MIPIM Picks Out a Few Overseas Property Investment Hotspots for 2010

According to an article in Overseas Property Professional, the recent MIPIM property investment seminar highlighted very few investment hotspots.

Apparently residential property in Asia is where we should all be investing. One example given was Vietnam, which has a developing tourism industry, but that is not where to invest, according to a David Blackhall of VinaCapital Real Estate, it is the local residential housing projects which have the biggest growth opportunities.

I have to say, I would be very disappointed to have had to pay good money to go to MIPIM just to pick up that pearl of wisdom in the Trends in Asia Pacific Property Markets seminar, something which is pretty much common knowledge among anyone with even a passing interest in overseas property markets.

Asian population and economic growth is among the fastest in the world, and in most countries the demand for affordable housing among the newly employed is growing far faster than developers can keep up with; so it doesn’t take a rocket scientist to work out that affordable housing is a good investment in any of those countries – Vietnam being one of them with bells on.

The South-East Europe – Riding Out the Storm seminar was apparently very tough on the region it spoke of, pointing out roaring liquidity problems and massive price falls in almost every country in the region. Bulgaria, Romania and Greece were picked out as among the worst performers.

Turkey on the other hand was picked out as the exception to the rule. According to those in the know the worst of the crisis is over in Turkey, and while liquidity problems remain, growth is expected to resume this year. Turkey’s population growth of 1.2 million per year was highlighted as a massive strength for residential investment.

Serbia and Ukraine were also highlighted as worthy of investment in the South East Europe region.

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.

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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.

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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

Spanish Property Sales Bouncing at Bottom as Government Denial Starts to Crumble

According to Spain's National Institute of Statistics, sales of Spanish property were 48% lower last year, than in 2007, at just 372.000 sales excluding social housing. This represented a year on year decline of 27%.

That said, according to their data, month-on-month transaction numbers have been hovering around the 30,000 mark since November 2008, which is less than half the sales recorded month-on-month at the beginning of 2007.

The INE data also showed that sales of new developments outstripped resales throughout much of 2009 but have more recently started to reach similar levels. This is likely because of the high prevalence (well dominance is a more apt word) of lifestyle buyers during the last year, and the increasing number of investment buyers now looking to snap up bargains.

The Spanish property market and economy have their own set of problems, not least because the economy was built solely on the strength of the property boom, as Spain saw more construction starts than Germany, Italy and France put together.

Spain seems to have remained in denial far longer than most; and rather than admitting the problems so that the populous can learn to deal with the tough measures necessary to fix it, the Spanish government has continued to parade around price indexes that show only slight decreases in prices, and other positives, without any negatives.

According to the government Spanish house price decline has yet to reach double digits over a year, and even the index ran by Tinsa, regarded as most accurate put the price decline at just 5.5% in the year ending January 2009. In reality developers and agents have only been selling at a discount of 25% or more. The 1.8% increase in mortgage approvals recorded by the INE in November is another example; 1.8% of very little is not a great deal.

This has now changed, analysts believe it is down to the Greece debt debacle, and in just the last 2 weeks, the government has started to come to grips with the economy's problems. It has announced some serious plans to tackle public spending, like cutting pensions over the medium term and cutting short term deficits by reducing infrastructure and civil service expenses.

The next steps needed are things like educational reforms to give Spain more strings to its economic bow than tourism and construction, as well as taking steps to eliminate the harmful split between permanent and temporary workers, which destroys any incentive for professional development.

Spain is in the fortunate position of being able to finance these reforms relatively easily, unlike Italy where the reforms needed to return to growth will cause substantial problems for the population and therefore the government. Spain has among the lowest levels of public debt in Europe, and Moody's just reaffirmed its triple AAA investment rating.

Why Demand for Overseas Property is Increasing so Rapidly Right Now

Overseas property buying is on the increase once again, and rightly so. Around the world there are literally millions of properties available at heavily discounted prices. The discounts range from 40% off to 60% off. Even more importantly; the trend is that the hotter the market was during the boom, the more discounted properties there are now.

Spain, America and the UK in particular are offering an abundance of exceptional bargains. Within that, sub-sections of the most popular areas are now where to go for the biggest bargains, Florida, London, and Marbella have thousands of distressed sales, repossessed and otherwise discounted properties.

Therefore, it is understandable that the first signs of recovery in the global economy, by being enough to life the panic over the extend the crisis could reach, would be enough to cause significant increases in demand for property in these markets.

At the height of the boom millions of properties around the world were being purchased every week by buyers foreign to the country of purchase. This died very quickly, and for every person that lost money in the crash, there was at least 1 person who was actively looking to buy but just hadn't got so far as to do so.

As many of you will know, once you have started looking at and/or longing for something like an overseas property, it is hard to stop wanting it even though you can't (or in this case shouldn't) get it. So, to say there was pent-up demand is somewhat of an understatement.

Anyone who wants to buy an overseas property will surely be buying it now, while no one (analysts and pundits included) is absolutely sure when prices will start rising again, but almost everyone is pretty sure they won't be falling very much further. Therefore, this explains why demand for bargain properties is really accelerating at the moment.