Asia Leading Growth in Property Investment and Development

At the recent fifth annual City Development Meeting in HCM city, Lim Lam Yuan, President of Singapore’s Institute of Surveyors and Valuers stated that the Asia Pacific region is currently the leading area in global property market recovery since the global financial crisis.

Additionally, Yuan added that this region is seeing more and more wealthy men and women connect with this region and desire prime property for investments as well as lifestyle reasons.

Due to being the world’s most populous region, as well as a continued influx of people, Asia is emerging as an attractive destination for property developers. The continued increase in population, as well as plentiful economic resources and low costs has made this region superior in comparison with other nations in Europe or the United States.

China’s property market has been growing rapidly with sales totals reaching over 4.7 trillion yuan last year. This number is much larger that 2009’s total of 4.3 trillion yuan. Interest rates were as low as 0.36 percent. The rental market has seen some progression as well, with rentals for private residential properties experiencing a 17.9 percent increase.

India’s property market is doing quite well also. Due to excellent infrastructure, a well-polished legal system, and a high number of doctors and engineers, India is a prime location for investment opportunities.

India has been experiencing more investments in its country, with increased residential development, new construction and new town planning, mall development, and hospitality and office/industrial space development and management.

Colombia tipped for growth

Colombia has been tipped for growth since 2009 when the acronym CIVETS was coined by the Global Forecasting Director, Robert Ward for the Economist Intelligence Unit. The acronym stands for Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa. These countries were singled out for attention because they have a young population, have managed to control inflation and have a relatively sophisticated banking system already in place.

This is certainly true of Columbia, and out of all these countries it has the best infrastructure already in place which will enable rapid economic growth. It has also managed to achieve consistent GDP growth for over 70 years and has never experienced hyperinflation, and in fact inflation has been kept within single digit figures since 1999. The GDP growth from 2002 to 2007 averaged out at 5% a year which was mainly due to increased foreign investment, export growth and reforms in the energy sectors. The country has large mineral and energy reserves, especially coal and natural gas.

Columbia has managed to triple its exports during the last six years which was largely due to the Andean Trade Promotion and Drug Eradication Act. During this time period exports grew from $13 million in 2003 to $32 million in 2009. It has successfully increased tourism numbers even at the height of the global recession. Tourism numbers throughout the world fell by 4% in 2009 while in Colombia it increased to 10.2% in the same year. The Columbian government actively encourages overseas investors as it is looking to increase business opportunities within international markets.

Denmark's property prices stable

House prices in Denmark recovered strongly during the first half of 2010, but came to a standstill during the second half due to weaker economic growth. Prices rose by an average of 2.6% every quarter between the fourth quarter of 2009 and the second quarter of 2010. While prices of flats fell slightly in the third quarter of 2010 they were still 6.6% higher than the same time in 2009.

The present property cycle began in 1993 with prices peaking between 2006 and 2007 by which time the price of a single family home had increased by almost 250%, while flats had increased by 360%. Since then prices have declined by just under 30%. The cost of buying a property in Denmark is relatively low at 1.3 to 3% of the property value, and rental yields here are between 4.2% and 5.7% and taxes on rental income are moderate.

Denmark enjoys one of the highest standards of living in the world and is one of the few countries that contribute more than 0.7% of its gross national income to foreign aid in less developed countries. Principal exports are food products and machinery with the United States being its largest non-European trading partner.

The economic crisis has affected Denmark as its export market has shrunk which is partly due to weaker trading partner’s currencies. There are also some problems within the banking system but overall it remains stable and is considered to have sufficient capital to meet the needs of the economy and interest rates are expected to remain steady as inflation is under control. The economy grew by 1.9% in 2010 and is expected to grow by 2% this year. The country has one of the lowest unemployment rates in the EU.

Large companies already eyeing up Columbia

Large international companies are already starting to realise the potential in Colombia and investment firms are looking at property companies which will provide the best returns.

The feeling is that the property market there is about to take off and it's best to get in early to get the best profits. It's not just large property companies who are investing here as the world's richest man Carlos Slim already has major holdings in Colombia which are largely in oil and gas reserves, and has indicated he intends to increase these further.

