Global property markets to eye this year

Istanbul

Turkey is expected to be the fastest growing economy in the OECD by 2017, with an annual average GDP growth rate of 6.7 percent(1). A revision to Turkish property law announced in May enables the citizens of 183 nations to own property in Turkey now, opening the market towards cash-rich investors from Russia and the Gulf states for the first time. Istanbul’s housing market saw price growth by 17.75% in September y-o-y and rental increases of 15.2% for the same period(2). Highlighted by the economic growth and relaxed investment regulations, the Istanbul market outlook is bright

Perth

Located in the resource-rich state of Western Australia, Perth’s relationship with the mining sector continues to underpin GDP and employment growth and the city’s residential property market has been growing along with the broader economy. Apartment prices have grown 12.73% y-o-y as of September and apartment rents are up 20.83% for the year according to RESINDEX(3), BIS Shrapnel expects Perth home prices to grow by a cumulative 20.4% over the next three years through 2015(4).

Boston

The Boston market is rebounding quickly, with median price gains of 5.3% so far in 2012, with prices now only about 5.6% below their 2005 peak(5) and vacancy rate below the national average at 3.6% in the third quarter(6). Benefiting from a strong local economy supported by growth industries such as technology, education, healthcare and bio-tech, Boston’s property market has recovered much faster than most other U.S. cities, which continue to be plagued by high unemployment and foreclosure activity. Buoyed by strong demand and low inventory levels, the city is likely to see continued price and rental growth over the long term.

Mongolia

Driven by the boom in the mining industry coupled with the increasing influx of international capital, the Mongolian economy is forecast by IMF to grow by 12.7% and 15.7% respectively in 2012 and 2013 (7). In Ulaanbaatar, there has been a rapid increase in the number of wealthy local Mongolians and expatriates attracted to the area by employment and stronger economy. Quality accommodation suitable for these people is very limited however, especially in high-demand areas such as the CBD(8), and property investors are beginning to see opportunity. Despite the strong economy and shortage of quality housing, however, risks remain due to the possibility of a slowdown in exports and high inflation.

Paris

New president Francois Hollande’s proposed roll out of higher taxes on capital gains and rental income have caused many wealthy Parisians to seek refuge abroad, most notably in London. As a result, luxury home prices fell 3.4% in the first half of 2012 and demand slowed according to Savills (9). Though many investors are taking a wait-and-see approach until the tax issue has been settled, others see the declining prices and a weak euro as an opportunity to seize up prime Parisian properties on the cheap.

Los Angeles

In the first nine months of 2012, the median home price in L.A. has increased 4.2%, but still 38% of its pre-recession peak according to Zillow(10). With foreclosures in the city having dropped by 29% in Q3(11) (y-o-y), the housing market seems to have turned a corner. Completions will increase signi¬cantly next year pushing up the inventory level(12). Risks remain however as high unemployment and the amount of “shadow inventory” remaining could continue to weigh down the market.

Coastal Spain

2012 saw Spanish property prices continue to decline, highlighted by a 9.5% y-o-y price decrease in September and nationwide home prices are now nearly as low as 2002 (13), erasing a decade’s worth of equity for many homeowners. Coastal regions of Spain, especially popular tourist destinations, were overdeveloped during the boom years. Banks eager to reduce real estate exposure, are now offering foreclosed properties at high discounts, which has further depress the market. With a dire economic outlook in 2013, highlighted by 25% unemployment in Q3(14) and a -1.3% GDP growth forecast(15), investors would be wise to avoid the Spanish market.

Miami

The Miami market has some signs of life in 2012, with 10 consecutive months (16) of price appreciation amid high transaction levels boosted by overseas buyers. Condominium prices increased 36.2% y-o-y as of September. However, the Miami metro area ranked in the top 10 cities with the highest foreclosure rates in the U.S., with an 11% increase (17) in foreclosure filings in Q3 (y-o-y). Without significant improvements in the economic fundamentals of the area, the over-supply of housing residual from the boom will continue to overshadow the Miami property market for several years.

Singapore

Resale prices of private non-landed homes in Singapore increased by 3.2% in Q3 of 2012, according to the latest data from the Singapore Real Estate Exchange (SRX), while price of new units fell 2.2% (18) over the period. The introduction of the Additional Buyer’s Stamp Duty (ABSD) and other government measures intended to cool the market last December has clearly had an impact on the market. Jones Lang LaSalle has forecast that sales volumes could drop by up to 27% in 2013 (19). High liquidity and the low interest rates are the likely reason the market has stayed stable, but policy makers are determined to cool the market and have indicated they may use further measures if prices remain elevated.