In Europe, established holiday home markets like the Swiss Alps, southern France, south west England and the Italian regions of Tuscany and Umbria are expected to do best in 2011.
“People are going back to the tried and tested areas,” says James Price, partner at Knight Frank, “I don't get as many calls for emerging markets as we used to get. There are very few speculative investors around.”
“Switzerland has been strong. It is well established, you get a very good, safe, secure and high quality of lifestyle, and they restrict the number of permits for foreign home owners which investors like.”
Interest in the southern French regions of Cote d'Azur and Provence is particularly strong.
“Our French team across the south of France has had record level of viewing, so people are looking again,” says Price.
Activity in Europe's holiday homes market would stay focused on prime areas like the Tuscany, French Riviera and Swiss Alps in 2011, partly because banks preferred lending to cash-rich individuals purchasing in these markets he says.
“We don't expect prices to rocket in any of these places, prices may even go down a little bit more, but we will see more people looking,” he says.
Oversupply problems mean the Spanish and Portuguese holiday home markets remain weak says Price. However, the Spanish island of Ibiza and the Portuguese island of Madeira are attracting overseas buyers.
“Despite the winter season, we are seeing constant demand for Ibiza from all ages funnily enough and such a range of people, not just the young and trendy,” says Camilla Mabbott, marketing director at estate agency, Aylesford International.
The Portuguese island of Madeira, a long time favourite with Britons is attracting buyers from new locations. At the island's completed Palheiro Estate development overlooking the capital, Funchal, buyers from eastern Europe, South America and South Africa are buying apartments and villas.
Across Europe's holiday home locations, developers selling off-plan would continue to struggle Price expects.
“Unless developments are substantially out of the ground they (developers) can wave goodbye to any interest in it,” he says, “People want to be sure that it will be built.”
http://globalpropertynews.blogspot.com
Monday, 31 January 2011
Wednesday, 26 January 2011
IRELAND PROPERTY FORECAST: THE BAILOUT AFFECT
What does the international bailout of Ireland's public finances, impending general election and warnings of debt default mean for the Irish housing market? Probably not much in the long term.
After Ireland's upper legislature passes the government's finance bill on Saturday allowing a Euro67 billion bailout by the EU, IMF and Britain to go ahead a general election will be called, probably for late February.
Ireland's next government, most likely a coalition of conservative Fine Gael and socialist Labour, will want to re-negotiate the bailout package agreed by the outgoing coalition government of conservative Fianna Fail and environmentalist Greens. They want those “punitive” 5.8 per cent interest rates charged by the EU on loan repayments cut. Bank economists warn those high interest rates invite default. Rates must be halved to 3 per cent at least, to keep the Irish on board US bank, Citi, says.
If Ireland defaulted on debt repayments this would infuriate the EU, so this is unlikely, but not impossible, especially if anti-EU, ultra-nationalist, far-left Sinn Fein gets a grip on the balance of power in the next Irish Parliament.
Although damaging initially, debt default may make little difference to the housing market in the longer term says Brian O'Driscoll, head of residential research Ireland at estate agency Savills says.
“There would be a couple of years of complete and absolute instability in the market and then it would stabilise,” he says, “It would not be an absolute disaster.”
The Euro6 billion of tax rises and spending cuts in the government's bailout budget does little for housing. Although stamp duty was cut from a top level of 9 per cent to 1 per cent for homes valued under Euro1 million and down to 2 per cent for homes valued above that figure, this will not be enough to compensate for job losses, wage freezes and tax rises arising from the budget which leaves Irishmen and women with less to spend on home buying.
The Irish property market's biggest problem is the tens of thousands of homes lying empty, especially in the new build “ghost housing estates” outside Dublin O'Driscoll says. Last year University College Dublin calculated 170,000 homes were empty following massive over-construction during the boom years of the mid-noughties.
The lack of mortgage funding is another drag on the market O'Driscoll says.
“In 2007 there were 15 mortgage lenders, now there are three and they are nationalised or being nationalised,” he says, “You won't get a loan unless you work in government or have rock solid employment. Lots of categories of business are deemed to be unacceptable. Without a fluid mortgage system it is hard to have a fluent property market.”
