Canadian Residential Property Sales Declined in May

Canadian residential property sales declined last month, and were
down by 3.1% compared to April, according to data from the Canadian
Real Estate Association. This is the first monthly decline since the
beginning of the year, but activity levels were still slightly above
the five and 10 year averages for May, showing the housing market is
still in reasonable shape.

The average price for a house sold last month was $375,605. This
is a 0.3% decline compared to May 2011, and although the national
average has remained pretty flat since last spring, sales prices have
increased in seven out of ten local Canadian markets.

Toronto is still Canada's most active housing market, and property
is selling quickly, but sales and average prices are also up in
Calgary compared to May last year. In comparison the rest of the
market in Canada has seen only modest growth, and market conditions
remain balanced. The number of newly listed homes has changed little
during the past three months, and listings were up just 0.3% compared
to April.

The number of new listings for the month was static in 49 markets,
and eased in 52 markets. The new listing to national sales ratio,
which is a measure of market balance, was 53.4% in May, slightly down
from April when the reading was 55.3%. National inventory levels were
at 5.9 months at the end of May, which is a slight increase on
April's 5.7 months. Experts consider housing supply and demand in
Canada to the balanced.

Residential Property Sales Accelerating in New Zealand

The rate of residential property sales in New Zealand has been accelerating over the last four consecutive quarters, as during the second quarter of last year, sales increased by 7%. By the following quarter this had increased to 18%, and during the final quarter of last year property sales grew by 22%.

This rate of growth has continued into the first quarter of 2012, with sales growing by 29%. This last quarter’s sales growth equates to 3,969 more properties being sold during this period, compared to the same period last year, or 44 properties per day.
This rate of growth hasn’t been matched by the pace of listings, as these have grown by just 10% during the first quarter of this year. This lag in listings is quite common and is being seen all around the country, and it’s not unusual for it to take up to six months to catch up.

While sales may be increasing, so are prices, and New Zealand is one of the most expensive places in the world to buy property, when income is taken into account. The Demographia International Housing Affordability Survey found the average property in Auckland cost 6.4 times the average annual salary in the city, compared to 6.2 in New York, and 5.7 in Los Angeles.

The problem isn’t just confined to Auckland, as property prices in Christchurch are 6.3 times the average income, while in Dunedin prices are 5.2 times the average income, and are 5.1 times the average income in Wellington. This unaffordability is reflected in the fact that less than 30% of those aged 40 or under own or partially own the property in which they live.

New Zealand Government Introduces New Bill to Ban Foreign Companies from Buying Rural Land

The New Zealand government is looking at introducing a new bill into Parliament which would prevent foreign companies from buying up rural land, and is due to controversy over Chinese companies trying to purchase lucrative dairy farms on the North Island.

The Chinese company, Shanghai Pengxin had put in a bid to purchase 16 dairy farms in Crafar on the North Island, and this bid had already received approval from the government before being overturned in the High Court. The bid was overturned as the High Court felt any potential benefits must be measured against an alternative buyer.

Labour leader David Shearer wants the law to be changed so governments reject any foreign bids to purchase New Zealand farms unless the bid would result in more exports, and more new jobs being formed than from a New Zealand bid.

Such a law would mean most bids to buy New Zealand land would be turned down, and only those implementing new technologies or introducing new products would be allowed. Although the government already has the power to turn down sales of farms to overseas buyers the Labour leader doesn't think it is being properly implemented, and that most sales result in profits flowing out of the country.

Selling farms to overseas buyers is also likely to raise the price out of reach of native farmers which would be very detrimental to the country.

At the moment any decision by the Overseas Investment Office to sell property to foreigners has to be approved by two government ministers who are able to decide which factors are relevant to the sale. If the new bill is made law it will be much stricter.

New Report Finds Nearly One Quarter of US Homes Are in Negative Equity

A new report from CoreLogic says that 22.8%, or 11.1 million homes in the US were in negative equity by the end of the fourth quarter last year. This is an increase on the third quarter when 22.1%, or 10.7 million homes were in negative equity. Another 2.5 million homeowners had less than 5% equity during the fourth quarter, which is known as near negative equity.

