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Chinese emerge as enthusiastic buyers of property in the US
The volume of property sold to overseas buyers in the United States has declined slightly but Chinese people are buying more real estate, exceeding the amount of other top international buyers. Research from the National Association of Realtors suggest that waning economic growth in many countries and higher home prices along with a strengthening US dollar was responsible for the slight overall fall. However, the data, covering sales to overseas buyers between April 2015 and March 2016, reveals a significant fall in buying from non-resident foreigners. Sales to overseas buyers amounted to $102.6 billion of residential property, a 1.3% decline from the $103.9 billion of property purchased in the previous year’s survey. Overall, a total of 214,885 residential properties were bought by foreign buyers, up 2.8%, and properties were typically valued higher at $277,380 compared to the median price of all US existing home sales at $223,058. Lawrence Yun, NAR chief economist, said the figures highlight the tremendous appeal US real estate still has on many foreign nationals despite the price of property becoming less affordable. ‘Weaker economic growth throughout the world, devalued foreign currencies and financial market turbulence combined to present significant challenges for foreign buyers over the past year,’ he explained. ‘While these obstacles led to a cool down in sales from non-resident foreign buyers, the purchases by recent immigrant foreigners rose, resulting in the overall sales dollar volume still being the second highest since 2009,’ he pointed out. He also pointed out that overall foreigners, especially those from China, continue to see the US real estate as a solid investment opportunity and the country as an attractive place to visit and live. According to the survey, sales to non-resident foreign buyers pulled back by approximately $10 billion to the lowest dollar volume since 2013 when it was $35 billion. The decline was largely caused by the decrease in the share of non-resident foreign buyers to foreign residential buyers to 41%, down from the almost even split between the two in previous years. ‘Both the increase in US home prices, up 6% in March 2016 compared to one year ago, and the depreciating value of foreign currencies against the US dollar made buying property a lot pricier last year,’ said Yun. The research shows that at least eight countries, including China and Canada, saw double digit percent increases in the median sales price of a US existing home when measured in their country’s currency, led by Venezuela at 45% and Brazil at 24%. For the fourth year in a row, buyers from China exceeded all countries by dollar volume of sales at $27.3 billion, which was a slight decrease from last year’s survey at $28.6 billion, but over triple the total dollar volume of sales from Canadian buyers who were ranked second at $8.9 billion. Indeed, Chinese buyers purchased the most housing units for the second consecutive year at 29,195 but this was down from 34,327 in 2015, and also typically bought… Continue reading
Prime central London prices down 0.2% in June
Average property in the prime central London market fell by 0.2% in June, making it the weakest monthly result since November 2014, according to the latest published data. It means that year on year annual price growth in this sector is down, 0.6%, according to the index report from international real estate firm Knight Frank. Tom Bill, head of London residential research at Knight Frank, pointed out that the index data for June largely covered the period leading up to the UK’s referendum on the country’s future in the European Union. ‘Weaker price growth, together with rising economic and market uncertainty surrounding the European vote, has prompted vendors to reduce asking prices over recent months,’ he explained. But he pointed out that this more realistic approach has resulted in an uptick in activity, most notably in the immediate aftermath of the referendum result on 24 June. Following the referendum the number of transactions across prime London was 38% higher than the prior week and 29% higher than the final week of May. ‘This positive story has been widely reported, but what has often been missed is the weakness of sales prior to the vote, which has flattered more recent sales data. While the reduction in asking prices has boosted recent activity, it would be wrong to ignore market risks,’ said Bill. ‘An initial reading of post-referendum data on new buyer registrations and viewings reveals both have slipped back slightly compared to the same period a month ago although it is still very early to draw firm conclusions,’ he added. Looking ahead, Bill said that political uncertainty in the UK will undoubtedly weigh on sentiment, and will be likely to last until at least the heads of terms of the new relationship between the UK and the EU are agreed. ‘A reduction in political risk, should allow mitigating factors to kick in and support the London market. A cut in the UK base rate, while unlikely to fully translate into lower mortgage rates, would be a positive for the property market. Similarly, recent and proposed rate cuts in markets like India and China and record low government bond yields make property a more attractive investment by comparison,’ he explained. The index report also shows that the current residential yield in prime central London is 3.1% versus 0.9% on a 10 year UK government bond. Bill also pointed out that the recent weakening of Sterling is having a positive impact on relative affordability for international buyers in the London market. For example, for a Hong Kong buyer effective pricing in prime central London is 21% lower than it was two years ago. ‘Looking at the market by price band, we see a more nuanced story. On a quarterly basis, while the whole market saw prices fall 0.3%, prices for sub-£1 million properties rose on average by 0.4%,’ Bill also said. The data also shows that this outperformance of lower price points within the prime London market is… Continue reading
Signs that currency volatility could boost UK market, especially in London
Currency volatility sparked by the decision in the UK to leave the European Union could create a scenario where overseas investors make major profits by continuing to invest and store their wealth in prime property in London, it is suggested. Market conditions are ripe for opportunistic foreign investors, which could create a welcome increase in the level of sales enquiries received by London developers and give a lift to the British property sector, according to a report from Arcadis. Since the result of the EU referendum was announced, sterling has fallen relative to the euro and the US dollar with further falls forecast before the end of the year. The report suggests that buyers from Europe, Asia, and the Middle East are now well placed to secure bargains in the London prime housing market by exploiting both a softening of property values and a favourable currency situation. Furthermore, with some Banks forecasting a recovery of sterling during 2017 and agents predicting some recovery of prime London house prices during 2018, those investing £2 million now may see their investments rise by as much as £250,000 in value, according to Mark Cleverly, head of commercial development at Arcadis. Although the appetite for opportunistic investment will depend on forecasts of further depreciation of sterling in the short term, the London prime market could soon see another influx of foreign investment. This would provide a timely boost for the UK construction sector in the long term, particularly if increased competitiveness is also matched by government funding for infrastructure, helping to underpin confidence in the new build sector. ‘The market volatility we’ve seen as a result of the Brexit vote is, perhaps ironically, going to re-open the luxury property market to overseas investors, as several of our clients have already reported a bounce in enquiries following the referendum. This influx of investment coming into the UK could boost British construction again in the future as well as giving shot in the arm to the Treasury through increasing stamp duty receipts,’ Cleverly explained. ‘For a market that, in some areas, has been stuttering for some time due to ongoing stamp duty hikes taking the steam out of buyer demand, the buying opportunity presented by recent events could be a big plus. More buyers means a more buoyant market which can only be good news for the industry,’ he added. Already there has been a surge in interest from overseas buyers, according to Benoit Properties International due to the plunge in the value of sterling. The firm says buyers could make a saving of around 12%. Matthew Lavin of Benoit Properties International said there has been a surge in interest in buy to let property from investors in the Middle East, Hong Kong and other countries with currencies pegged to the dollar. Within days of the referendum result the firm sold… Continue reading