O'Driscoll considers consensus opinion among forecasters is for property prices to fall -10 to -15 per cent by the end of 2012. Prices of some new build homes outside Dublin may drop -40 per cent in 2011.
Prices will keep falling until the economy and mortgage lending expand substantially, and the supply of excess housing is soaked up he warns. Dublin's suburbs will remain the country's least weakest market.
Ireland's property slump began in June 2006 since when values have halved and buy-to-let investors have become nearly extinct. Only 250 investors bought Irish property in 2010 compared to 30,000 in 2006, a contraction of 99 per cent.
http://globalpropertynews.blogspot.com
After Ireland's upper legislature passes the government's finance bill on Saturday allowing a Euro67 billion bailout by the EU, IMF and Britain to go ahead a general election will be called, probably for late February.
Ireland's next government, most likely a coalition of conservative Fine Gael and socialist Labour, will want to re-negotiate the bailout package agreed by the outgoing coalition government of conservative Fianna Fail and environmentalist Greens. They want those “punitive” 5.8 per cent interest rates charged by the EU on loan repayments cut. Bank economists warn those high interest rates invite default. Rates must be halved to 3 per cent at least, to keep the Irish on board US bank, Citi, says.
If Ireland defaulted on debt repayments this would infuriate the EU, so this is unlikely, but not impossible, especially if anti-EU, ultra-nationalist, far-left Sinn Fein gets a grip on the balance of power in the next Irish Parliament.
Although damaging initially, debt default may make little difference to the housing market in the longer term says Brian O'Driscoll, head of residential research Ireland at estate agency Savills says.
“There would be a couple of years of complete and absolute instability in the market and then it would stabilise,” he says, “It would not be an absolute disaster.”
The Euro6 billion of tax rises and spending cuts in the government's bailout budget does little for housing. Although stamp duty was cut from a top level of 9 per cent to 1 per cent for homes valued under Euro1 million and down to 2 per cent for homes valued above that figure, this will not be enough to compensate for job losses, wage freezes and tax rises arising from the budget which leaves Irishmen and women with less to spend on home buying.
The Irish property market's biggest problem is the tens of thousands of homes lying empty, especially in the new build “ghost housing estates” outside Dublin O'Driscoll says. Last year University College Dublin calculated 170,000 homes were empty following massive over-construction during the boom years of the mid-noughties.
The lack of mortgage funding is another drag on the market O'Driscoll says.
“In 2007 there were 15 mortgage lenders, now there are three and they are nationalised or being nationalised,” he says, “You won't get a loan unless you work in government or have rock solid employment. Lots of categories of business are deemed to be unacceptable. Without a fluid mortgage system it is hard to have a fluent property market.”
O'Driscoll considers consensus opinion among forecasters is for property prices to fall -10 to -15 per cent by the end of 2012. Prices of some new build homes outside Dublin may drop -40 per cent in 2011.
Prices will keep falling until the economy and mortgage lending expand substantially, and the supply of excess housing is soaked up he warns. Dublin's suburbs will remain the country's least weakest market.
Ireland's property slump began in June 2006 since when values have halved and buy-to-let investors have become nearly extinct. Only 250 investors bought Irish property in 2010 compared to 30,000 in 2006, a contraction of 99 per cent.
http://globalpropertynews.blogspot.com
Monday, 3 January 2011
GLOBAL PROPERTY MARKET FORECAST 2011
Did you heed Warren Buffet's advice? Two years ago he told us “the time to get greedy is when others are fearful”. He said this after he bought a chunk of troubled Goldman Sachs bank when most other investors were rushing for the exits - the banking crisis was at its peak.
At that time I argued Buffet's approach can work for property investment, a view that proved correct - many investors who got greedy for bricks and mortar over the last 24 months have been rewarded.
The global housing slump reached its low point two years ago, since when house prices have risen by 10 per cent on average estate agency, Knight Frank, reports.
“Each quarter we are presented with further evidence that the impact of the global recession on the world’s housing markets is diminishing,” says Liam Bailey, head of residential research at Knight Frank, “Economic stimulus measures put in place by many western governments such as ultra-low interest rates, first time buyer concessions and targeted support for banks have encouraged house buyers.”