This means the total percentage of homes in negative or near negative equity was 27.8% during the fourth quarter, up from 27.1% in the third quarter of 2011. The total debt for these properties in negative or near negative equity rose from $2.7 trillion in the third quarter to reach $2.8 trillion by the end of the fourth quarter.

The report found that Nevada had the highest percentage of homeowners in negative equity, with 61% of all mortgage properties falling into this category. The second worst state was Arizona with 48% of properties in negative equity, followed by Florida with 44%, Michigan with 35%, and Georgia with 33%.

When combined these five states have an average negative equity percentage of 44.3%, while the combined average of the remaining states is just 15.3%. The majority of homes in negative equity are at the lower end of the market and are valued at less than $200,000. Although these figures are affected by seasonal declines, it's expected this situation will take quite some time to improve. If the economic recovery falters it could mean an increase in the number of foreclosures.

Property Prices in the East End Have Increased by £800 a Month since July 2005

In July 2005 London was awarded the Olympic Games, and now with just five months ago Lloyds TSB has revealed that house prices in the area around the main site have increased by around 30% since London's successful bid.

The average home cost £268,884 last November which is an increase of £62,739 since July 2005, equating to a very nice average monthly rise of £815. In comparison homes in England and Wales have risen by 25% during the same period, which equates to a monthly increase of £611.

Prices in eight out of the 14 postal districts closest to the Olympic Park have increased by at least 20% since July 2005, with Dalston and Homerton seeing the fastest price growth as each have recorded average increases of around 55% for that time period. Shoreditch came a close second with properties increasing by an average of 47% while in comparison Stratford which is the closest to Olympic construction activity has seen prices increased by just 13%, to reach an average of £227,893.

Prices in London have increased by an average of 5.4% during the last 12 months, and just two of the postal districts closest to the Olympic sites have exceeded this increase. Prices in Dalston increased by 10.3%, while prices in Clapton rose by 7.1%, but prices in Bethnal Green fell by an average of 5.2%. In spite of the massive increases seen over the last few years the typical house price in postal areas closest to the Olympic sites is still 22% below the London average of £342,551.

The most affordable homes can be found in Plaistow where the average house costs £188,760, which is 45% below the average London price. In contrast homes in Dalston cost £359,436, and it is the most expensive site closest to the Olympics.

Australian Banks Warned by IMF to Stash Cash

The main four Australian banks have been warned by the International Monetary Fund to make sure they have sufficient cash reserves to cover any potential downturn in the housing market.

The IMF is worried that the Australian housing market may be overheated and that prices in cities are artificially inflated due to a number of wealthy overseas property investors from China entering the market.

Around 80% of the mortgage market is shared between just four domestic banks which are Westpac, NAB, ANZ and the Commonwealth Bank.

According to the IMF report, combining any corporate losses due to the global financial crisis with possible mortgage defaults could put too much pressure on Australian banks.

The situation isn't helped by economists at ANZ, who are already predicting government cuts will shave around a half percentage point off economic growth for the next four years.

US analyst Jordan Wirsz has already warned that house prices in Australia could slip by as much as 60%, although most would think that is quite an extreme prediction, and the latest report from Australian Property Monitors may yet prove it to be wrong.

After five consecutive quarterly falls, property prices have risen nationally for the first time since September 2010. Melbourne saw the greatest house price growth with prices rising by 1.1%, while in Sydney property prices remained the same. Melbourne is now ranked as one of the world's most costly cities in which to buy property, and is more expensive than London, New York and Los Angeles.

US Contract Cancellations Increase, but Sales Figures Are up

Sales figures for residential property in the US are up, in spite of contract cancellations increasing substantially. Latest data from the National Association of Realtors shows sales of single family homes, townhomes, condominiums and co-op's increased by 1.4% in October to 4.97 million, compared to 4.9 billion in September. Year-on-year sales have increased by 3.5% compared to 4.38 million homes sold in the year ending October 2010.

These figures would be even better had sales not being negatively affected by this increase in contract cancellations. These are due to various factors including failed mortgage applications, loss of employment and bad home inspections. Cancellations rose by an incredible 33% in October compared to 18% in September.

Although the sales figures are slowly rising, Lawrence Yun, chief economist at the NAR thinks the market is still operating at a lower level than desired in spite of improving factors which include rising rents, increased affordability and the creation of new jobs, and feels many people who want to buy new homes are having their plans thwarted.

