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Global Property Markets2014 Predictions
Global Property Markets 2014 Predictions
Call us on +44 1865 202 700 Email [email protected]
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Global Property Markets 2014 Predictions
Call us on +44 1865 202 700 Email [email protected]
>
>
Worldwide opportunities in 2014
This time last year we were feeling cautiously optimistic about the prospects for the year ahead predicting that 13 could be a lucky number for property investments in pockets all over the world.
Well did we get it right? Yes - in fact the world growth has been far healthier than originally expected. This time last year The Organisation for Economic Co-operation and Development (OECD) predicted that economic growth in 2013 would be 1.4% increasing to 2.3% in 2014. In reality the world GDP and world trade growth increased by double that (2.7%) and is set to growth by 3.6% during the next year and then 3.9% in 2015. This is all good positive news although the current recovery is still weak compared to pre-recession standards.
Much of the world’s success and its potential vulnerability still lies with the United States. As predicted, the US recovery has been healthy and steady and the latest statistics show that the economy grew by 1.7% during 2013 and is expected to grow a further 2.6% in 2014.
Most of Europe has remained in the doldrums although low prices seem to have brought the lifestyle buyers back to Spain. Investors have remained nervous because of the Euro and the limited potential for rental income. That seems to be changing though with some cash flow positive deals coming to the market. Spain could be attracting the investor buyer next year.
Really, the big international property story of the year has been the UK. London in particular has drawn buyers from around the world and will continue to do so. However expect to see increasing foreign investment in places other than London during 2014.
The BRIC and emerging nations are still forging ahead and as their wealth grows so does their spending power. These newly rich nations are for the first time spending on retail and travelling the world. According to the China Tourism Academy the number of outbound trips taken by the Chinese in 2013 will be around 100 million, an increase of 18% on 2012 and Morgan Stanley predict that Chinese
tourists could be spending as much as $194 billion a year in vacation spots worldwide by 2015. It is not only the Chinese who have got the travel bug. The total number of tourists worldwide in 2012 exceeded 1 billion for the first time according to the World Tourism Organisation. With the tourism market booming holiday destinations and key holiday hotel accommodation continue to provide exciting investment opportunities worldwide.
Another healthy sign is the increased investment in the commercial real estate sector.
Global commercial sales totalled $224 billion in the first six months of 2013, 11.7% higher than the same period in 2012. All indications are that this trend will continue as confidence returns, economies strengthen, unemployment continues to drop and consumer spending continues to increase. Whilst much investment will still centre on the west many unusual and lucrative opportunities lie in retail investments within the emerging economies.
Global Property Markets 2014 Predictions
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The USA
The big news story of the year has been the recovery in the USA.
Whilst the economy in general is on the up, it is the property market which has made the most dramatic advances. US house prices surged 12.8% year-on-year in October 2013, according to new figures from the National Association of Realtors. Demand from both local and overseas investors has pushed up prices largely due to lack of housing supply. Like in the UK, construction has all but halted as a result of the international recession so now large scale new home construction is needed. However at present the American banking system is still restricting loans not only to those who would like a mortgage but also small builders who are unable to get construction loans even when there is strong local demand for housing.
But America is a large place so where would we recommend you consider investing?
Florida remains a popular destination and the inflexion point for prices has been passed. That means there is still value to be had, but people are more comfortable that prices are going the right way.
The state has seen prices climb year-on-year for 23 months in a row and the Florida Association of Realtors reports that sales have risen 6.5% year-on-year in October 2013. The limited housing stock has also given rise to healthy rental returns and with strong employment growth and increased immigration, the future of property sales looks healthy in the “Sunshine” State.
Global Property Markets 2014 Predictions
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The UK, and London in particular, is definitely leading the world as the most desirable place for property investment.
House prices in London rose 9.4% in the year to September 2013 and according to Rightmove jumped a staggering 10.2% from September to October 2013– the biggest monthly increase since 2002.
