Weekend round-up

Here is a collection of real estate articles from around the world to comment on. What are you seeing out there in your area? Post your links and thoughts.

Farming the cream of the real estate crop

Sales figures compiled by the Real Estate Institute (REINZ) show the median farm price increased by 52 per cent between April 2007 and April 2008, ...

From boom to gloom?

Leave it to Garth Turner to throw cold water on the notion Canada can achieve a soft real estate landing, when history and the slump south of the border ...

Western prosperity buoys real estate in Maritimes

Western prosperity is helping boost prospects for Atlantic Canada's real estate markets, a major national realtor reported Monday. ...

US economy struggles to regain its balance

But the thing to remember is that it's not just residential real estate. The same factors that were behind the housing bubble were also at work, ...

Silicon Valley investors join in Vietnam's real estate frenzy

HO CHI MINH CITY, Vietnam - A half a world away from Silicon Valley's anemic real estate market, agent Cindy Nguyen has little time for sleep while she sniffs out deals in one of the world's hottest property markets...

Why the Property Boom Bypassed Germany

Lured by remarkably low prices, property investors from the United Kingdom and Ireland have been snapping up real estate, especially in Berlin. ...

How long will the slowdown last?

For many real estate executives, 2008 is the year of radical changes. Building sales through the first five months of the year in New York's investment sales market have been moving at a snail's pace. Investment sales executives are marketing plenty of office and residential properties, yet very few are actually closing and investment sales are down by as much as 80%.
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Weekend round-up

Here is a collection of real estate articles from around the world to comment on. What are you seeing out there in your area? Post your links and thoughts.

Online property sales probed - Australia

Moody's: Commercial real estate prices slipping - USA

Real estate sector growth trends - Bulgaria

5-10 percent European property fall

Real estate wary of hot foreign money - UAE

Al Gharbia set to become a real estate hot spot - UAE

Israel is still a hot market for high-end real estate

Africa: Asset Managers Look to Continent

Japan faces backlog of unsold homes

Well, it used to be cheap to live in the burbs

There is an interesting post on The Oil Drum. There are some great graphics posted that show the percentage of income required to commute as you move away from the city and into the suburbs in Sydney.

The main article behind the post talks about the rising cost of fuel cutting into the family budget for car-dependant commuters. Fuel prices in Sydney are approaching $1.50 per litre and some estimate it could rise to $2.00 over the next couple years which would equate to about 6% of income for those who commute. Add to this an inadequate transit system and the lack of government to fast track alternative fuel research some are worried a serious crisis will develop.

Final thoughts: The article briefly mentioned the impact on those who are already mortgage strapped and I couldn't help but see this as a global problem.

Australia, US, Canada, Great Britain and many other countries have had major real estate booms and as gas prices continue to climb, those who maxed out on their mortgage I suspect started feeling the pinch when fuel broke $1.00 per litre.

Maybe unemployment is at an all-time low in some areas because those who are mortgage strapped have 2nd and 3rd jobs.

Today's quote: Every day, you’ll have opportunities to take chances and to work outside your safety net. Sure, it’s a lot easier to stay in your comfort zone.. in my case, business suits and real estate.. but sometimes you have to take risks. When the risks pay off, that’s when you reap the biggest rewards. Donald Trump

Weekend round-up

Here is a collection of real estate articles from around the world to comment on. What are you seeing out there in your area? Post your links and thoughts.

International Real Estate Investment: What Investors Should Know - General

Media to blame for slump, say real estate agents - New Zealand

Global wealth boom to trigger a 77pc surge in millionaires - World

India Real Estate Expo 2008 - USA

REAL ESTATE: Outlook tough for sellers - USA

Foreign buyers snap up US real estate - USA

Property in the Caribbean: St Lucia goes bananas for property - Caribbean

Can UAE real estate boom dodge US slow down? - Middle East

International buyers eye Canadian real estate - Canada

Vancouver prices continue to rise

With record listings, year over year sales down and prices in some localized markets flat or slightly down, there still seems to be plenty of people who still think real estate prices only go in one direction - up.

CMHC is still bullish on the Vancouver market calling for an overall 8% increase in 2008 and another 5% for 2009. CMHC is hanging its hat on job and population growth despite their speculation that the decline we are seeing is in part, a result of events in the US real estate market causing fear and investors wanting to ring the register and take their profits. They also noted that resales, a measure of investors flipping houses, is also down.

Final thoughts: First, to all those flippers who have taken your profits and are sitting on the sidelines planning your next investment, well done.

To those who are still in the game looking for another 10%, remember this saying: the bulls make money, the bears make money but pigs just get slaughtered.

The predicted 8% an 5% increase for 2008 and 2009 respectively is a possibility however it may also be very optimistic.

Lets not forget following:

Vancouver is the most expensive city in Canada taking 67% of your income to buy the average house.

