have Lost $1.7 Trillion of Value in 2010

Zillow, the US's second largest property portal has predicted that the value of US homes will be down $1.7 trillion this year compared to last year.

This, compared to the $1 trillion loss in value last year compared to 2008, represents a 63% larger decline, and means that the US housing market has lost $9 trillion in value since the collapse began in 2006. While many markets around the world have apparently fallen faster and harder than the states, few can match a decline like that.

As we would expect, the portal reports that the largest falls happened in the second half of the year. With the homebuyer tax credit propping up the market, the housing market lost $700 billion in the first half, and with the tax credit rug firmly pulled out from below prices the second half loss is predicted to be $1 trillion according to Zillow.

"It's a testament to the nearly irresistible force of the overall market correction that government incentives can only temporarily hold back the tide, and that the market will ultimately find its natural equilibrium of supply and demand," said Zillow Chief Economist Dr. Stan Humphries.

And it may not get much better.

"Unfortunately, with foreclosures near an all-time high in late 2010 and high rates of negative equity persisting, it does not appear that the first part of 2011 will bring much relief," Humphries said.

While the value of homes in Boston increased by $10.8 billion and those in San Diego by $10.2 billion, it was the most overvalued cities which really dragged the overall picture down. In New York, the value of homes has fallen a whopping $103.7 billion this year, and in Los Angeles it has fallen by $38.7 billion.

According to the big investment banks, the American economy is turning around, the picture seems to be continuing to worsen for the housing market.

According to reports in the third quarter, 23.2% of single family home owners owed more on their mortgage than the value of the property, up from 21.8% in the third quarter of 2009. Until defaults and repossessions are brought under control, and the backlog of properties sold there is unlikely to be any recovery. Of course, with investors snapping up properties at 60% below their replacement costs and earning 10% yields on tenanted properties, many are in no rush for recovery anyway.

Turkish Property Sales Increasing, Set to Continue Growing

Conti, one of the largest mortgage brokers for foreign property purchases has revealed that it issued twice the quotes for mortgages on Turkish property in May than in April.

The firm said that this huge growth followed steady growth over the last year, which it put down to the strong Euro highlighting the better value for money Turkey offered as a tourism destination and in property purchases.

Clare Nessling, Conti's operations director, says: "These factors, combined with low interest rates and some bargain property prices, have made Turkey increasingly attractive, as well as more affordable, for UK buyers. Property purchase costs and taxes there tend to be lower than other popular hotspots. Accessibility is important too and the country has a wide choice of airports which are well served by flights from the UK. Bodrum, for example, is only half an hour's drive from the international airport."

While Conti pointed out the steady growth in demand for Turkish mortgages over the last year, looking back to June last year, we can see that Conti then released data revealing a 143% growth in Turkish mortgage quotes in the previous two months, and a 65% increase comparing the opening 5 months of 2009 to the closing 5 months of 2008.

This is a very positive sign for Turkey, especially at a time when overseas property sales in the lower-budget category -- which Turkish property falls into -- are on the increase.

Of course, with the pound now strengthening against the Euro, Turkey will have to compete with Eurozone destinations.

This shouldn't be a problem though, Turkish property sales accelerated rapidly between 2005 and the second half of 2008 when the crunch went global, so it is a safe bet that Turkey will see strong sales again as part of the natural progression of recovery in overseas property demand. In fact if anything, the downturn will prove to have done Turkish property a favour, by increasing its status as a global property destination.

EU Property Investment Up 15% in the First Quarter

13.4 billion euros worth of property investment deals took place in the EU in the first quarter of this year. This represents a 15 per cent increase over the first three months of 2009, according to research from PropertyEU released yesterday.

This shows unequivocally that faith is returning in the international property arena. Sure, this report is on commercial real estate, but growth in the residential sector will almost certainly follow in the areas where these purchases and expansions are taking place.

Malls need staff, malls need shops, new ventures open up and they need staff, not to mention staff to manage the malls. It is a fact that many of these staff will already be in place, but I do not know one mall investor who will not want to have some sort of presence in the higher levels of their new investment’s staff.

