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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First Nations housing market

The Government of Canada is introducing a new financing plan that will allow First Nations people living on reserve to build, buy or renovate a house on-reserve.

The plan has three stakeholders; the Canadian Government (a.k.a the taxpayer), Canadian financial institutions and First Nations organizations.

The intention of the program is to create an on-reserve housing market that will encourage investment and home ownership.

Essentially, the Fund is designed to provide an extra safety net for the lender in the event the borrower defaults on the loan and the First Nation does not honour its obligation to step in using its own resources, to remedy the default.

Final thoughts: One item that I am not clear on is the ownership of the underlying land. IMO the land must be part of the home ownership if this is to work.

If First Nations people can only invest in the "house" on the land, then they are paying allot of money for a depreciating asset. Under this scenario the program is a money loser for all except the lender.

There are many challenges ahead for this program to create an "investment" type housing market on a First Nations reserve. Some of these challenges are covered in this post by Grassroots News .

It will be interesting to see how this "real estate market" takes form over the long term. If you have any additional information on this please leave a post.

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

Hawaiian home away from home

Canadians are one of the forces holding up Hawaii's real estate market and currently estimated to account for 10% to 15% of foreign buyers.

The main draw for foreigners seem to be in the $500,000 + luxury home and condo sector as many see this market as currently having good value with great future growth potential.

Sales volume has cooled off from its highs in 2005 and with the weak US dollar, many foreigners are buying up luxury condos and houses for investment and vacation homes.

One realtor comments, "Maui inventory is much more available and affordable. The period of "irrational exuberance" in the Real Estate Market is over for now. There has been a correction and the over inflated priced homes do not sell. The market seems to have stabilized in the recent months."

Final thoughts: A quick search showed vacation rentals in the $120.00 per night for a 2 bedroom 2 bath condo.

I looked around an MLS site and there are plenty of options for less than $300,000.

It would require more investigation but on the surface it looks like one could purchase a decent condo around the $200,000 mark and have tourists pay it off.

If you are interested in a vacation home in Hawaii it's worth looking into.

REIT's and Real Estate Funds

Looking for the next real estate play? Real Estate Investment Trusts and Real Estate Funds are worth a look.

In the US, a Wall Street Journal article states; "The average real-estate fund, which lost more than 14% on average in 2007, is up nearly 5.6% this year through May 12, which makes it the second-best performing U.S. stock fund group this year, behind the hot natural-resources funds category."

The Jerusalem Post in Israel quoted; "The current crisis that started with the sub-prime fiasco has [affected] real estate prices all over the world. It is now possible to buy real estate for rental purposes at prices that are lower by up to 20% from a year ago, and I believe prices will fall more. The current prices are hurting many, but for those companies or individuals with ready cash, it has created attractive investment opportunities. "

If you are interested in these real estate investment vehicles, China is one of the places to put on your radar. A storey in The Sydney Morning Herald printed this; "As the fastest growing real estate market, with substantial commercial property assets that are of investment grade, China has the potential to be an REIT phenomenon if the legislation for such a market is put in place."


Final Thoughts: There are several real estate markets around the world that are still growing.

In markets such as the US, the price to get into these types of investments are cheap compared to previous levels.

There is talk out there in the msm covering how these trusts and funds got beat down in 2007 and the upside potential that is beginning to take shape. Now is the time to investigate. If you wait to hear about it on the evening news before you make a move...well need I say more.


Today's Quote: Owning a home is a keystone of wealth.. both financial affluence and emotional security. Suze Orman

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

Wary of realty speculators

This article talks about how developers working in the Vancouver, BC real estate market are refusing to sign pre-sale deals to suspected speculators.

The developers are concerned that if the market flattens speculators will just walk away from the deal before the building is finished complicating financing which is dependant upon the number of units pre-sold in the building.

In this particular story the developer blames the marketing company for attracting speculators, however speculators are and will always be a part of a booming market.

Final thoughts: A quick search of Craigslist shows 421 assignments offered in the Vancouver area. What is not known are the number of assignments that are unknowingly transferred from speculator to speculator.

There are plenty of quasi-investors out there who think this market has another 3 plus years to run. I am not saying they are wrong, however the evidence to the contrary is starting to build.

This storey of the developer being concerned about speculators buying in their building tells me they are concerned about the strength of the real estate market over the next couple of years. The financing aspect is just the fallout of a declining market. When real estate values decline, speculators and would-be owners alike will walk away from these assignments.

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.

Market Numbers

Click on the image for a larger view.

REM: The numbers are up across the board. Any predictions for the market for the remainder of the year?

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?

Increased real estate prices encourage boomers to invest

As real estate prices rise sharply across the country, more boomers seem to be focusing on property as an investment vehicle.

According to the most recent Statistics Canada Survey of Financial Security, "a significant change in the composition of assets during this six-year period was growth investments in real estate such as cottages, timeshares, rental properties and other commercial properties."

The value of real estate holdings, excluding principal residences, increased by 80.5 per cent between 1999 and 2005. This, notes the survey, was "by far the largest rate of growth of any asset type."

Realtor Brent McElheran of Royal LePage Team Realty, who specializes in the urban condo market, frequently deals with boomers purchasing investment properties and pieds-a-terre (a house or apartment that one keeps as somewhere to stay on occasional visits) in downtown Ottawa.

"Some are downsizing, but many of my clients are buying condominiums as investment properties to rent out," he says.

Other buyers buy and sell without renting, speculating the market will continue to rise, as it has done over the last decade. According to the Canadian Real Estate Association, the average selling price of a house across the country was $324,312 in the first three quarters of 2007, almost double the average $154,606 selling price of 1997.


Link

REM: Would like to know where all these boomers are investing in real estate that has cash flow - certainly not Vancouver BC.