Investors who ploughed money into East Asian markets in 2010 may feel they have the Midas touch. Property prices rose by more than a quarter in Hong Kong, and by a third in Singapore and China's biggest cities, last year. Those who braved the Latvian housing market must feel smug. The Baltic state's housing market was devastated by the crash. It's home prices sank 43 per cent from a 2007 peak, but in 2010 they recovered strongly, rising about 20 per cent, making it Europe's best performing housing market over the past twelve months.
Other buoyant markets included Brazil, Russia, Australia and South Africa. In France, modest property price rises kept pace with inflation.
It does not always pay to be greedy. Those who bought homes in most other European countries including Spain, Ireland, Monaco and Switzerland may wish they had not done so, because values fell. The same was true for most of the United States.
Knight Frank's forecast for 2011 is for a gentle recovery in the West and a reining in of excessive price rises in the East.
“The potential risks to future growth are many and varied,” says Bailey, “For western economies the availability of new funding, the scale of austerity measures, earnings and employment growth will prove critical to the health of their housing markets. In Asia, a lot hinges on how far governments intervene in fiscal policy.”
Some European countries, including France, Italy and Switzerland, will enjoy price rises this year the agency says. This must be viewed as the best case scenario, because a Eurozone crisis has not been averted. If the unflaterringly labelled PIGS(debt laden Portugal, Ireland, Greece and Spain) fail to manage their finances better, then their economies and housing markets will suffer. And so will the rest of Eurozone which would have to bail them out.
Even if the Greeks, Irish and Iberians do keep a grip in 2011, they will still suffer. Knight Frank forecasts a 3 per cent fall in Irish property values in 2011. However, a new set of tax rises and public spending cuts in the wake of the International Monetary Find (IMF) and European Union (EU) bailout will surely exacerbate price falls. Harsh austerity measures in Spain, Greece and Portugal will drag down property values in these countries.
However, if the Euro were to collapse on international exchanges as a result of government debt problems, then Eurozone property would become much cheaper for buyers from outside the region - the resulting influx of Britons, Chinese, Arabs, Kazaks and others could help buoy some markets, especially top end holiday home destinations and prime areas in capital cities. Paris, Cote'D Azur, Tuscany, Umbria and the Alps would top the list - these destinations are established and not over-built.
Even without Eurozone government debt crises, a lack of mortgage funding will continue to squeeze demand and prices in the region in 2011.
Britain's position is precarious. The EU is Britain's largest trading partner and its banks have lent heavily to Ireland, so it's economy and property market would struggle if the Eurozone's financial crises spread. Such potential disasters aside, economists are split on Britain's prospects. Bailey forecasts a modest 2 per cent rise in Britain in 2011, partly because demand outstrips limited supply. Consultancy, Capital Economics forecasts a -10 per cent fall, because a shrinking mortgage market and government austerity programme will drain the housing market of cash.
London was Britain's strongest housing market in 2010, mainly because of strong demand from foreign buyers attracted by the weakness of Sterling. Bullish economists say the capital's private sector revival will give London home prices a boost in 2011, but sceptics say they will fall further than elsewhere in Britain, because affordability levels are overstretched.
Most likely, Britain will be a mixed bag. Property markets in locations dependent on public sector funding and old declining industries will fair badly, while those in areas with vibrant private sectors with strong knowledge-based businesses, good communications and attractive, well maintained housing stock, will do better. In short, locations, like central London, Reading, Brighton and Cambridge have the best prospects.
Ironically, Europe's strongest property market in 2011 may be in a country shunned by the EU: Turkey - it came through the banking crisis relatively unscathed, its mortgage market is expanding, the economy is growing and interest rates are coming down. Morocco is tipped as a hot spot by some agencies - the growing list of luxury holiday home resort communities being built there is a vote of confidence from developers.
In the United States, a revival in Wall Street's fortunes meant property markets in high end locations of Manhattan and Brooklyn boomed in 2010. The Hamptons, the playground of bankers and stockbrokers, also fared well. As for most of the rest of the United States, the end of homebuyer tax credits in April signalled the start of another slide in US property values. Capital Economics expects US property prices to be 5 per cent lower than they are now this time next year. Knight Frank is more positive, forecasting a 1 per cent rise in 2011.
