Above charts courtesy of Unıon Bank of Switzerland (UBS) ... please contact your local UBS office for more information and research.
Oct 30 2018 Worldwide, luxury properties rose by just 2.7% on average across the 43 cities that make up the index - this is the weakest performance in annual terms in almost 6 years.
The Cities Singapore, Edinburgh and Madrid led with gains of 10% + over he 12 months to the end of September, in the top five, while Paris and Berlin posted steady gains in he last six months of 3% and 7%, respectively.
London wound down, moving into negative territory, watching prices fall 2.9% as a result of the continuing uncertainty around Brexit.
Vancouver declined the most, at 13%. Also among the decliners was Dubai, where prices fell 3.8% resulting in fifth worst on the list.
Istanbul, Stockholm and Taipei all registered 6.3% year-over-year declines, tying them all for second worst place.
And now the Federal Reserve Central Bank in the United States signals that a more hawkish approach lies ahead during the coming two years, for an upward move in interest rates, towards the rate of inflation, triggering headlines:
House prices from Atlanta to Sydney and everywhere in between are beginning to roll over and head down.
Research and Graphics Courtesy of Knight Frank Research
October 3 2018
Surprising to many of our readers with properties in the UK and South Eastern Mediterranean, accustomed to weak market conditions in recent years, is the booming state of property markets elsewhere around the world. As the graphics above illustrate, this may share similarities of a balloon type bubble.
Now the first signs of that bubble bursting are beginning to appear. Prices are easing back in leading markets.
Weak conditions in New York’s luxury segment are now spreading to the broader market. Manhattan sales are down 11% in an ongoing trend, while listings are at the highest levels since 2011. The number of sellers cutting prices is the highest for 9 years, with prices of 3 bedroom apartments declining 17%. Supply of studios and one bedroom apartments are up 15% and 21% in the third quarter, as reported by Bloomberg.
In Hong Kong prices decline for the first time in 29 months as bank lending interest rates increase for the first time in more than 10 years.
Meanwhile in Vancouver, the beneficiary of aggressive Chinese buying for so long, Home sales crash 44%, while seller’s listings surged 38% year on year, and the Chinese buyers have disappeared.
The obvious reason is the monetary tightening gradually being escalated by central bank policy makers, as interest rate increases are rising closer to inflation rates. And such policies show no signs of abating at the moment- rather the opposite is true, the policy may well become more earnestly enforced in 2019 and 2020.
The conclusion? If these 'leading' markets suffer a slow down or crash, don't imagine that prices in your market will benefit and go up- it simply won't happen. Instead, prices everywhere will suffer lower. If you have reason to be thinking of selling a property, do not wait, go to the market, maximise your value proposition, and find a bid…don’t list with an offering price and wait for a buyer at that price, unless you are prepared to wait a very long time, perhaps until after the recession, and the next upward cycle begins, several years from now.
Dec 2017 Is rising inflation good for property prices? Inflation in the US and China has reached the highest levels for 5 years. Inflation in the core EU economy of Germany recently exceeded expectations, and has more than doubled for the year.
Many readers will remember past times, when property values increased with inflation, making property an ideal ‘user-friendly’ inflation protected investment. And most likely, property values will continue to increase with inflation, especially while interest rates remain artificially low. In past decades, an increase in inflation was met with an increase in interest rates, as central banks battled to keep inflation low. Now times are different. For more than fifteen years, central banks have been striving to increase inflation. In the current environment, any increase in interest rates to dampen down inflation, is likely to be slower in coming, and of a lesser magnitude, than in the past, as recent events clearly illustrate.
In such an environment, inflation is likely to be very positive for property prices and valuations... more so than most investors are currently expecting. Why? The reason is because when inflation exceeds interest rates, the real rate of interest is negative. For real estate investors, this means a borrower is paying less annual interest, than the annual inflated capital appreciation of the property- effectively the investor is being paid to borrow, and invest, and those are the circumstances unfolding, at present, and that is good for property prices....
Spring 2018 The Pain of negative capital growth, occurs when house price inflation is less than the mortgage rate…
New buying from local buyers unlikely to fuel upward prices. New buyers registering with real-estate agents fell for an 11th month in February (RICS).
Increased taxes on landlords and loan limits in Singapore have also helped to damp demand from overseas, leading to a record number of homes under construction in the U.K. capital that have yet to find a buyer.
Further, price declines likely, trending lower as house price inflation now dipping below mortgage interest rates.
Westmister – down 16.8% from Last Year.... London Falling at fastest pace for 8 years
London house prices are falling at the fastest pace since the depths of the recession almost a decade ago, with the capital’s most expensive areas seeing the biggest declines. Average prices fell to 593,396 pounds ($820,000) in January, an annual decline of 2.6 percent, according to a report published by Acadata. That’s the most since August 2009. The fall in London house prices is likely a warning shot before prices begin to fall elsewhere.