Mortgage rates haven't fully followed the current rate cuts by the Bank of Canada.

Sub-prime mortgages they say is a small portion of mortgages in Canada but what about zero down and 40 year amortizations. I am certain with the affordability factor the way it has been over the last couple of years there are a behemoth of first-time homeowners with these mortgages. Not to mention, until this credit crisis hit, the lending intuitions in Canada were also like the US and giving away cash.

How about the "real" inflation we are getting hit with, you know the inflation that includes the basic necessities like fuel, food and housing costs.

Finally, I believe this this massive run up in real estate value and record sales in Vancouver is the result of the ability for just about anyone with a heart beat to get a mortgaged over the last 5 +/- years. In other words, the buyers of tomorrow are already strapped with a massive mortgage.

So we are different than the US and we don't have the sub-prime problem but that doesn't mean we won't have a meltdown - Canadian style.

The best and the worst of the US real estate market

We all aware of the real estate slump in the US and how it is expected to continue for the next couple of years before we see a bottom.

Here is a sample of some of the steepest declines in residential real estate since the peak of the market in 2005/2006:

Detroit, MI -24.5%
Miami, FL -23.7%
Sacramento, CA -30.2%

These and other areas are forecasted to continue falling another -15% to -24% over the next 12 months.

Not all areas are facing such steep declines and look more like a return to a balanced market. What has only been a whisper in the msm are those real estate markets in the US that are holding up and even predicted to see an increase in home values over the next 12 months. When considering that the median asking prices are in the $100,00 to $200,000 range, one can conclude these were not "hot" markets in the first place.


Final thought: I am going to paraphrase a quote from Noel Whittaker, Rich Assets Real Estate that I thought was fitting and true to a fault.

The property boom has made us all feel wealthy, but unfortunately it has lulled many into a false sense of security.

Real estate bargains in high-growth areas of the world

With the US in a real estate down-turn, and the credit crisis negatively affecting capital markets around the world, real estate investors are looking to the emerging markets for opportunities.

Some emerging markets of interest include Brazil, Asia and India which are areas that are still growing at a healthy pace. While participating directly in these markets is not feasible for most individuals there are opportunities to get in on the action through REITs that invest in foreign real estate.

Final thought: While there seems to be much hype around foreign real estate investments on the web with plenty of "big" names such as Goldman Sachs, Lehman Brothers and Merrill Lynch chasing the money. However, the contrarian in me suspects the best opportunities are those markets that have already been beaten down. As the old Wall Street saying goes, buy when there is blood on the street.

Prince George worth a look

Prince George with a population of around 77,000 is facing an economic downturn. This is mainly due to the softening of the lumber industry.

The City is a centre for mining companies that operate in Central B.C. There are reports that indicate along with the current mining of minerals the area is showing promise of petroleum resource potential.

Prince George is also at the cross-roads to the northwest coast where there are a number of new projects in play to support shipping to the orient.

Century 21 reports that values are essentially flat year over year while the B.C. Northern Real Estate Board claims the average Prince George house price is up six per cent this year.

CMHC reports the vacancy rate as of October 2007 for all apartments in the city stood at just 1.9 per cent down from 2.6 per cent the year before.

Housing starts were down slightly in March and also year to date however this is not indicative of a trend this early in the year.

Prince George is also a major shopping centre for many surrounding communities within a one to two hours drive.

Final though: A quick MLS search showed a multitude of housing options under $200,000

Agriculture the next real estate play

Everyone has been hearing and reading about the rising costs of food around the world. This storey is in part a decline in food production, increased global demand from developing countries like China and India, the US government pushing forward on corn based ethanol production and finally market speculators pushing up the prices. That being said several commodity, real estate and other experts are looking forward on a 10 year boom in commodity prices.

If we look at it from a real estate perspective, farmland is the obvious place to be. Assuming a 10 year boom in the commodity market plays out, real estate values of farmland will skyrocket. I base this primarily on the limited supply of farmland and adding another billion people to the world population by 2020. In addition to this, farmland around the world is decreasing due to development and loss of ground water .

The Spring 2008 Farmland Values Report released by Farm Credit Canada says the following:

"The average value of Canadian farmland increased 7.7 per cent during the last six months of 2007, Canada's highest increase since 2002. This is higher than the 3.6 per cent increase in the first six months of 2007.

Most provinces continue to see growth in farmland values, with British Columbia experiencing a huge 14.5 per cent increase. Overall increases are consistent with an upward trend in land values since January 2000.

With the largest increase in B.C. at 14.5 per cent, Alberta shows the second largest increase at 10.3 per cent. Saskatchewan follows closely behind with an average 7.8 per cent increase and Manitoba is experiencing a similar per cent increase of 7.3 per cent.

Quebec shows an increase of 3.6 per cent, while Ontario's farmland values increased slightly at 1.2 per cent during the last six months of 2007.