In Asia, bubbles are forming. In Beijing, the average cost of a home is 22 times earnings. Taiwan's market is rife with speculators buying up property in anticipation of large Chinese investment in the years ahead.
In Hong Kong, prices are inflated largely because interest rates are barely at 1 per cent. In locations like Hong Kong and the United Arab Emirates currencies are pegged to the US Dollar, and their interest rates to those of the Fed. US interest rates are low to help reflate the American economy, but in Hong Kong these low rates are over-inflating an economy that is already boomimng.
Eventually, when the Fed raises interest rates, they will rise correspondingly in Hong Kong, so people taking out large, cheap loans in that Special Administratuve Region of China today will find them becoming expensive. If banks absorb these rate rises, then borrowers may escape unscathed.
After losing half of its value in 2009, the UAE property market slipped back a relatively modest -6 per cent in 2010.
Steven Morgan, head of estate agency, Cluttons UAE, is confident about Dubai's prospects.
“A number of encouraging indices such as the re-entering of (lenders) Tamweel and Amlak into the mortgage market, increased tourism numbers in Dubai, and growing container shipments through Jebel Ali all point to stabilisation and even modest recovery within the real estate market in 2011,” says Morgan.
On the other hand, the supply of housing in Dubai is enormous, so a quick-turnaround in fortunes is unlikely.
In these uncertain times many of us may prefer not to buy a home fearing we may lose money if markets fall. Maybe the way to approach this conundrum is to ask “What would Buffett do?”. The Sage of Omaha is sanguine about uncertainty. Plan for the long term he advises. “Only buy something that you'd be perfectly happy to hold if the market shut down for ten years,” is a famous Buffett quote. He was referring to stocks and shares, but, as we have found, his approach works for property ownership too.
http://globalpropertynews.blogspot.com
At that time I argued Buffet's approach can work for property investment, a view that proved correct - many investors who got greedy for bricks and mortar over the last 24 months have been rewarded.
The global housing slump reached its low point two years ago, since when house prices have risen by 10 per cent on average estate agency, Knight Frank, reports.
“Each quarter we are presented with further evidence that the impact of the global recession on the world’s housing markets is diminishing,” says Liam Bailey, head of residential research at Knight Frank, “Economic stimulus measures put in place by many western governments such as ultra-low interest rates, first time buyer concessions and targeted support for banks have encouraged house buyers.”
Investors who ploughed money into East Asian markets in 2010 may feel they have the Midas touch. Property prices rose by more than a quarter in Hong Kong, and by a third in Singapore and China's biggest cities, last year. Those who braved the Latvian housing market must feel smug. The Baltic state's housing market was devastated by the crash. It's home prices sank 43 per cent from a 2007 peak, but in 2010 they recovered strongly, rising about 20 per cent, making it Europe's best performing housing market over the past twelve months.
Other buoyant markets included Brazil, Russia, Australia and South Africa. In France, modest property price rises kept pace with inflation.
It does not always pay to be greedy. Those who bought homes in most other European countries including Spain, Ireland, Monaco and Switzerland may wish they had not done so, because values fell. The same was true for most of the United States.
Knight Frank's forecast for 2011 is for a gentle recovery in the West and a reining in of excessive price rises in the East.
“The potential risks to future growth are many and varied,” says Bailey, “For western economies the availability of new funding, the scale of austerity measures, earnings and employment growth will prove critical to the health of their housing markets. In Asia, a lot hinges on how far governments intervene in fiscal policy.”
Some European countries, including France, Italy and Switzerland, will enjoy price rises this year the agency says. This must be viewed as the best case scenario, because a Eurozone crisis has not been averted. If the unflaterringly labelled PIGS(debt laden Portugal, Ireland, Greece and Spain) fail to manage their finances better, then their economies and housing markets will suffer. And so will the rest of Eurozone which would have to bail them out.
Even if the Greeks, Irish and Iberians do keep a grip in 2011, they will still suffer. Knight Frank forecasts a 3 per cent fall in Irish property values in 2011. However, a new set of tax rises and public spending cuts in the wake of the International Monetary Find (IMF) and European Union (EU) bailout will surely exacerbate price falls. Harsh austerity measures in Spain, Greece and Portugal will drag down property values in these countries.