Also, the malls and offices wouldn’t be worth investing in if growth and expansion were unlikely in the market. This means expansion of stores and business, which cannot happen without more staff.

Speaking of which, according to the report, the retail sector was by far the best performing, over the office and industrial sectors.

The retail sector, which saw a 5.2 billion euro growth, was boosted, by the 1.3 billion euro purchase of a portfolio of operational shopping centres and shopping centre developments by Dutch investment trust Corio,  from developer-owner Multi Corporation.

Both companies agreed that Corio would acquire four active retail centres in Germany, Spain and Portugal and another retail centre under construction, again, in Germany.

The second most lucrative deal in the first quarter, was the purchase of  Simon Ivanhoe's portfolio of shopping centres in France and Poland, worth about 715 million euro, in February, by Unibail-Rodamco.

According to the website of PropertyEU, the site was established in 2006 to provide insight on financing and investment in the latest important deals in Europe, investors from North America, the UK and elsewhere.

The research follows investment deals exceeding 20 million euro in value, for which the financial details are known.

Bulgarian GDP Down 5% in 2009, Property Market Looking Up?

Official government figures have revealed that Bulgarian GDP shrank some 5% in 2009. That is of course bad, but given that many economies in the world shrank by that amount or larger, putting it in the proper context it can easily be viewed as a positive for Bulgaria, which some (most if we’re honest) analysts predicted to contract by much more. The IMF predicted a 6.5% contraction for example.

The statistical institute had previously said that the economy contracted 5.1% last year, so the latest data is a revision upwards. What wasn’t revised upwards was the fact that the contraction accelerated on a quarterly basis throughout the year, with the final quarter being the worst.

According to the data the Bulgarian economy contracted by 3.5% in the first quarter, 4.7% in the second quarter, 5.4% in the third quarter, and 5.9% in the final quarter.

The government is expecting a further 2% contraction for this year, which is what it has based its forecast on.

Meanwhile Bulgaria property is becoming more popular. According to data released by leading portal Primelocation, searches for Bulgarian property increased by over 50% in January.

Bulgaria property is known as being some of the lowest priced in the world. Thus, with the level of research that today’s buyers are known to be doing this presents the chance of getting some exceptional value for money on carefully chosen properties. There have been reports of oversupply, but to a lifestyle buyer after a quality ski resort property for example, that doesn’t necessarily matter all that much if that are able to get a really good deal/

Cyprus Property Sales Increasing in 2010; Let’s Try not to Cry

The latest property sale figures from the Land Registry show a 30% increase in property sales in February this year compared to last year, and a 27% increase in January and February this year compared to the same period last year. Respectively the numbers were 558 and 1274 contracts of sale registered.

While this is most definitely positive news, analysts have been quick to point out that sales are still 60% down on 2008 levels. They have been quick to point out also that this is general data, and there is no indication of what proportion of sales are attributable to foreign buyers -- the Cyprus property market has become incredibly reliant on foreign buyers in recent years. Figures on sales to foreign buyers are expected to come out in the next few days.

The most surprising response however came from Solomon Kourouklides, president of the Cyprus Real Estate Agents’ Association, he has been quoted as saying:

“The latest increase is attributable to the opportunities in the market. Many Cypriot individuals and investors have bought properties from non-Cypriots or Cypriots who cannot pay off their loans. But these opportunities will run out

"If the economic parameters remain the same, we believe that the market will remain at the same level as in 2009, while there is a possibility of a slight deterioration."

Talk about looking a gift-horse in the mouth (yes, I know that saying doesn't exactly fit, but until I think of a better one...).

No one seems to have touched on the fact that this is now 2 straight months of increasing sales in Cyprus. In January sales to foreigners were also found to have increased. This would seem to indicate that the mix of government legislation and advice from Cypriot legal officials has cooled some of the negative effect the title deeds issue caused.

Nor has anyone mentioned the potential positive effect the slew of new golf courses scheduled to be built in Cyprus starting from this year could have. I am not saying go out and buy champagne to celebrate the massive increase in Cyprus property prices in advance, but I am saying, let's not be too negative either. 2010 is likely to be a strong year for overseas property sales, and with the deeds issue semi-resolved and the new courses, Cyprus may well get some of that action.