At the moment there are 3.33 million homes on the market, and stock levels are falling steadily with October showing a 2.2% fall leaving an eight month supply. The market reached its peak in July 2008 when they were 4.58 million homes on the market.

Some areas are also seeing a shortage of foreclosures, especially in lower priced homes where multiple bidding on desirable property is becoming more commonplace. This has prompted realtors to ask for foreclosures to come on the market at a faster rate because they have buyers ready to purchase, and giving credit to investors would help absorb inventory at a faster rate.

Find out more about Foreclosure property in Florida

Australia's House Prices Fall for the Third Straight Quarter

Property prices in Australia have fallen for three straight quarters due to increased borrowing costs, but there are signs this decline could be bottoming out as September marked the smallest price decline in seven months. Homes in capital cities fell by just 0.2% while regional home values increased by 0.1%, and experts think the trend of downward prices may be reversing.

House prices in capital cities have decreased by 4.2% this year while apartment prices have fallen by 1.4%, with Brisbane proving to be the worst performer so far this year, although all the signs are that it could be the first to see prices recover as home values increased by 0.4% in September.

Adelaide did even better with prices up by 0.5%, while more resilient markets such as the Sydney and Canberra saw the largest price declines with prices down by 0.6% and 0.5% respectively.

Economists are also hopeful that interest rates will be gradually reduced which could help to revive the first-time buyers' market, although most are predicting a recovery will come by the middle of next year. Another hopeful sign for the housing market is the fact that auction clearance rates are stable and there are less signs of discounting. Financing is also becoming easier.

The decline in house prices in Australia is certainly good news for all the Brits wanting to move to the country, as apparently the Overseas Guides Company has seen a 160% increase in the last quarter. Australia is seen as being particularly attractive as there is a skills shortage so certain professionals will find getting visas to live and work a relatively straightforward process.

Portuguese Property Bargains on the Way

According to a leading currency exchange firm, the election of the social Democrat government in Portugal will bring about a new era of austerity in the country which should see property prices falling even further. The coalition government in the country is due to implement the austerity package being demanded by the EU in return for their £70 million bailout.

While this might seem reasonable enough, the Prime Minister, Pedro Passos Coelho has promised that his government will make even more cuts, with the idea being that deficit reduction targets will be met ahead of time, attracting investors back into the country. Cuts include selling off public services, higher health care costs and a reduction in unfair dismissal compensation.

It's expected that all this will have a negative effect on Portugal property prices as households will have less money to spend, but should prove attractive to foreign investors, especially those looking to buy property in popular destinations such as the Algarve.

Although Portugal has a similar deficit crisis to that of Greece and Ireland, it is slightly different in that the property market here has had very little effect on these problems. There has been far less re-mortgaging and high loan to value ratio loans available to the Portuguese, and in fact the country exhibited one of the most stable rates of loan default during the worst of the economic crisis. At the height of the boom in 2007 the non-performing loan barometer was just 4%, and this figure decreased to 3% last year.

Foreclosures Make for Hot Florida Property Investments

Ocala, Florida has seen home prices drop lately and the sales of single- family homes have increased as the abundance of foreclosures abound. With the struggling economy and higher unemployment rate, it seems as if now is the time for those wanting to relocate to Florida to purchase that retirement or winter home.

It appears that property prices for residential homes last month in Marion County were at levels that we haven’t seen since the 1990’s. The average median home price decreased from $87,800 in November 2009 to $75,900 in November 2010. That is a significant 14 percent drop and the biggest percentage drop in the Florida metropolitan area.

The home prices in Ocala have been decreasing for about three years now due to the recession and double digits unemployment rate. Home investors at home and abroad are taking advantage of the price decline and buying up investment properties. According to MLS surveys, just last month in November, realtors sold 269 residential homes compared to 251 a year ago in 2009. That is a 7 percent increase in sales mainly due to the amount of foreclosures on the market. The past year has seen many more foreclosures and distressed sales due to the struggling economy.

Almost 630 homes were on the foreclosure list in November, which equals out to one in every 251 homes were looking at foreclosure. With so many foreclosures, investors have taken advantage of such a prime market to buy up homes for short or long term rentals in the hopes of gaining significant returns in the future.

