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.

View Greek property for sale

EU Property Investment Up 15% in the First Quarter

13.4 billion euros worth of property investment deals took place in the EU in the first quarter of this year. This represents a 15 per cent increase over the first three months of 2009, according to research from PropertyEU released yesterday.

This shows unequivocally that faith is returning in the international property arena. Sure, this report is on commercial real estate, but growth in the residential sector will almost certainly follow in the areas where these purchases and expansions are taking place.

Malls need staff, malls need shops, new ventures open up and they need staff, not to mention staff to manage the malls. It is a fact that many of these staff will already be in place, but I do not know one mall investor who will not want to have some sort of presence in the higher levels of their new investment’s staff.

Also, the malls and offices wouldn’t be worth investing in if growth and expansion were unlikely in the market. This means expansion of stores and business, which cannot happen without more staff.

Speaking of which, according to the report, the retail sector was by far the best performing, over the office and industrial sectors.

The retail sector, which saw a 5.2 billion euro growth, was boosted, by the 1.3 billion euro purchase of a portfolio of operational shopping centres and shopping centre developments by Dutch investment trust Corio,  from developer-owner Multi Corporation.

Both companies agreed that Corio would acquire four active retail centres in Germany, Spain and Portugal and another retail centre under construction, again, in Germany.

The second most lucrative deal in the first quarter, was the purchase of  Simon Ivanhoe's portfolio of shopping centres in France and Poland, worth about 715 million euro, in February, by Unibail-Rodamco.

According to the website of PropertyEU, the site was established in 2006 to provide insight on financing and investment in the latest important deals in Europe, investors from North America, the UK and elsewhere.

The research follows investment deals exceeding 20 million euro in value, for which the financial details are known.

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.

View Italian property for sale

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.

View Cyprus property for sale

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.

View bargain American properties