View Cyprus property for sale

US Mortgage Interest Rate Crosses 5% Threshold, Worries Market

It seems that the Federal Reserve (FED) winding down its policy of buying mortgage backed securities (MBS) from US lenders is already having an effect, with US mortgage rates climbing for the first time in three weeks. More importantly the rate climbed past the 5% mark, which is thought to be a key level that could see demand for housing loans suppressed in a still depressed US economy.

Interest rates on the most-common U.S. 30-year fixed-rate mortgages averaged 5.05 percent for the week ended Feb. 25, up from the 4.93 percent recorded in the previous week, according to the survey released by Freddie Mac (FRE.P) (FRE.N), the second-largest U.S. mortgage finance company.

The figure is slightly below the figure recorded in February last year of 5.07 percent, but above the record low of 4.71 percent recorded in early December. Freddie Mac started the survey in 1971.

"Interest rates for 30-year fixed mortgages followed long-term bond yields higher and rose above 5 percent this week amid a mixed set of economic data reports" Freddie Mac vice president and chief economist Frank Nothaft said in a statement.

Analysts have been worried that the FED's hope for foreign sovereign wealth funds to fill the void in MBS sales left by the end of its buying policy would not be realised, and that this would bring a rise in interest rates. Ironically, such a rise in interest rates will make MBS more profitable and could bring increased interest from foreign funds.

In the meantime the end of the FED's MBS buying policy could hit the housing market, which is still very fragile with a double whammy: it will cause increased mortgage interest rates, and it will also reduce liquidity in the banking sector again, making mortgages harder to obtain (again).

That said: the FED couldn't keep buying the banks' MBS forever, the market was always going to have to return to normal at some point. Perhaps they think it is better getting the rocky-ride over with now, when the wider economy is still a little shaky, so that the two can stand together on their own two feet as they walk slowly into a 2011 recovery.

View bargain American properties

Germany Rated One of Best for Property Investment in 2010

Germany continues to be rated as one of the top property investment markets for 2010. In fact: the number of people sharing this view has risen to 80% from 66% last year. This is one of the key findings of Ernst & Young Real Estate’s annual trend survey of some 100 companies and investors. That said: another finding was that over 80% of the respondents do not believe the market has bottomed in terms of demand, space, and payment behaviours.

Survey participants included banks, closed-end real estate funds, real estate stock corporations/REITs, institutional investors, investment companies, opportunity/private equity funds, insurance companies and residential real estate companies.

'Although the transaction volume is set to increase for the first time since the beginning of the crisis, major commercial portfolio transactions and distressed sales are currently not anticipated,' said Hartmut Fründ, Managing Partner of Ernst & Young Real Estate GmbH. 'The market is still going through a period of consolidation,' he added.

Other statements from Ernst & Young partners confirmed what we said in yesterday's post; that residential property (buy to let) is attracting more attention from institutional investors than it has for years.

Partner Christian Schulz-Wulkow said that the residential sector is currently very popular: 'Residential property entails less risk and it has become a considerably more attractive proposition for institutional investors,' he said.

Another finding that was particularly interesting, was the fact that only a minority of those surveyed expected sovereign wealth funds and banks to be active buyers in 2010. In 2008 these buyer classes were among the most active in the German market -- especially in Berlin. The majority believe that family offices and institutional investors, most notably insurance companies, special funds and open-ended funds, will continue to be key buyer groups in 2010.

Opportunity and private equity funds, real estate stock corporations and international funds are seen as the biggest seller groups in 2010. Non-property companies and the public sector will make occasional sales only, according to the majority of respondents.

View German property for sale

Predictions Confirmed So Far, So Sales Set for Big Increase in February… Maybe anyway

Today two things I had thought to be true about overseas property, were confirmed to be true.

A: I had been watching and reading, and surmising that rental rates had not fallen as fast as prices have, thus rental yields would mostly have improved around the world.

Today Invesco confirmed that rental yields across Europe were running higher than their long term averages.