Australia’s Booming Property Market Attracting Attention of Investors

Australia’s housing market continues to grow stronger and is anticipated to remain a strong contender for drawing property investors in the upcoming year. Australia and Canada have been competing neck and neck but it seems that Australia is pulling away as Canada’s real estate sales are cooling down.

Due to low interest rates as well as economies beginning to recover, global markets have seen some rebounding this year. It has been reported that house prices rose in six of twelve industrialized countries, including Australia, Canada, France, Sweden, Switzerland, and the U.K.

Low interest rates and a strong and stable economy attract first time buyers as well as property investors looking to capitalize on the real estate market’s abundance of affordable homes. Investors have confidence that their investments will yield good size returns in years to come as the property market continues to grow strong and house values rise.

Some of the success of the property market will depend on factors such as job growth as well an income growth. Interest rates and lending rules play important roles as well. Interest rates are expected to stay relatively the same throughout next year which will help keep the market stable. Australia seems to be doing well as solid job growth is reported and high demand comes from Asia.

Other areas of the world are seeing some growth as well. The U.K. and Swiss markets are seeing some recovery and it is reported that Sweden is actually experiencing somewhat of a mini-boom. In Italy house prices are dropping some and the U.S. market is becoming more stable.

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.

Spanish Developers Lure Buyers with Great Deals

Despite the fact that Spanish property sales have reportedly been improving for the last several months, developers continue to take seemingly extreme measures to lure buyers.

Costa Almeria development Balcones de Palomares is a good example just added to the Azure Overseas portfolio. Anyone not bowled over by the price; just £68,469 for a key-ready 2 bedroom apartment in a quiet and secure development near the coast and with white good included, probably will when they realise that 100% mortgages are being offered with properties in the development.

Most buyers of Spanish property in the last 2 years have been cash buyers, equally because wealthy individuals made up the majority of buyers, and because mortgages were scarcely available. Slowly but surely buyers who need mortgages (low budget buyers) are returning, and thankfully more mortgages are coming up as well.

The price is the most impressive thing here though, well designed, quality 2 bedroom apartments in a nice development with a communal pool in Andalusia, Spain for not much more than you would pay in Turkey is truly a bargain.

Low prices like this in an established market like Spain is always good news for investors; the low price means you can set your rental rates lower and sill make a strong yield. Not to mention capital growth potential, in the fact that Spain will recover, and when it does these units will quickly double in value, then go to 150% of their current price.

American Property Market: Volatile but Bountiful in Opportunities

The US property market is probably the most volatile in the 1st world right now. We have reports of prices falling, and we still have tens of thousands of homes being repossessed every week, some reports talk of falling repossessions because of the freeze, other's say the freeze was barely a blip. On the other hand mortgage interest rates are at all time lows and most reports concur that sales are increasing in most regions.

Volatility aside, few can deny that the US market is currently abundant with opportunities, and that these opportunities are in their best presented to foreigners, or certainly out-of-state buyers. Foreign and out of state buyers needn't care about the effect that the rock-bottom price they are paying for a distressed or repossessed property, only that the price they are getting for will increase their rental yield (rents haven't fallen as fast as sale prices, and there is no such thing as a distressed rental -- not now anyway). Not to mention the potential capital growth when America finally gets back on her feet.

And what an opportunity it is:

The dozens of repossessions don't only increase availability of property at rock bottom prices, but they also increase the number of people and families in demand of rental accommodation. Thus, investors can buy in at low prices and with a large pool of potential tenants.

In fact, there is an even better way to invest...

Shrewd investors, developers and anyone else with the cash to do so, have decided to cut out the void between buying and finding a tenant, they are buying distressed homes and renting them back to the original owner. This is why we are currently seeing so many tenanted deals coming across the Atlantic. The average yield on the tenanted deals is 6%.

There is nothing average however, about the Village at Town Centre development in Orlando, offering tenanted 3 bedroom apartments just minutes from Disney World from just £47,300. Understandably, net yields of 10% are currently being achieved.

Berlin Property Prices Lowest in Industrialised World

Berlin property prices are lower than in any capital city in the industrialised world, according to a new comparative study by Engels & Volkers, although it is not the first time this has been reported, and it will probably not be the last either.

