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.

Confidence Increasing in Overseas Property

We have all heard reports that the low interest rates in the UK are causing more people to look to overseas property. The latest report to confirm this trend comes from the latest Worldwide Property Group confidence tracker; a survey of those considering buying overseas property.

The survey found that 71% of potential overseas property buyers said that the current level of rates had increased their desire to purchase a property, 64% said that they are benefiting from the continuing low level of interest rates. Interestingly.

73% respondents said that they felt that now is a good time to buy property overseas showing that confidence is returning. 68% of respondents said they are actively considering buying a property overseas.

Asked which regions they were most interested in, respondents came up favouring the US, Caribbean, and Brazil, followed by the traditional European destinations like Spain, France and Italy, with Portugal also getting a mention.

Commenting on the figures, Kevin Wilkes, Managing Director of the Worldwide Property Group said: “The results of this survey make for very positive reading. I am delighted to see that confidence in property both in the UK and overseas has reached such a high level. It is also very interesting to see that with all the fantastic opportunities currently available around the world, it is still the more traditional markets that draw the most interest. This is valuable information as it enables us to offer exactly what our clients want.”

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.

Top Russian Portal Publishes Search Data

Leading Russian overseas property portal 1-property.ru has just revealed its first ever chart of top overseas property destinations, based on search data from users of the site.

The top 5 is as follows:

1. Bulgaria
2. Spain
3. Turkey
4. Montenegro
5. Cyprus

Firstly, Bulgaria in number 1 is particularly significant. No, not that it is a favourite with Russian buyers, who have always tended to choose Eastern Europe for their beach holiday homes, but for Bulgaria's ailing property market. The number of Russian buyers is growing rapidly, and the Bulgarian property market is in a lot of trouble from oversupply. Russian buyers could potentially increase in volume sufficiently to really pull the market out of the proverbial.

Secondly Spain, another significant result, though we have been hearing similar reports about British buyers returning to Spain, it seems the dark clouds may be lifting there as well. It also has a massive oversupply problem and needs all the help it can get.

What a result for Turkey in third. Turkey is climbing the ranks of British charts as well, and for it to be third with Russian buyers backs up the reports we have been hearing from Turkish property agents.

Montenegro certainly isn't surprising, it has long been a favourite with Russian tourists.

Cyprus, again, a market in a lot of trouble, left near-baron by the exodus of British buyers, and could gain a lot from an influx of Russian ones.

Dubai Property Victims: the Sad Story of 29 Boulevard

It's been a while since we posted a Dubai disaster story, but following the lead of the Indian TV station NDTV we thought we'd do a little digging.

NDTV's report is a bit like the one shown on British television not that long ago, an episode of the program Homes from Hell dedicated solely to the tragic tales of people who have paid thousands of pounds dollars and euros towards Dubai properties that are still no more than rotting foundations, and how, because the market developed so rapidly, the legal system still has nothing governing off plan purchases, and so there is very little that those affected can do but wait.

The NDTV report focuses on the property 29 Boulevard, a prestigious skyscraper project designed by New York architect Frank Williams and to be built near the now completed Burj Khalifa, the tallest building in the world. 100 people camped outside the Emaar offices to bag a good unit in the development, according to the NDTV report. The property has never got any further than its foundations, which are "rotting" according to NDTV.

“It’s really a disaster, the situation in Dubai,” said Silvia Turrin, a real estate agent who bought into the development, and has been unable to get her money back out. “It’s not like in Western countries. It’s very difficult to exit here if there’s a problem. And we’ll never get our money back, but now we’re stuck dealing with this hole.”

The lack of legal framework is allowing Emaar to hold onto people's down payments of up to 80%, despite failing to deliver on the project.

In a statement, Emaar acknowledged that 29 Boulevard was still “under construction” but said that it upheld transparency standards and had “taken several proactive measures to address the concerns of investors on developments that are in the pipeline.”

As we know, 29 Boulevard is far from being an isolated case, the ITV program covered dozens of couples and buyers trapped paying off loans for payments made on properties they look unlikely to ever receive.

It is ironic that Dubai's legal system is strong enough to prevent people from walking away from loans for fear of being jailed, but unable to force developers to honour contracts.

But we know all this. However, according to the NDTV report vacancy rates in Dubai are still rising. This flies in the face of a recent report by Dubai investor newsletter Arabian Money, which said vacancy rates fell over the summer. It is obviously counting a different figure for total housing stock, and potentially new supply as well, which no one really has a handle on, again this is down to the legal systems.

If one good thing has come out of all this it is that buyers are doing more digging than ever before. Checking laws, checking the season to make sure they will not be holidaying in a baron landscape off season, and checking planning permission, developer status, in short: checking everything they should be checking.

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.