B: from various sources and events -- not least the fact that investment oriented destinations began to dominate the top 10’s of various overseas property portals -- I had reckoned that the number of investors actively purchasing overseas real estate had increased in the final quarter of last year.

Today, the Royal Institute of Chartered Surveyors confirmed that indeed the number of people buying overseas property as an investment as oppose to a lifestyle choice had indeed increased in the final quarter of last year.

Now, if my other big predictions come true, that 2010 will be a good year for overseas property, and that sales will increase from February, it will be even better.

In fact, now that you mention it (yes, I know you didn’t but…) one of them already has. According to an article in Overseas Property Professional an agent in Sharm El Sheikh has been selling Sharm property to overseas buyers at a rate of 1 per day since the beginning of the year.

So, watch this space for the next big prediction, in fact… why wait: in 2010, I am forecasting a resurgence in the resort markets of Koh Samui and Phuket.

Polish Property Gets A Daft New Portal

As confirmation that Poland is currently one of the hottest overseas property markets, Daft Media have just launched a new portal for Polish properties.

Poland was one of the few countries in Europe to avoid recession altogether, and property prices in the country have also shown incredible resilience, and then even growth since early 2009. As a result millions of Euros have been invested into commercial property in Poland by funds, and a wave of private investment is expected to follow. Daft's portal however, is aimed at the domestic market.

Anyone who has been around the overseas property industry in the last 2 years has probably heard of daft.ie, the Irish property portal, well now there is daft.pl, the Polish property portal as well.

Daft Media were very adept at spotting the gap in the market that existed for an Irish property portal, in fact at the time they were the portal specialising in Irish property. One can only assume that a similar gap existed in the Polish property market, which has now also been filled with Daftness (sorry, couldn't resist any longer).

If the success of their Irish portal is anything to go by, then many a Pole will be buying his house using the Daft.pl portal. According to Alexa, which ranks websites on their traffic levels, Daft.ie is the 8,644th most visited website in the world.

The one area that Daft Media's Irish portal struggled in was its placements in the search engines. Not for terms relating to its core Irish market, but in its overseas section: I remember one of the agents I worked for doing an analysis of all the portals we listed on and finding that Daft were producing the least leads. A look at the search term overseas property for sale puts them in 42nd for overseas property for sale.

Back then they didn't allow users to upload multiple properties using a datafeed either, this may or may not have changed since then.

Bright Signs for Overseas Property in 2010: But What About the Second Bite?

There is no doubt about it: as of the end of 2009 and for at least the first quarter of this year, the fear over the depth the financial crisis could plumb has subsided and anyone who has not been put in financial straits during the last 2/3 years is making plans and taking actions as if things are completely back to normal.

Some people are shouting about a second bite, including me in some areas, but I just wanted to explore the possibility that people going back to normal as they are could feed economies sufficiently enough to avoid the dreaded second bite as the stimulus rugs are pulled out from below us.

Okay, firstly there was a report of massive traffic increases to the prominent UK portals: traffic up 25% to Rightmove Overseas, 32% to the Move Channel and 38% Property-Abroad.com, all in the first seven days of the year. Of course there is the possibility that it was as much to do with the freak weather giving people more time to browse, but one thing about the freak weather is that is will have also increased the inclination to browse for a home in the sun.

Now, we have 133% increase in the sales of Miami condos. You will hear a lot of over 100% rises in the first quarter of this year, but this one holds weight because it gave figures. Condo Vultures research showed that 1655 condos were sold in Miami in the "latter part" of the year, compared to only 711 in the first 6 months.

HolidayLettings.co.uk, Rightmove's sister site has now reported an increase in traffic of 55% as over 1 million people visit the site in the first ten days of the year.

Yes, again this can be put down to the winter blues as Britain experienced freak weather, but I was here during the freak weather, and so was all my family and none of them were on holiday lettings booking trips or looking into buying property overseas on Rightmove.

The fear over the second bite comes from the fact that, at some point, probably within the next 4 months central banks, including the bank of England will start to pull back from their stimulus. This will lead to rising interest rates and falling liquidity. It will also mean more job losses as the government starts paying for the stimulus.