In Mitte, the upmarket district of Berlin, top end apartments currently go for an average price of 3,500 Euros per square meter, which is a fraction of the price of a comparable unit in the financial district of New York.

Engel and Volkers declared Berlin's history of division as responsible for its failure to grow like other capital cities.

"We have only begun to see things changing here in the last ten years. But, compared with other major cities, the impact of this on the property market is rather minimal," said Anne Riney, managing partner of Engels & Volkers in Berlin-Mitte.

"It will take a long time yet before the market reaches anything like the price margins of London, Tokyo, New York or Paris. Until then, Berlin will remain the world capital with the lowest-priced residential property," she added.

It is true; history is a huge part of the reason why Berlin property prices are so low, but not in the way laid out by Engels and Volkers.

Only 40% of Germans own their own homes, much lower than the developed world average of around 70%. The status quo has developed over the years, and the renters culture is now deeply entrenched in Berlin.

Because of the situation, the government imposes controls on rental rates, allowing rents to rise only when wages rise. Because the biggest buyers of property in Berlin are buy to let investors, price rises are governed by rental rates. This vicious cycle has kept the lid on Berlin property prices for years.

US Housing Market on a Positive Run?

The latest figures released by the federal government show a pleasantly surprising 6.6% rise in sales of new homes in September. The second monthly rise, took total sales to 307,000, which is stronger than the 300,000 analysts predicted, but still nowhere near the 414,000 seen before the government tax credit ended.

Recent figures also showed a 10% rise in existing home sales, both reports seemingly supporting the view by some economists that the housing market will bottom at the end of this year.

“After dropping precipitously following the expiration of the first-time home buyer tax credit, it looks as though new home sales have stabilized,” said Nicholas Tenev, an economist at Barclays Capital. “We expect a gradual recovery over the coming months.”

None the less, new home sales are still 21.5% lower than this time last year. Also, supply is still a big problem; the government estimates that there is 8 months worth of supply on the market, although that is a slight improvement on the 8.6 months predicted in August. According to supply data in September, stock fell 1% on the month, and 19% on the year.

“With little new construction going on, inventories of unsold new homes at least aren’t a problem even with sales at a depressed level, with the number of new homes for sale extending a run of record lows,” said David Greenlaw, an economist at Morgan Stanley.

New home prices recorded a slight rise as well in September, up 1.5% month on month, and up 3.3% year on year. This took the average to $223,800, approximately 30% above the average price of existing homes.

According to analysts, the foreclosure moratorium by some leading lenders, had only a small effect on the housing market in September.

Looking at September, and the data running up to it, this would seem to be one of the most positive periods we have seen in the US housing market. While repossessions still seem a long way from ending, maybe the misery is starting to ease just a little.

US Sellers Slash Prices as Foreigners Keep Coming

Research shows that the asking prices on almost half of all the properties in 26 US markets, Florida in particular, are being cut by sellers.

Now, real estate investors from Asia, Europe, the Middle East, Russia and South America are finding bargains as a result of the price cuts.

California based online real estate brokerage ZipRealty believes the price cuts on 47.8% of the housing inventory tell only part of the story, according to the firm 25% more sellers have cut their prices this year than last year, and have cut prices twice in most cases.

The median reduction was $19,725 and this was 7.25% of the list price on average. Florida sellers have been wielding the heaviest knife, with Miami, Jackonsonville and Orlando sellers cutting double digit percentages off their asking prices. Miami saw the biggest discounts, with sellers slashing an average 12% off their asking prices. Discounted properties in Orlando are a big hit in the UK.

‘The summer home selling season never kicked in this year, leading anxious sellers to slash prices,’ said a statement from Zip Realty.

Florida is currently seeing a large number of foreign buyers, attracted by the bargains. Foreigners have always been high in Florida, but the gap between Florida and other states has widened because prices are so low.

Foreigners now make up for 10% of the market according to a recent report by the National Association of Realtors, but this is spreading fast according to experts. Marketing campaigns are now targeting foreigners specifically and realtors are offering heavily discounted viewing trips.

Distressed US Investment Property Supplies Increasing

Sales of distressed and bank owned property accounted for some 24% of all US home sales in the second quarter, down from 31% in the first quarter, according to the latest data from Realty Trac.