Atlantic Canada land values varied, with Nova Scotia showing a 3.1 per cent increase, while Prince Edward Island and New Brunswick indicating decreases of 1.4 per cent and 3.3 per cent, respectively. Newfoundland and Labrador land values remained the same in the second half of 2007. "

Final thought: For all those times you wish you would have jumped into the market early and made your fortune, now is the time to investigate the future follow the money and make your play.

Calgary is leading the real estate decline

This article talks about Calgary leading the pack of the four most active provinces in resale housing activity.

"A report released Tuesday by the Canadian Real Estate Association says MLS sales in the province were down 30.5 per cent compared with the first quarter of 2007, new listings increased by 36.2 per cent, total dollar volume of all transactions dropped by 26.7 per cent but the average sale price increased by 5.4 per cent to $361,544."

REM: The question is, how long will this "balanced market" and "modest price gains" last? My call is that we will pass by the "balanced market" on our destination to a buyers market.

The duration the market will hold a balance I believe is directly linked to the number of people/quasi-investors who have been holding on to hit the top of the market before selling.

There still seems to be a fair number of people I talk to who believe the market will continue on a 5% -10% gain over the next couple of years (at least in Vancouver BC). The problem with timing the top of the market is that you don't see the top until it has already passed by.

I will leave you with this Wall Street truism as a final thought: Bulls Make Money, Bears Make Money, Pigs Get Slaughtered.

Looking for a Vacation Home Amigo?

I just got back from a well deserved vacation in Mexico. While I am back to my day-to-day routine my mind is still in Puerto Vallarta. The weather was excellent, the ocean was warm and the locals are great people. Although, just getting away from the rainy cold weather of the west coast would make anyplace with a temperature above 15 degrees seem like paradise.

What interested me most about Puerto Vallarta was the real estate investment possibilities. You can get into this market for as little as $80k US for a 2 bdrm - 2 bath condo however I'm sure "you get what you pay for" applies. There are several options for condos not on the beach but within waking distance priced in the $140 to $200K range. Beach condos will cost you an easy $500,000 to $1,000,000 plus. There are also options for buying a house for those interested.

With vacation rental fees in the $100 to $200 USD per night for a 2 bdrm - 2 bath condo close to amenities but not on the beach, purchasing one with a positive cash flow should be attainable.

The limited market research I did while on vacation indicated that the real estate market in Puerto Vallarta has been experiencing a 5 year boom with some signs of a turn. Such as the number of listings increasing over the previous year and speculation that the US credit problems will somewhat weaken the real estate market in Mexico.

There are a few things we can take from this; first, every boom runs out of steam and is followed by a pullback at some point.

Next, this market is also predominantly driven by US buyers. Now that the consensus amongst most experts is that the US is in a recession, discretionary spending on a vacation home should decline.

In addition, real estate markets in some US states like Florida and California are a buyers market increasing the competition for vacation properties in general.

Finally, the US sub prime impact. I don't think that this alone will have a major impact on the real estate market in Mexico for the following reasons:
* most sub prime loans were made to people whom could not afford their first home.
* others who got caught up by the easy money availability invested locally.
That being said, the current tightening of credit availability will have some impact on the vacation home market the question is just how much.

The vacation home market in general has been strong for the past several years in most areas and some markets will continue to remain strong in the future due to demand from retiring baby boomers with cash to burn. However not all these markets will play out the same.

If you have been considering purchasing a vacation home now is the time to start researching and paying attention to the local real estate market you are interested in.

Central banks buy time for commercial lenders

Globe and Mail - Update December 18, 2007

Following up on their united pledge of last week to make more money available for terms that extended into the new year, the European Central Bank, the Bank of England and the Bank of Canada flooded short-term credit markets with accessible cash. The U.S. Federal Reserve made its own injections on Monday.

The flood of cash has greased the wheels in many short-term credit markets, ensuring that commercial banks have enough money on hand to tie up loose ends before the New Year and fund Christmas shoppers' annual needs for liquidity.

While much of the intervention had been foreshadowed by the joint announcement last week, the ECB took markets by surprise by going well beyond its initial intentions. It infused about $500-billion (U.S.) into money markets – the largest injection yet for that central bank, and one that was quickly gobbled up by some 390 financial institutions.

The Bank of Canada infused $2-billion (Canadian) into short-term markets, more than the $1-billion it announced as a minimum last week.
When the five European and North American central banks made their announcement last week, many analysts were skeptical that liquidity injections into short-term money markets would do anything substantial to ease the credit squeeze that threatens to undermine economic growth.

But since then, economists have lowered their expectations, and aren't looking to the central banks to solve the credit issues. Rather, they say the central banks' role at this point is simply to make sure money markets are liquid enough to remain functioning while commercial banks sort out their exposure to U.S. subprime loans.