There is an increasing demand for affordable and middle income housing within Colombia and with the rise of the middle class this demand will remain constant for quite some time to come. Colombia also has plans to integrate its securities exchange with Peru and Chile which will attract overseas investors and create more liquidity.

Colombia has a population of 45 million, and in common with so many other rising economies it is youthful. The country has managed to shake off much of its violent reputation through the institution of new security policies. These policies were put into place in 2002 and have reduced the number of murders by half and the number of kidnappings by 93%. Since then the country has gained confidence and has greatly strengthened its economy.

The economy is predicted to increase by 4.5% this year, and foreign investment in the country has quadrupled over the last decade. The current president plans to double government housing subsidies to the poor and middle class to boost the economy even further.

Germany's strong recovery continues as economy bounces back

Germany's economy is recovering extremely well as it expanded by 3.6% last year, and while this was partly to be expected from such a deep recession it was also due to carefully implemented government measures. These measures ensured that unemployment was kept at its lowest level since 1992 which has ensured a feeling of prosperity in the country with business confidence at its highest level for 20 years.

Germany has always been very good at keeping its public finances under control and it had the added advantage of not experiencing any credit or property bubble, and it has also concentrated on keeping export levels high. Its central geographic position also enabled it to take advantage of cheaper labour from eastern European countries increasing the efficiency of firms. One of its biggest export markets is China as luxury German cars are in high demand, as is machinery for Chinese factories.

While the economy may be booming house prices in Germany are still surprisingly affordable especially when compared to similar properties in the UK. There have been indications in recent months that the property market is beginning to benefit from continuing consumer confidence and that the strong economy is drawing in new investors. The continued recovery has also meant that the construction of new homes has begun once more although anyone choosing to invest here should regard it as a long term prospect. The fact that a high proportion of the population choose to rent rather than own makes this country extremely attractive for buy to let investors.

US Housing Recovery on the Cards

Some experts say that the United States is on the way to a housing recovery as home affordability is returning to pre-bubble levels in more and more cities in America.

Home values have fallen 2.6 percent in the last quarter and such a significant drop has not been seen since the first quarter of 2009. Moody’s Analytics tracks the ratio of median home prices to yearly household incomes in 74 markets. According to their data, housing affordability is about the same now as it was between 1989 and 2003 in 47 of those markets. It is believed by most finance experts that the housing boom began in 2003.

It was during the boom that house prices increased greatly due to lax lending and inflation. This increase was greater than the average increase in household income, thus the ratio of home prices to yearly household income peaked in 2005 at 2.3 percent. Since September of 2010, it has dropped to 1.6 percent, which mirrored the lowest level in 35 years.

Chief economist at Moody’s Analytics, Mark Zandi, states that these are very affordable prices for people based on incomes. Home price declines are drawing buyers back into the market and especially property investors.

According to other economists and housing analysts, further declines in home values between 5 to 10 percent may occur by late this year or early next year. With such a decrease, most believe that this will be the bottom and that prices will begin their increase from there.

Kenyan property still good investment

The Kenyan property market has survived the recent downturn reasonably well with prices still rising albeit more slowly than during the property boom of the last decade. It is now lower-cost housing that is proving most popular, and there is also a change in the way property purchases are being funded. As the economic recovery has taken place there has been an increase in the number of mortgages being taken out whereas properties used to be bought for cash.

This increase is due to a policy implemented by the Central Bank of Kenya which reduced interest rates and in turn triggered a large decline on returns on government bonds. This forced financial markets to look for some other form of income which led to them to begin promoting mortgages especially to middle income professionals. There is no doubt that the mortgage market has huge potential in a country where just 16% of the population own their own homes, but the increase in mortgages has also amplified the shortage of housing especially for those on lower incomes.

This shortage is attracting investment in several forms as there has been an increase in direct foreign investment in property projects, as well as interest from foreign private equity firms and pension funds. This increase looks likely to spark further building projects to increase the housing stock in an attempt to meet growing demand as more and more Kenyans want to get onto the property ladder. It's highly likely that in the short to mid-term the demand for housing will continue to outstrip supply as the economy continues to improve and the availability of mortgages gets better.