Of this bank owned properties accounted for 15% of home sales in the second quarter, and properties in some stage of mortgage distress for 9% of sales. This is down from 19% and 12% respectively in the first quarter.

This shows that sales are dropping. But the number of properties sold after receiving a default or auction notice was up 5% from the previous quarter, although it was 20% lower than last year. This would seem to suggest that supply may be rising.

Discounts on distressed and repossessed US properties are also falling, which also suggests that supply may be rising. According to the Realty Trac data, the average discount on sales of properties in default or scheduled for auction was 13% in the second quarter, down from 16% in the first quarter, and 19% in the second quarter of last year.

The average discount on bank owned properties in the second quarter stayed at the running average of 31%.

While supply of distressed and repossessed US properties rising is bad news for the US housing market, because their heavily discounted sale prices are factored into future valuations of other houses in the area, it is not such bad news for the droves of investors from across America and around the world who are getting some seriously good deals on US property.

Azure Overseas are currently marketing the Village at Town Center, a development of luxury condos just a few minutes away from Orlando's main attractions. The price of just £47k for a 3 bedroom unit is evidence of the fantastic investment potential of discounted US properties. Think of the yield you could make renting that out on a PPPN basis.

Spanish Property Benefiting from Resurgence of Low Budget Buyers?

When it comes to overseas property purchases reliant on mortgages, the market is very much dominated by just three countries. That is, according to the latest data from Conti, which said that of all mortgage applications received this year 85% have been for just 3 countries, namely France, Spain and Turkey.

With 43%, French property has been by far the most popular with the British buyers seeking mortgages through Conti, Spain takes second place with 24%, and Turkey third with 18%.

Conti has previously told us that France is currently the dominant force among British buyers looking for mortgages on overseas property, people see that the years of restraint in the French banking and mortgage sector is now paying dividends for France, with low interest rates and stable liquidity.

But isn't this significant news for the Spanish property market. We all know how the Spanish market was devastated by the exodus of British buyers because of the financial crisis, which compounded the emerging over supply problems and at the same time caused the latter problem to worsen to the nth factor because developments started had to be finished (where possible).

Reports began turning positive last year, with developers discounting prices between 25% and 40% and cash rich buyers snapping up the bargains. However, as I said this was predominantly cash buyers, and predominantly wealthy buyers buying in prime areas like Marbella etc.

The data from Conti indicates that Spain could be benefiting from the resurgence of low budget buyers seeking mortgages, which we know from other sources is happening across the industry. This should spread demand out into other areas of the country.

Speaking of bargain properties in Spain, Azure Overseas has just added the Alcazaba Hills Development, offering 2 bed 2 bath apartments, in a luxury resort near the Costa del Sol's ever-popular Estepona from £191,363. The development is located just a short drive from Marbella and Gibraltar, making the prices even more incredible.

Greek Tax Changes to Have Big Effect on the Market

As some of you will know there have been some pretty sweeping changes to the Greek taxation system in relation to property purchases and sale. Usually when a government does things like this it is easy to pick out their motive, but this time it is unclear whether they are trying to revive foreign sales, increase tax payable for commercial transactions, both or something else entirely.

Firstly and perhaps most importantly for the market, the annual levy on properties held by foreign companies and funds was increased from 3% to 15%. This will almost certainly be reduce investment in Greek property by international real estate investment trusts (REITs) and other commercial funds.

On the flip side, the 1% property transaction duty and capital gains tax on property were both zeroed, and transfer tax reduced from 11% to 10%. This should be good news for many foreign buyers.

Not all buyers will benefit however, because VAT on new build homes was increased by up to 2%, which will cancel out some of the benefits to new build buyers.

The changes won’t drastically reduce demand from foreigners buying privately, if correct advice is given, says Peter Mihalos, president of Southeast Real Estate Group.

“A ‘normal’ foreign buyer will actually see a small discount in the transactional tax due,” he told Overseas Property Professional.

“Furthermore European Union citizens are also eligible for various tax breaks, especially if they are residents here.”

The changes could bring about a 20% reduction in Greek property prices as investors give the country a wide birth, says RICS Hellas spokesman George Litsas.

“I believe that this will turn off foreign investors buying any kind of real estate in Greece, local demand for property will slump and eventually, from the second semester of 2010 the property prices will decrease,” he said.

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