Essentially, the central banks have bought commercial banks some time to figure out their losses, said Stewart Hall, market strategist at HSBC (Canada.).

“Large banks are now awash with cash. The issue is not whether they have enough cash, it is whether they are inclined to lend,” the Bank of England's governor, Mervyn King, said yesterday.

At the core of their unwillingness to lend is fear about losses connected to failing subprime loans.

Analysts believe the exposure will amount to at least $300-billion (U.S.) on the balance sheets of commercial banks, and only about $80-billion of that has been officially acknowledged.

Interbank lending is priced high because lenders don't know where the rest of the losses are hidden, Mr. Luxton said.

REM: Do you really think this is the solution? The word on the street is that this is not a liquidity problem but a solvency problem. Do you agree or disagree?

Dodge says credit conditions could get worse

"These difficulties are expected to persist for a longer period of time than previously thought," he said, adding that the weakness in the U.S. has increased the risk that exports will decline further.

"All of these factors considered the bank judges there's been a shift to the downside in the balance of risks ... ," he said.

Dodge said the bank expects weaker economic growth in the fourth quarter of this year and the first half of 2008.

REM: Except in BC where it is the land of milk and honey.

However, the Canadian economy is still operating above its non-inflationary capacity, said Dodge, who is retiring as governor at the end of January.
"Given the strength of domestic demand and weak productivity growth there continue to be upside risks to the bank's inflation projections," he said "However, ... other developments ... suggest the downside risks to the inflation projections ... have increased."

REM: It would be nice if he could pick a side.

Dodge's semi-annual testimony to the Senate banking trade and commerce committee came as the central bank released a report saying that the Canadian economy - including the business sector - was in good shape to weather the global financial turmoil resulting from the U.S. housing market meltdown and the fall in the greenback against most currencies, including the loonie.

"There will be some impact on the Canadian economy directly through credit spreads and availability, and indirectly through the effects on the U.S. economy," it said bank said in a Finance System Risk Assessment in its latest Financial System Review.
"The effects on the Canadian financial system, however, should be mitigated by the strong balance sheets of financial and non-financial corporations built up through years of strong growth and substantial profits."

Yet, it also warned that there is a "low" risk that the U.S. and global financial and economic situation could deteriorate more than expected.

REM: I think they are down-playing this “low” risk. There has been much talk about certain rescission and the credit conditions deteriorating well into 2008 over the past couple months in the US. There are also those that disagree with this. The one thing I have learned is that when the sheep believe in a boom or bust the psychology and not the fundamentals behind it seem to prevail.

If that occurred, the greater-than-expected slowing in the economy of the U.S., and possibly globally, together with a rise in the loonie would "increase stress on Canadian businesses, households and financial institutions.

"This might threaten the viability of some firms," it warned.

Meanwhile, in a separate report appearing in the Financial System Review, the central bank said heavily indebted households are becoming more vulnerable to financial or economic shocks, including a rise in interest rates.

REM: Heavily indebted household do not become vulnerable, they are vulnerable, one hiccup and the party’s over.

Full Storey Here

Bullish on Canada

Are you Bullish on Canada? Michael Levy of Custom House gave his outlook on Canada in his final contribution to the World Market Update.

We start with energy because the vast reserves of oil and natural gas in the ground will some day make Canada the world's largest supplier of fossil fuels to the world.

When the method of efficiently extracting the oil reserves from the Canadian oil sands is perfected, and that could be a few years down the road, Canada will even match or surpass the likes of Saudi Arabia and become one of the richest nations on earth because of our ability to safely produce and refine energy products whose world demand continues to grow at record levels year over year.

The world will continue to need our commodities whether the aforementioned energy products, base metals, lumber, precious metals, water, power from the likes of Quebec (and B.C. once again as more hydro is produced in the decades to come), grains from the prairies, and the list goes on.

The list is endless and includes most all the base metals used in the manufacturing of just about everything from cellular phones to electronic devices to automobiles. Base metals that come from Canada.

Canada is the only country in the G-8 that does not have a budget deficit; in fact in the past 10 years where the U.S. national debt has almost doubled to over $9 trillion, Canada has actually paid off over $92 billion on our sovereign debt.

Canada is going to become the lowest taxed regime corporately in the industrialized world, with federal income tax on businesses coming down to 15% in the next five years; an invitation for industries and corporations of world to set up shop in our country.

Canada is safe geo-politically, has a stable government, and invites the world to our doorstep.

Our dollar will once again go back past the recent highs of November and could in years to come go to $1.20 or $1.30 U.S., or even higher as our economy explodes as the world demands what we produce.
Get the full story here.

REM: Agrees that Canada is well positioned to capitalize on its abundant resources. When the world does comes knocking on our door, the good fortune will spill over into the real estate market. Those areas that are close to the action (resources) will see strong gains in real estate value.