The Pain of negative capital growth, occurs when house price inflation is less than the mortgage rate…
Must Read- Debunking the Myth - https://news.goldcore.com/ie/gold-blog/london-house-prices-recession/ Note- Beware the inaccuracies in this report- sited prices falling were not actually falling, then, only the rate of increase is falling... but they are falling now...
The Investors' Toll Kit for Buying Residential Property:
A Safer, Smarter, Better Way to Buy Property in Turkey
Nov 30, 2018 How’s the property market doing? Investors' intuition and instincts are telling them one thing, but the news and statistics are saying something else... For real estate investors experiencing this dilemma, these charts tell why….
This market boom is not like the last one, in the most important way; sales volumes are averaging lower prices, and less profit margin. It has been a good time to be invested in real estate, but not as good as previous cycles. A comparison of two distinctly different real estate markets, Miami and Istanbul, reveals both share this common ailment. The similarities are relevant- the better market conditions of the last five years have not been at price levels or profit margins of the previous up-turn.
When it comes to comparing investment viability across different residential real estate markets, no where does the sun shine brighter than Miami. The present cycle is now stretching out so long that one might be forgiven for mistakenly believing this uptrend is structural. Alas, the signs of an imminent cyclical downturn are becoming more frequent, as the crest of the wave…
Miami, having done so well for the last ten years, hasn’t experienced a notable pull back to buy into. Considering all key ingredients of a stellar residential real estate investment, Miami has them in spades, beating all the rest, Hong Kong and Singapore not withstanding. This leading global market performance during the present economic cycle, benefiting from having long been a key attractor as the cultural capital of Latin American diaspora, the present small down tick in foreign buying, is notable.
Istanbul on the other hand, is a comparative new comer on the radar screen of international residential real estate investors. Briefly an out-performer of its peers, suddenly fallen sharply with a weak currency impacted by strong Dollar and upward global interest rates, is now struggling with resurgence. Much mooted citizenship investment stimuli, recently produced a small but sharp up-tick of inward foreign investment, likely to continue for sometime, like Miami, driven by cultural priorities of investors- a favourable factor for sustainability and duration of the trend. The Istanbul market is benefiting from positioning as the cultural capital of Islam, with more than 500 years historical context. New Citizenship Investment regulations have reduced the minimum amount of property purchase required, to $250,000. In October, 36 percent of total sales, just over 2,200 units, were to foreign investors.
In Miami, the statistics show foreign home buyers are disappearing. For the year ending July 2018, foreign buyers purchased about $23 billion of South Florida real estate, down 5% from the previous year, at 19% of existing home sales versus 21%, previously. The share of foreign buying in South Florida nearly doubles the US national average of 10%. Canadians and Brazilians bought the most, 52,000 properties, a decrease of 15%; Latin American and Caribbean buyers together amounted to 36%, Canadians 22%, Europeans 19%, and Asians 11%. A strong dollar, higher global interest rates, and declining local currencies have virtually eliminated buying from Mexicans, Argentineans, and Venezuelans. The decline in sales is particularly notable in the million dollar segment.
In Turkey, official statistics of property purchases by foreigners in October showed that Iraqis topped the list with 1,439 units, followed by Iranians with 557, Kuwaitis with 378, Germans with 341, and Russians with 336; whilst the largest segments of foreign buying in the previous cycles from, British, and Swedes increased from virtually non-existent levels by 131 percent, and 137 percent, respectively, directly correlated to the recovery in tourism this summer. For the record, the
official prognosis in Turkey, is …’ we may sell 40,000 units to foreigners in 2018, this is a historic record for our country." Such optimism is remarkable, considering the influx of foreign residential ownership for the first five years of the previous boom totalled some 50,000. And those 50,000 were primarily to northern Europeans, sales at significantly higher prices and larger profit margins. Perhaps in the context of ebullient enthusiasm, it’s worth remembering, that similarly optimistic forecasts of the return of Russian buying in 2017, amounted in the end, to a mere total of $ 1 million….
The current outlook in both Miami and Istanbul has now pivoted sharply, each in different directions. Developers in Miami are halting new construction, as properties, such as Miami Beach’s Sunset Island II, are lingering on the market for more than six months, instead of selling in one month, on a first visit, the buyers are more cautious, visiting three or four times. In Istanbul, developers are now rejoicing at having buyers return, whilst competing to sell un-moved inventory.
Reflecting the US situation in a global context, with Istanbul as an example, is relevant because the US market directly influences global interest rates, and thus global real estate markets. In September, Bank of America signalled the peak of the US housing market, citing declining affordability, greater price reductions, and deteriorating housing sentiment. The effects are impacting real estate markets globally. Three month Libor interest rates, the benchmark for more than $ 30 trillion of global borrowing, mortgages included, is in a sustained uptrend.
The significant insight is that markets are peaking at the end of the current cycle, without having attained the pricing or profitability of the previous cycle. This is the reason why residential investors intuition is not corresponding with the news, because investment returns are not matching up to those enjoyed near the peak of the previous cycle, nor to the bullish press-releases of the real estate media.