However, everyone knows this is going to happen. The people who work in the government departments likely to be affected by the cutbacks know that they work in the departments likely to be affected by the cutbacks. Therefore it is fairly safe to assume that those currently doing the browsing are able to spend in relative security.

Of course people will get caught out, but no more than normal. And of course there will be people browsing for the sake of browsing, but also, no more than normal.

I think that this current surge of activity is genuinely a very bright sign for the overseas property and tourism industries in 2010.

Overseas Property Industry Trends from 2009 to Influence or Expand in 2010

I just read a great article in Overseas Property Professional titled: LESSONS FROM 2009 TO PROSPER IN 2010. The article linked to several other articles explaining what had been selling in 2009, how this would carry forward into 2010, and some of the difficulties that would still be faced by some markets in 2010.

Actually one of the articles given as an example of the latter was most interesting of all: in the last few months the rebound in British and foreign demand for international property developed so quickly, that the reports can easily blind us to the fact that 2010 is still going to be a very difficult year for some parts of the industry.

The most enlightening was the one on Portugal, which told of a conference held by major players in the Portuguese tourism and realty industries on how they could work together to increase foreign trade and purchases of property in Portugal. The conference spoke of the pressure being applied to developers for them to cut prices, which many still refuse to do.

Since April the reports have been circulating of increasing British buyers in the Portuguese property market. However, these reports all involved UK based agents who are obviously finding it easier to attract the UK buyer.

Another hot seller in 2009, to continue doing well in 2010 is repossessed and distressed sales in established markets, namely Spain, America and the UK. America is expected to be particularly hot next year, with a record 3.9million repossessions expected according to RealtyTrac. The article said that distressed opportunities in Florida would dry up pretty quickly, while there would be opportunities to buy distressed property in Detroit for sometime.

It is no secret that America will be offering some pretty fantastic buy to let yields for as long as the repossessions continue, and that is why America was 3rd on our list of top investment destinations for 2010.

Another trend we have commented on here was highlighted in the OPP article:

“Our clients are pulling away from any risk, and are looking for guarantees. This is why we have decided to only recommend key-in-hand developments, and those that also offer a guaranteed leaseback are top of the list,” said Daniel Wentworth, International Sales Manager, Promonova.

We have written many articles on the risk-aversion of the buyers currently active in the market, and of the offers developers are having to lay on in order to increase sales, as is covered in the article linked by OPP as related news.

One trend missed by OPP that we are sure is in emergence (though it is covered indirectly in a few of the related articles and quotes) is the rise of buy to let investment in overseas property. This was again confirmed by Germany being 3rd most popular on portal Property Abroad.com in December.

The single biggest reason foreigners buy German property (obviously there are exceptions) is for buy to let investment. Germany is also known as one of the safest and most stable places in the world to invest, which ties in with the risk aversion also.

Another thing tying 2009 to 2010 missed by OPP was the chance given to Turkey to shine. Turkey property had been growing in popularity with foreign buyers for some time, but the effect the credit crunch had on foreign exchange rates has benefited Turkey in 2009 and will do so even more in 2010.

The strong euro/pound rate caused British tourism to Turkey to see accelerated growth. It also led to British sales of Turkish property surviving better than many European favourites.

We have just taken on a new development in Turkey that is certain to be a favourite in 2010: 2 bedroom apartments by a reputed developer in the South West Aegean Coast resort of Akbuk for £50k. Click here to find out more.

2010 and International Property: Turning Rebound into Recovery... Starring Supply & Demand

2010 is shaping up as the year when things really get moving again in the world of overseas property. 2009 will be known in history as the year the rebound started, and 2010 will determine whether or not the rebound turns into a full scale recovery.

In terms of a property market recovery this looks like being determined by 2 main factors, supply and demand. Before you slap me for stating the obvious, what I mean is: whether demand will continue to rise as government and financial stimuli are removed, and whether or not construction firms can uncurl themselves from the protective ball they rolled into quickly enough to prevent the recovery from stalling.

Sure, this is not the case in all markets; Spain and Dubai are shouting out at me as completely different situations because they are struggling to see any real rises in demand, and have oversupply sufficient to last about 5 years unless sales accelerate rapidly. None the less, that is a pretty good model.