With the London property market predicted to rise by 24.4% (Savills) over the next 4 years, cash strapped Londoners are now looking further afield. Our advice is “follow the train” and head to locations on the new upcoming Crossrail, Crossrail 2 and Northern Line & Thameslink extensions which are set to create fast connections from as far afield as Reading and Heathrow to Gravesend in the East. Key areas where house prices are expected to rise are Maidenhead, Taplow and Burnham outside London and Ealing Broadway, Farringdon and Paddington in central London.
The improvement in the economic outlook, low interest rates and a chronic shortage of real estate is set to continue to push prices up over the next few years. Expect rises of between 4 and 7% across the UK as a whole during 2014.
One of the big stories in 2013 was the return of the buy-to-let investor. Our tip is prime city centre apartments which can still provide a good return of around 6% NET in the right location. Cities to consider are Bradford in Yorkshire, home of the new Westfield Shopping Centre and Liverpool where below market value properties can still be purchased yet above average rental yields achieved. Beyond 2014 towns on the HS1 remain undervalued and have higher than average yields – towns such as Ashford and Folkestone in Kent.
Outside the residential market, commercial property is also set to have strong growth in 2014 especially in London.
The UK
Global Property Markets 2014 Predictions
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The eyes of the sporting world will be firmly placed on just one country over the next few years – Brazil. As host to both the 2014 FIFA World Cup and the 2016 Summer Olympic and Paralympic Games the ensuing mass international tourism will create unprecedented demand for hotel accommodation.
Regardless of hosting such prestigious sporting events, Brazil has a lot to shout about. As one of the BRIC nations Brazil is one of the fastest growing nations on the planet with a thriving banking system and booming economy. Consumerism is at an all-time high with branded goods and services in great demand and increasing disposable income leading to significant growth in domestic tourist spending.
The Brazilian tourism industry is exploding with some 5.9 million foreign visitors forecast for 2013 and a further 10.5% increase forecast for 2014. Domestic tourism increased by 8% in 2012, reaching a total of 205 million trips and the industry is expected to grow by 5% in 2013.
Our money is on hotel investments in beach resorts in the northern eastern region of Natal where year round occupancy levels are 90% and where the world’s seventh largest airport is due to open in 2014.
Since 2012 both occupancy and revenue rates for hotel rooms in Natal have increased around 10% pa and with no restrictions on property ownership for foreign investors and excellent returns available this market is one set to thrive long after the athletes have returned home.
Brazil
Global Property Markets 2014 Predictions
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Africa is the last great economic frontier. For many years the continent has been plagued by instability, but today, many economists believe that we are entering a period of dynamic growth across the continent.
Vast but underexploited mineral and agricultural wealth combines with a young, growing population to create the bedrock for many years of growth. In parts of Africa, this can already be seen. Many African capitals are growing rapidly as the middle classes grow and as overseas executives pour in to support burgeoning foreign investment.
This economic growth creates an exciting opportunity for property investors. As the wealth of local people increases and as the immigration of expatriates continues, there becomes an acute undersupply of appropriate housing. This is already happening in places like Uganda, Angola and Tanzania to name but a few.
Because of the market dynamics, property in Africa generally has a much higher yield than in other markets as well strong growth prospects. A project where property is aimed at rental to expatriates makes a prime opportunity. It may sound high risk, but it is possible to invest safely in African property and profit from the continents long awaited boom.
Africa
Global Property Markets 2014 Predictions
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One of the most significant trends in property investment over the last few years has been the growth in citizenship investing and the plethora of tax advantages available in a number of Caribbean countries.
In order to generate much needed revenue a number of islands have established themselves not only as tax free havens but are offering tax exempt local citizenship in return for healthy financial contributions or real estate investment. Those already with systems in place include Dominica, St Kitts and Nevis, Belize and Barbados but now they are also being joined by Grenada and Antigua.
Known as the “spice island” due to its long history in the production of nutmeg and cocoa cultivation, Grenada has increasingly turned to tourism in the aftermath of hurricanes Ivan (2004) and Emily (2005) which all but destroyed its long established agricultural sector. By building exclusive 5 star hotel developments, yacht clubs and marinas - which are considerably cheaper to invest in than some of its neighbouring islands – Grenada’s tourism industry is growing fast and as a result the World Travel and Tourism Council (WTTC) have predicted that Grenada will be the fastest growing Caribbean market between 2011 and 2021.