Evidently, as is plain to see in the charts above; each new financial bail-out by Central Banks, has a diminishing impact on economic activity and wealth creation.
Special Thanks for Graphics, to Lance Roberts via RealInvestmentAdvice.com…
Nov 15, 2018 Around the world, rising interest rates and tumbling property prices leave little scope for trend investors seeking sensible capital value growth prospects. There is one place that is still investable on financial merit; a virgin market with long term structural changes pushing prices upward, but still with unbeatable valuations. This opportunity shines all the more brightly for defensive investment merits and desirable lifestyle delights… this is the one place to buy now ...
Oct 30 2018 Reversal of the downward trend in the Lira seems to have prompted potential buyers that were watching and waiting, to finally take action. With the Lira now up 20% from it's lows, this pent-up demand is resulting in purchases in Istanbul and coastal regions.
Istanbul’s foreign buyers may also be influenced by travel considerations. The opening of Istanbul’s new airport, the world’s largest by capacity area, offers a convenient logistical solution for business travelers. Rather than merely a stop-over hub, Istanbul potentially may become preferred living base station for those with business interests in South East Asia, the Gulf, North Africa, Northern Europe, and North America. Singapore is 18 hours flight time from New York- Istanbul is only 10.- a significant difference, particularly in jet-lag recovery time. European destinations and Moscow, are all within 2-3 hours flight, half the time of a journey from Dubai and the Gulf. North Africa, and the Gulf, are 3-4 hours from Istanbul, half the time of a flight from London. Considered from this perspective, Istanbul is better placed as an international business hub, than Dubai, Geneva, Frankfurt, or London.
And now the Citizenship by Investment threshold for property has been reduced to $ 250,000, making it clearly competitive with other nearby locations, the underlying demand is emerging. Extended families of consecutive generations, seeking the purchase of two and three properties, and re-location services, for schooling, business start-up, and medical facilities, have an ample selection of high quality services to choose from.
In recent years Istanbul has become known widely for its remarkable local culture in many exotic dimensions, and that reputation will continue to attract interest as a place many aspire to live in. A new Turkish passport, and plentiful nearby flight destinations, are an alluring combination, for investors from many regions of the world.
Investors wishing to learn more about the Investors' Tool-kit for residential property purchases in Turkey, and Finding a Property in Turkey, please click here.
Sep 28, 2018 The Central Bank's announcement of a six percent increase in interest rates sparked an immediate 10% increase in the value of the Lira, and liquid Turkish assets bounced off their bottoms in sympathy, for a 28% index gain in dollar terms over the preceeding two week period. This short term upward trend could conceivably extend an additional 15% before encountering resistance, provided political and economic conditions remain favourable. This scenario is supported by an upward trend in tourism revenues combined with a sharp decrease in the monthly trade deficit for August, as imports collapsed. Unfortunately, exports also declined, and any long term upward trend is unsustainable without a meaningful resurgence of exports, or foreign capital-stack restructuring.
Sep 21, 2018 Offering prices of resale properties in central Istanbul are finally beginning to emerge at sensible and near compelling price levels. Recent price analysis of the luxury villa segment in a specific location of the Turquaz Riviera showed a 7% decline in Lira prices and an 18% decline in Euro terms for the three month period of Feb-May 2018. This surprising situation warranted further research. Instead of focusing on general price indecies for real estate, which are often clouded with various statistical anomalies and distortions, asset values in Turkey in general were analysed for the best indication providing an accurate perspective of the current situation.
This graphic for the five year period 2013 to Sep 21 2018 shows the value of Turkish assets priced in US Dollars. This means that despite rampant Turkish Lira Inflation, the assets are reflecting a deep US Dollar Deflation, as the economy, banking system, and de facto the construction sector, struggle to generate sufficient Dollar liquidity to repay debt AND re-invest in growth- in other words, net negative US Dolllar (hard currency) liquidity creation. The conclusion is that during any and all times over the past five years a decision to sell assets was a better decision than to hold or buy for the duration.
Yes, prices were overheating in 2013 and so the subsequent decline was more accentuated. .. a 67% decline, over that specific five year period, from that specific peak valuation in 2013. When adding re-invested income to the equation, such as dividends, interest, or holiday rental income for example, an asset will needed to have generated an estimated gross yield (to cover expenses and the risk adjusted USD opportunity cost of capital) of approximately 17% yearly to compensate for the annual average 13% decline in the assets capital value, and preserve the capital value of the investment at break even. Thus present yields of 18% or more on Turkish assets are above the five year average trendline, with assets pricing at a corresponding discount to the same. The assets are an international benchmark equity index, MSCI, which includes Turkey's largest Real Estate Investment Trusts.
An unprecedented rush for Turkey and the Lira due to the sudden decline in Turkish Lira exchange rates, and ...
Boom !- Last minute holiday bookings explode !
Whoosh…! Turkish Lira sold out in the UK as Brits buy up all …only small amounts remaining at two airports.read more here.