Developed Nations in Favour
Sometimes the global
property market resembles Alice in Wonderland. Only the unexpected
can be expected with certainty. Look back at forecasts for 2013 and
we can see how difficult it is to predict what might happen in 2014.
For example, highly respected economists said British property values
would drop 2 per cent last year. In reality, they rose 7 per cent.
Continued high levels of foreign investment in London, the
introduction of Government subsidies for home-buyers in its
Help-to-Buy scheme and a stronger-than-forecast economic recovery
were unexpected events that helped lift British home prices.
Whilst calculating
accurate property price rises can be problematic, some broad-brush
trends are easier to forecast. East Asian governments, like
Singapore, implemented measures to cool their overheating property
markets in 2013, and they can be expected to try and keep a lid on
prices again in 2014. This means values could fall by as much as 15
per cent in Hong Kong and rise modestly at best in China property
consultancy, Knight Frank, forecasts. In the BRIC cities of Moscow,
Mumbai, Hong Kong and Shanghai investment returns will be low in
2014, because of deteriorating market conditions forecasts property
consultancy, Savills.
Bric buyers busy
With their home countries
increasingly less favourable for investment, growing numbers of
Russians, Chinese and Indians will buy properties elsewhere in 2014.
According to Savills,
Chinese investment overseas will grow by at least
20 per cent per year over the next decade, a reflection of their
increasing wealth. Middle Eastern investment abroad is likely to grow
in 2014, as business people seek to avoid conflict zones within their
region and others look to re-invest oil and gas profits in
international property markets.
Keen to attract Asian and
Russian investors are many western countries, whose governments want
to stoke up activity in housing markets to fuel faltering economies.
Spain and Greece joined Portugal, Ireland and Cyprus in offering
residency to overseas investors in 2013, and if the initial rise in
buyer enquiries is a guide, this ought to result in increased
property sales in 2014.
Small hints of a
turnaround in the holiday home markets of battered southern European
property markets were recorded in late 2013, with prices rising in
Spain's Balearic islands, for example. An influx of wealthy overseas
buyers may help to stabilise luxury home prices in Europe's
Mediterranean markets in 2014. In Paris, the outflow of wealthy
French seeking tax exile abroad is likely to be balanced by an inflow
of wealthy foreigners taking advantage of price cuts to purchase
trophy homes in this architectural oasis.
eurozone monster
But the Jabberwock, a
monster that terrorised characters in Alice's Wonderland, has a
European, real-life equivalent – the unresolved eurozone crisis.
Continued fear of possible economic collapse among Europeans will
suppress home-buying activity within the eurozone, counteracting
increased investment by foreigners. The European Central Bank has
pumped money into the region's financial system to ensure banks don't
go bust and loaned money to individual countries like Greece, but the
debt mountains remain, unemployment is high and strong economic
growth a distant memory.
In some respects, eurozone members resemble
chaotic characters at the Mad Hatters Tea Party, because some
countries, like Portugal, are cutting property taxes to attract
investment and then contradicting those moves by raising other
property taxes to fund debt repayments, or even, as is the case with
Italy, introducing additional property taxes in 2013 and then
considering whether to abolish them in 2014 for the same reasons.
Britain "too strong?"
In Britain, estate agents
fret that politicians' talk about the imposition of a possible
“mansion tax” is deterring foreign buyers. Prices in central
London, where foreign buyers are most active, slipped 2 per cent in
the final months of last year. However, the capital's record high
prices are likely to be a bigger issue for buyers, and this could
lead to a slow down in the number of sales made in 2014.
Outside of London,
property prices are likely to strengthen as more Britons enter the
housing market this year. And yet, Savills warns that Britain's
housing market may fall victim to the country's economic success in
2014 if the Pound strengthens on international exchanges, because
that might make its bricks and mortar prohibitively expensive for
overseas investors.
Tax havens boom
Some Caribbean tax havens
have extended residency schemes to attract more High Networth
Individuals to their shores, and this could lead to increased
property sales in 2014. For example, Barbados introduced Special
Entry and Reside Permits last September which allow wealthy
individuals to come and go from the island as they please.
The Caribbean's emerging
rivals for beach-combing tax exiles, the Indian Ocean nations of
Seychelles, Maldives and Mauritius, will continue to grow in our
collective consciousness during 2014, as more luxurious resort
communities are built on their sandy sea shores.
Key hotspots
The United States housing
market resembles a patchwork quilt. At one extreme, property prices
in Manhattan are above their 2007 peak, while at the other end, the
bankrupt city Detroit is having much of its housing razed to the
ground as inhabitants leave to start new lives in towns and cities
with brighter economic futures. Perhaps the US city to watch in 2014
is Miami where Savills says prices for luxury condos are within a
whisker of their 2007 peak following an influx of South American
second home buyers over the past couple of years.
Other cities around the
world that might attract growing numbers of homebuyers in 2014 are
Tokyo, Dubai and Hamburg. Tokyo may be ripe for investment, because
the city's capital values and rental returns are rising. Dubai's
property market, which temporarily topped some international indices
for price growth in 2013, will continue to perform strongly in 2014,
as its economy bounds forward.
Few international property
buyers considered Hamburg in the past, but that is changing.
“International standard” housing projects in Germany's largest port city are being marketed to
overseas buyers for the first time, including the water-front,
Sophienterrassen project where developer Frankonia, is building 191
homes with Karl Lagerfeld-designed communal areas.
Brands popular
Operating at the top end
of the housing market Frankonia is a well-known brand in Germany.
Increasingly, when buying newly-built properties overseas,
home-buyers want to purchase from reputable brands, because they feel
more confident about how the development will turn out. The services
and facilities available to residents at branded schemes, including
gyms and home cleaning, appeal too. With
growing numbers of developments branded and serviced by top hotel
chains like the Mandarin Oriental, their
popularity is likely to grow stronger in 2014.
Lastly, a look at an
overhyped housing market - Rio. Estate agents say hosting the FIFA
World Cup 2014 and Olympic Games 2016 will result in increased
international attention which will boost sales of homes to
foreigners. However, the chaotic organisation of these sporting
events, street riots and high levels of crime are generating the kind
of publicity that most estate agents could do without. Also, much of
the promised new infrastructure will not be completed.
If the property market
still appears a bit bewildering in 2014, consider the Cheshire Cat's
advice to Alice: “You
just go where your high-top sneakers sneak, and don't forget to use
your head.”