However, if the Euro were to collapse on international exchanges as a result of government debt problems, then Eurozone property would become much cheaper for buyers from outside the region - the resulting influx of Britons, Chinese, Arabs, Kazaks and others could help buoy some markets, especially top end holiday home destinations and prime areas in capital cities. Paris, Cote'D Azur, Tuscany, Umbria and the Alps would top the list - these destinations are established and not over-built.
Even without Eurozone government debt crises, a lack of mortgage funding will continue to squeeze demand and prices in the region in 2011.
Britain's position is precarious. The EU is Britain's largest trading partner and its banks have lent heavily to Ireland, so it's economy and property market would struggle if the Eurozone's financial crises spread. Such potential disasters aside, economists are split on Britain's prospects. Bailey forecasts a modest 2 per cent rise in Britain in 2011, partly because demand outstrips limited supply. Consultancy, Capital Economics forecasts a -10 per cent fall, because a shrinking mortgage market and government austerity programme will drain the housing market of cash.
London was Britain's strongest housing market in 2010, mainly because of strong demand from foreign buyers attracted by the weakness of Sterling. Bullish economists say the capital's private sector revival will give London home prices a boost in 2011, but sceptics say they will fall further than elsewhere in Britain, because affordability levels are overstretched.
Most likely, Britain will be a mixed bag. Property markets in locations dependent on public sector funding and old declining industries will fair badly, while those in areas with vibrant private sectors with strong knowledge-based businesses, good communications and attractive, well maintained housing stock, will do better. In short, locations, like central London, Reading, Brighton and Cambridge have the best prospects.
Ironically, Europe's strongest property market in 2011 may be in a country shunned by the EU: Turkey - it came through the banking crisis relatively unscathed, its mortgage market is expanding, the economy is growing and interest rates are coming down. Morocco is tipped as a hot spot by some agencies - the growing list of luxury holiday home resort communities being built there is a vote of confidence from developers.
In the United States, a revival in Wall Street's fortunes meant property markets in high end locations of Manhattan and Brooklyn boomed in 2010. The Hamptons, the playground of bankers and stockbrokers, also fared well. As for most of the rest of the United States, the end of homebuyer tax credits in April signalled the start of another slide in US property values. Capital Economics expects US property prices to be 5 per cent lower than they are now this time next year. Knight Frank is more positive, forecasting a 1 per cent rise in 2011.
In Asia, bubbles are forming. In Beijing, the average cost of a home is 22 times earnings. Taiwan's market is rife with speculators buying up property in anticipation of large Chinese investment in the years ahead.
In Hong Kong, prices are inflated largely because interest rates are barely at 1 per cent. In locations like Hong Kong and the United Arab Emirates currencies are pegged to the US Dollar, and their interest rates to those of the Fed. US interest rates are low to help reflate the American economy, but in Hong Kong these low rates are over-inflating an economy that is already boomimng.
Eventually, when the Fed raises interest rates, they will rise correspondingly in Hong Kong, so people taking out large, cheap loans in that Special Administratuve Region of China today will find them becoming expensive. If banks absorb these rate rises, then borrowers may escape unscathed.
After losing half of its value in 2009, the UAE property market slipped back a relatively modest -6 per cent in 2010.
Steven Morgan, head of estate agency, Cluttons UAE, is confident about Dubai's prospects.
“A number of encouraging indices such as the re-entering of (lenders) Tamweel and Amlak into the mortgage market, increased tourism numbers in Dubai, and growing container shipments through Jebel Ali all point to stabilisation and even modest recovery within the real estate market in 2011,” says Morgan.
On the other hand, the supply of housing in Dubai is enormous, so a quick-turnaround in fortunes is unlikely.
In these uncertain times many of us may prefer not to buy a home fearing we may lose money if markets fall. Maybe the way to approach this conundrum is to ask “What would Buffett do?”. The Sage of Omaha is sanguine about uncertainty. Plan for the long term he advises. “Only buy something that you'd be perfectly happy to hold if the market shut down for ten years,” is a famous Buffett quote. He was referring to stocks and shares, but, as we have found, his approach works for property ownership too.
http://globalpropertynews.blogspot.com
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