The government has introduced a variety of tax exemptions and is in the process of introducing a new residency/citizen package to further encourage overseas investment. This Citizen By Investment Programme will require those accepted to invest in property and reside for at least part of the year in Grenada and is likely to attract high net worth buyers from the Middle East, Far East and China. The programme which is being geared to carefully attract only “clean and credit investors” is expected to bring greater liquidity to the Grenadian property market which should in turn have a continued positive impact upon property values here.
Grenada
Global Property Markets 2014 Predictions
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Back in 2007 Property Frontiers were the first UK company to offer investment property in Ulaanbaatar – the capital and commercial hub of Mongolia. Those who invested with us will happily testify that the rental returns they have obtained since their high-end residential apartments have completed has more than met their expectations, offering sustained returns of 24% and capital appreciation of 300%.
Now we are getting fired up all over again about the incredible opportunities that exist in this exciting melting pot of nomadic tribesmen and fast growing industrialisation.
The bedrock of Mongolia’s move from a third world nomadic herding and agricultural economy is its mining industry, with an estimated US $1.5 trillion in mineral reserves, it is unsurprising that it is being dubbed the “Asian Wolf” economy. Mineral investment propelled the economy forward at an explosive 17% rate in 2011 and existing deposits will keep the locomotive moving at a double digit pace for decades. All of this mining activity has led to a number of multilateral institutions forecasting that Mongolia will be the fastest growing economy in the world in 2014.
Not only will the economy go into overdrive from next year but its population is becoming increasingly wealthy and thanks to new Mongolian Central Bank initiatives local homeowners can now re-mortgage to increase their loans from 5-20 years and reduce their interest rates from 15-20% to 8%. With mortgage payments now being reduced by some 70-80%, the local Mongolian population is set have a much higher disposable income over the next few years.
It is no surprise therefore that Global Management consultancy A.T.Karney has placed Mongolia at number 7 on its 2013 Global Retail Development Index and large international retailers are moving in from KFC Ltd to luxury brands such as Louis Vuitton, Burberry, Emporia Armani and Hugo Boss.
Mongolia
Global Property Markets 2014 Predictions
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In summary...The events of recent years continue to present opportunities around the world. As always, it’s about finding the right ones. The greatest risk of all is a lack of knowledge so as always we advise you do your research and check that proper due diligence has been conducted wherever you choose to invest, and that the promoted terms are substantiated and realistically attainable.
Throughout 2013 we will continue to hunt out the best opportunities and investment structures to provide investments that offer realistic returns and as much security as possible. If you think we have missed anything then please let us know, we’d be keen to hear your thoughts.
Understand usProperty Frontiers has built a reputation as the UK’s most trusted and established international property investment advisor. We have a track record in sourcing the best international property investments to bring our clients proven and sustained investment returns across the world. Since 2004 we have helped over 1,700 investors to find the right investment, over half of whom have chosen to reinvest their returns though us.
With our unrivalled experience and knowledge, we try to pioneer new markets securely and conduct extensive independent research and thorough due diligence to minimise as best we can any investment risk. It is really this experience and our reputation that sets us apart. As founder members of the AIPP (Association of International Property Professionals), we believe we set the standard with our professionalism, customer service, innovative products and client-centric approach.
The awards we have won and the respect we hold within our industry says more about us than we possibly can. We have won the title of Best Large Agent in the AIPP (Association of Independent Property Professionals) for four years in a row - 2010, 2011, 2012 and 2013. 2013 also saw us score a hat trick at the Overseas Property Professional Awards of Excellence winning the gold award as the Best Global Estate Agency, Best European Estate Agency and Best Property Investment Advisors.
Ray Withers Chief Executive, Property Frontiers
+44 1865 202 700 | [email protected] | www.propertyfrontiers.com
2013
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