South Korea's Housing Market Is Bouncing Back

South Korea's housing market experienced something of a revival last year with housing starts and sales figures increasing substantially. Property prices rose by 6.86% during 2011, and the number of housing construction permits increased by 42.2% to 549,594 permits. Apartment building sales rose by 41.8% to reach 285,000 units.

However last year South Korea's economic growth rate slowed to just 3.6% from 6.16% in 2010, and the Bank of Korea is forecasting GDP growth of 3.7% this year. In 2006 South Korea's housing market was at the height of a price boom, and property prices in Seoul increased by nearly 20%. This prompted the government to take action and they imposed controls on housing loans and increased capital gains tax on speculative areas. The following year saw prices slow down, increasing by just 5.4% in Seoul and nationally by 3.1%.

In 2008 property prices in Seoul rose by 5%, while prices rose by 3.1% nationally. In 2009 the property market was affected by a combination of the collapse of the Lehman Bros and government curbs, and property transactions dropped by 35.8% year-on-year to September 2010, and this slowdown caused severe problems within the construction industry. The government began its plan to revive the property market in 2009 by purchasing $1.79 billion of unsold new property, and another $2.68 billion worth of land from construction firms, enabling them to repay their debts. In the summer of 2010 the government began easing property lending restrictions, and this measure has proved to be effective. Last year mortgage loans rose by 8.27% year-on-year.

South Africans Choosing Smaller Homes

People trying to sell South African homes currently have to discount prices by between nine and 12% in order to achieve a sale, according to Lew Geffen, chairman of Sotheby's International Realty in South Africa. He feels the most likely cause is the recent apprehension over elections, long school holidays and an increasing aversion to take on more debt.

Levels of household debt in South Africa are still at high levels, and with food, fuel and electricity costs forecast to rise, buyers are choosing not to take on such large mortgages, even if they can. The majority of South African households have an annual income of around R192K which puts them firmly into the lower income property buying market. This means they can comfortably afford homes costing up to R1.4 million.

As a result there has been increasing demand for smaller high-density housing in metropolitan areas. The affordability of homes has improved since 2007 and 2008, but people are definitely becoming more interested in keeping the costs of homeownership down, and are mindful about the prospect of interest rate rises by the end of the year.

There are also signs that banks will not lend on properties whose price is overinflated, so anyone asking an unrealistic price is less likely to achieve a sale. In general homebuyers are not particularly motivated to move at the moment, and are more likely to do so if they think they are getting a bargain. The market was bolstered to a certain extent by the effects of the 2010 FISA World Cup and the interest rate cuts late last year, but now these influences have run their course.

Singapore Safe as Houses for Investors

Sales of residential homes in Singapore have reached a five-month high as they increased 29% last month due to many foreign buyers seeing the country as a safe place in which to invest. This is because of the recent earthquake in Japan and the continuing political unrest in the Middle East regions.

Sales of new homes rose from 1,386 in March to 1,788 in April which is the highest level since 1,915 homes were bought in November. However this figure has dropped since a previous high of 2,208 recorded a year earlier.

According to Donald Han, managing director at Cushman and Wakefield, this shows that consumer confidence is still high both locally and internationally, and that Singapore is still seen as a highly desirable investment destination.

The economy in the country grew at an annual rate of 23.5% during the first quarter and homes are now at record prices in spite of the government's attempts to curb speculative buyers. The government has extended the period for sales tax liability on home sales from 3 to 4 years and has also raised the down payment necessary for second mortgages.

This hasn't stopped investors as most intend to hold onto their properties for longer term and are not buying them just to flip them. It remains to be seen if the government will introduce any more measures, and much depends on property price figures for the second quarter.

There is growing discontent amongst Singaporeans who are unable to afford property in the city and this led to the People's Action Party losing votes and seats during general elections held earlier in May.

http://www.bloomberg.com/news/2011-05-16/singapore-april-private-home-sales-rise-to-five-month-high-on-haven-status.html

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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Italian Property Market on the Turnaround

The Italian property market looks to have turned the same corner that many established markets did in the second half of last year, the corner onto the road leading to recovery.

Un the final quarter of 2009, property transactions declined by just 0.4% year on year, according to the latest housing market review from the Agenzia del Toro (Italian Land Registry). This is compared to a year on year drop of 18.6% in the first quarter. In the second half of 2009, Italian property prices were just 0.2% lower than in the first half, and just 0.7% lower than the second half of 2008.

This is hardly surprising. The trend in 2009 was buyers going for safety and stability. This made property markets where prices had held up well against the downturn much more popular than those that hadn’t.

Italian property prices fell by among the smallest amount in Europe throughout the entire course of the crisis. In fact, in Knight Frank’s index in Q2 of last year, Italy was the 10th best performing market in Europe (16th in the world), with prices down just 3.5% on Q2 of 2008. The same index in Q3 showed prices were still down only 3.5% year on year, by which time the market was clearly already on the turn.

Italy is a strange one though. The other markets that have seen prices holding have tended to fit certain criteria:

In economies that have not endured a severe recession, and, in some of these places, an economic stimulus has been far more than was needed, creating a liquidity surge.

Italy has endured a severe recession, and its stimulus has tended to be very measured. For this reason, when Italian property prices do start to grow now, going forward there will be no need for anyone to fear that a bubble is forming.

In terms of foreign demand, Italy may well suffer in the short term, as buyers look for bargains in the markets where prices have been slashed. Whether it does or not, Italy has now proven that the management of its property market is capable of preventing speculative bubbles, and this makes it a stable long-term growth market. This will do it more good than harm over the long term.

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