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.

Property Investment Not as Simple as Many Think

Property investment is a lot more diverse than many people give it credit for. Many people think it is a comparatively simple investment class compared to say stocks and shares, but when you break it down it is not so simple.

Firstly there is commercial and residential property investment. They are then further sub-divided into offices, retail and industrial property investment on the commercial side, and local and overseas property investment on the residential side. Overseas property investment can then be subdivided into residential and holiday rental investments. And we haven't even covered tenures or property debt investments yet.

Commercial property investment is most often the purchase of an office, retail or industrial space, to rent out to one or more companies -- usually on a long-term lease -- for an annual figure of between 4% and 8% of the purchase price. The 4% to 8% is known as the rental yield.

Residential investment usually works on the same principles, but the number of variables is much greater.

There is buy to let investment, which tends to mean the purchase of a local property or properties for the purposes of renting out to residential tenants or holiday makers. Buy to let investments usually yield between 4 and 6 percent, but can be much higher in the right set of circumstances; namely massive repossession volumes in an area, which reduce prices and increase rental demand.

Then there is overseas property investment. This is perhaps most diverse of all, because, as well as having to choose property class, location and tenure, we also have to choose country, region and also whether we want to let residentially or to holiday makers.

The huge choice usually gives way to higher yields for the shrewdest investors. This is especially true at the moment, because of the massive price reductions in many countries, including up to 60% off repossessed property in America and Spain etc.

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.

Investors Dominant in US Market – Little Wonder

Foreign investors are so heavily active in the US property market right now that, along with their US counterparts they are preventing first time and low income buyers from benefiting from the massively reduced prices on offer on repossessed and distressed sales.

Who can blame them though?

2 million homes were repossessed in 2008, 2.8million were repossessed in 2009, and a higher figure is predicted for this year. Not only does this mean 4.8 million homes being sold dirt cheap -- add on well over a million for this year already --, but it also means a high proportion of 4.8 (to 6+) million people moving back into the renting circle.

The downsides are: A: we need first time buyers and occupant buyers for a healthy market, and B: with such a high proportion of houses being bought by investors there is the potential for a severe jolt if they all (or too many of them) try to sell at once.

Luckily, we know that most investors today -- not only in America -- are investing for rental income, with capital appreciation being considered a bonus.

But this may only severely delay the problem. There is still the potential that years down the line, when the market has really strengthened, droves of them will sell up to recapitalise their business of for whatever reason and kick the market, or at least some local markets in the teeth for a bit. But anyway we are getting ahead of ourselves.

For now, all we need to say is that there are millions of great deals out there. And while it is sad that people are losing their homes, it is them, the economy and irresponsible lending (the banks) that are to blame, so there is no point in investors cutting off their nose not to capitalize on it.

Cuba 99 Year Lease Law to Indicate Overseas Investor Sentiment

Cuba's decision to allow 99 year leases will be an excellent indication into the current state of the overseas property market. In fact it will be one of the only true indications we ever get.

This is because the market is a truly strange place. Overseas property news and reports have always been dominated by people and companies with vested interests, and now is no different. But it is now harder to decide what is true and what isn't, as reports of increasing sales and searches conflict with things like austerity blues.

Why Cuba's decision will be an indication of how the market conditions is because analysts are expecting a wave of new condominium, golf and marina developments, like we saw in dozens of emerging markets during the boom.

According to sources in the Cuban government 16 condo developments have already been approved by the council of ministers and are proceeding to implementation, and another 4 marina only condo developments are in the pipeline. Many developers have been waiting for the chance to enter the Cuban market for year, so that is not the insightful part.

What will give us an insight into the current state of overseas property investment is sales and demand for the resorts. We know that agents and developers in the Caribbean have seen strong sales to wealthy lifestyle buyers since last year, and that sales of property in emerging markets like Turkey and Egypt have also reportedly grown.

But we don't hear much of the far flung markets like Panama, Phuket, Koh Samui etc. A reported new development on Koh Samui last year gave cause for hope, but there has been little since. Because the Cuba law is hot news, it can be expected that we will hear if demand is particularly strong or otherwise. Thus giving us an indication to where overseas property investor confidence is currently at.

Overseas Property: Has Private Investment Really Been Killed?

This week, overseas property portal Primelocation ran a report on how 91% of all property searches were for property in France, Spain, Italy and the US. But we know from recent reports that the world’s investors are focussing heavily on places like Turkey and Egypt, which are growing strongly at the moment. Surely pure property investment hasn’t been killed on the private level, has it?

It seems to have been according to portal searches. Rightmove Overseas’ results also showed no sign of Turkey or Egypt recently.

Thank fully we know that it hasn’t been. We know that buyers are still heavily interested in Turkish and Hurghada property because we talk to them everyday.

So where is the deficit? Well, the keyword is buyers. Most of us heard about the recent battle of the apps as both Rightmove and Primelocation brought out Apps for the much reveered Ipad at around the same time (Rightmove won by the way). These of course followed Iphone apps by not only Rightmove and Primelocation but all the other major portals as well.

These apps, and technological advances like it have not only made it easier to search for overseas property, but they have made it fun. Unfortunately this has increased the number of people searching for overseas property who have no serious intention of buying anytime soon.

Anyone who has ever dreamed of buying an overseas property (and let’s face it, who hasn’t?) in the sun is now searching for their dream home on the miserable commute home from work. Whereas before people would have played mini-games to escape the akward silence of the train, now they are playing with their apps.

This is great for the portals, but not such great news for the agents receiving their enquiries. So, while the portal search enquiries are an indication of the lasting popularity of the traditional destinations with those seeking a lifestyle buy, they do not neccesarily indicate an end to pure investment on the private level.

Any Briton on a low budget looking for an investment or holiday home investment they can afford now, and easily and affordably get to, is buying in Egypt or Turkey, and that will be the case for the foreseeable future.

Turkish Property and Tourism to Benefit from Economic Realities

Property in Turkey could see increased foreign demand as Europe continues to struggle with the recession and sovereign debt crisis, according to one overseas property commentator.

“We are all feeling the pinch as we struggle into a ‘rocky recovery’,” said Liam Bailey, director of Write About Property, explaining:

“In fact many people are feeling worse now than they did during the recession, because we all thought the worst was past, now inflation is rising faster than growth, and we are full of dread at the impending austerity measures.

“For the next few years, because people always want holidays abroad, we will see continued rises in tourism to low-cost destinations like Turkey, and this will also bring increases in demand for holiday homes and holiday home investments in the country, also fuelled by the country’s low prices.”

Bailey went on to say that Turkey would also benefit from Greece being practically a no-tourist zone.

“Greece has always been one of Turkey’s biggest competitors for tourism. Now, with the British Consulate and others warning of disruptions because of the industrial actions, and terrorist groups threatening to target the tourism industry, many people will give Turkey a wide berth, and many of them will choose Turkey instead.”

For the property market, Bailey also said that Turkey would benefit from being in a better state fiscally than its rivals.

“People are more cautious than ever when it comes to buying overseas property. When you look at Greece, Spain and Portugal being downgraded by investment ratings agencies, and Turkey looking likely to be upgraded, you do the math,” he said.