Turkey fits that model perfectly: new home sales in Turkey were 14% higher in the first nine months of this year than last year, and demand has continued to rise, meanwhile construction contracted by almost 20% this year. Now we must all watch and hope that construction can accelerate fast enough so that demand needn't stall on the way up.

Apart from some exceptions, Asia has the supply balance about right for the most part. Thailand is a good example: Thai property developers abandoned the international market early in the crisis, to concentrate on domestic demand, for which they ramped up their development plans; launching new projects throughout this year, so there should be plenty of supply there.

Malaysia however, is now looking at an oversupply problem as developers all (uncurl from their protective balls) come out of the blocks at the same time.

Montenegro could be the one to watch in 2010: when the international crisis came down, most of Montenegro's developers were locked in the country's lengthy planning stages, which meant they were able to simply hold off their plans, without having to cancel developments, or make any kind of announcement. In fact Montenegro has probably been the least talked about market in 2009, and the say no news is good news.

According to a conveyance I interviewed a while back for an article in Overseas Property Mall, many Montenegro developers were left holding land-banks, rather than those in Dubai holding half-finished developments and headaches. 2010 will be the year when all those plans are relaunched, and any that aren't will represent an abundance of cheap land for sale in Montenegro, for any new developers that want to enter the market. The only thing Montenegro will need to watch out for is over-supply, but with the country's lengthy planning phase that really shouldn't be a problem.

Top 3 Property Investments for 2010

I have seen a lot of articles in the last week or 2 highlighting the best property investments for 2010. Brazil has been on every one of them, but it won’t be on mine, and you’ll quickly understand why.

1: Turkey

Turkey received over 28 million tourists from around the world in 2008 and there is every indication the number has grown slightly this year. According to government officials they are still on track for their target of 30 million by 2010.

In 2008 they received 1.5 million British visitors. This is expected to be 3 million by 2010, not least because of the strong Euro.

The simple fact is there just aren’t enough commercial accommodation slots for such massive numbers of tourists, which brings rapidly rising demand for privately rented holiday accommodation in Turkey.

This is set to be further boosted as tourism continues to grow and as more and more people use the internet to compile their own package holidays for better quality accommodation and cheaper flights.

Then you have the value for money factor: Turkish property at its low prices always offered fantastic value for money. However, now that the Euro is a lot stronger against the pound, whilst the lira is weaker than its previous long-term average, Turkish property is offering even greater value for money.

According to realtors, Turkish property owners are currently fetching yields upwards of 6%. This is already very impressive and will grow as demand for rental property grows faster than prices in the next 2 years.

2: Egypt

In Egypt’s case it is also rising tourism and low property prices that make it one of the top overseas property investment destinations for 2010.

In our opinion the Red Sea Riviera, especially Hurghada is offering the best opportunities. There are currently dozens of apartments for sale in Hurghada offering guaranteed rental yields of 10 or 12% for 1 to 5 years.

This is because you can buy a 2 bedroom apartment in Hurghada for less than £40k and rent it for about £350 per week. giving a gross yield of 13.94% gross from a very conservative 15 week (32% approx) occupancy. If you make it a more realistic 60% (30wk approx) the gross yield is 25%. Now you can see why Hurghada properties come with such exceptional guaranteed rental yields.

3: America

Whatever we think about America, it is still the largest economy in the world, and it still owns the currency we all base trade on. Properties in America are currently being sold at between 10% more than in 2007, to about 40% less than they were worth in 2007, depending on where you look. Not to mention the tens of thousands of distressed and repossessed properties being sold at discounts of up to 60%.

It doesn’t take a rocket scientist to pick a property that will make a 10% rental yield or maybe even a little more, and to grow as the local economy recovers. Nor does it take a rocket scientist to also make sure that property is capable of regaining its 2007 value in a reasonable amount of time.

Investors doing the calculations on carefully chosen properties are coming up with yields of 140% – 200% after 5 years.

We also like Malaysia because of its strong economic fundamentals, stable property market and favourable tax laws, and India because it is set to see demand for property continue to outstrip supply at an alarming rate.

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