Property Owners in Moscow Set to Profit from Rocketing House Prices

Real estate prices in Russia’s capital city of Moscow have doubled over the last 12 months, and as a result many owners are choosing to sell and collect the cash tied up in their property.

Property prices are soaring in Moscow due to a combination of factors: a greater amount of cash and loans available for property purchases has caused an increase in demand; housing in the city is limited; and there is a shortage of secure investment alternatives. Property prices are high across the board, although certain areas are particularly expensive. The average price in the city is a little over $5,000 per sq.m., whereas in the prestigious Patriarch’s Pond area prices start at $10,000 per sq.m. (property is generally bought and sold in US Dollars in Moscow).

Although demand may decrease in the future due to the changeable economic and political conditions in Russia, it is not expected that prices will decline to any significant degree without a considerable shift in levels of supply and demand. Overseas buyers have little effect on Moscow’s market; they make up a small proportion of owners and as prices grow, this proportion is likely to become smaller. Of the Moscovites, many wish to move from the small apartments associated with Communist-era housing, in which they currently live. Also, many Russian investors who have made money from the oil or commodities market want to buy in the capital, for investment purposes or to have a base in the city.

Of those owners of Moscow real estate who are seeking to sell, the next step for many is likely to be an overseas purchase. Cashing in on their own property will often provide enough to buy something completely different to a Moscow apartment, such as a much larger property in one of Europe’s cheaper destinations.

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Obelisk International Confirms Involvement in the World’s Premier Real Estate Summit

The world's largest real estate convention, ‘MIPIM’, is taking place in Cannes, France from the 13th to the 16th of March of this year, and Obelisk International will be one of the key players from the global industry attending.

As part of Obelisk International’s commitment to source the best, world-class real estate investment opportunities, they will be taking part in the MIPIM real estate summit, where participants learn of the most up-to-date news, projects and trends from within the industry.

MIPIM acts as a global market place for the real estate industry, bringing together over 21,000 of the industry’s decision-makers and showcasing some of the world’s finest developments. The convention takes place over four days and enables attendees to have their fingers on the pulse of creative real estate investment and development.

Obelisk International is part of an exclusive audience within the convention’s participants that will allow them to meet with the world’s top developers in order to view the leading and most innovative projects found globally.

The MIPIM summit offers a truly global perspective on the real estate market with more than 74 countries attending, including respected organisations such as the Royal Institute of Chartered Surveyors and the Urban Land Institute.

Obelisk International’s involvement in the summit means that they will be helping to shape the future of the rapidly expanding international real estate market.

Turkey is Top Emerging Market in Global Investment Index

The Global Emerging Markets Index is published monthly by the independent company Currency Direct. The index tracks the number of foreign exchange transfers in emerging markets from around the world.

Turkey has held its position as the most attractive investment opportunity for some time, as has the country positioned at number two: Bulgaria. This month, Brazil has joined the top ten for the first time; Latin America’s richest country managed to climb to number nine on the list. Dubai has always performed positively in the index, regularly appearing in the top ten, as have Eastern European countries Hungary and Poland.

The foreign exchange firm has observed that most of its clients buying in Turkey are looking at the Aegean and Mediterranean coasts, and that over the past eighteen months, the number of Britons owning property in Turkey has jumped by more than 200%. They say the marked increase in the number of foreign exchange transfers in Turkey is due to the fact that foreigners are now able to obtain a local mortgage, combined with restrictions on property legislation being relaxed in the country. Property investors are attracted to the potential rental returns offered by the estimated 25 million tourists who holiday in Turkey every year.

Brazil’s Hotspots Attracting Investors from Northern Europe

Property in some areas of Brazil are experiencing price rises of over 20% per year, according to a recent report in ‘The Independent’. This comes largely as a result of the exposure the country received from a promotional campaign launched by the Brazilian Government in 2003, intended to boost the country’s tourism.

The Government invested in its coastal resorts and the development of its infrastructure, focusing on the areas with greatest tourism potential, intending to boost the country’s weak economy through a strong tourism industry. The resulting increase in tourism numbers had the additional effect of opening the country up to a new market of property buyers, attracted to Brazil’s natural scenery, low costs of living and party atmosphere. Properties prices were low, and since the influx of overseas buyers they have doubled or more in value.

The area of Natal, on the north-eastern coast of Brazil, has proved to be one of the most popular with overseas investors. Prices have risen by over 20% in the last year, which is higher than the price rises experienced in the rest of the country. Northern Europeans in particular are drawn to the area for its sunny climate as well as its accessible real estate market. There is also domestic interest in the area; many of the more affluent Brazilian residents are moving here from the traditionally popular areas along the south coast, such as Sao Paulo, attracted by comparatively lower crime levels and living costs.

Of the British people who are buying in Brazil, most are seeking a property for longer breaks rather than the shorter holidays that a European property can offer; the flight from the UK to Brazil takes approximately eight hours longer than flying from the UK to Spain.

New Turkish Mortgage System Given Green Light

Turkey’s long awaited mortgage system is firmly on the agenda of the Turkish Government in the run up to the country’s elections, according to reports from the Turkish Daily News this week. Turkey has waited for 15 months for the bill regarding the new mortgage system to be passed in Parliament – this has now been announced to take place before the end of February.

The decision to pass the mortgage bill is seen as part of the Turkish Government’s plans to place themselves favourably before the impending elections. This is due to the fact that so many people stand to benefit from accessible mortgages: property purchasers will be able to take advantage of the financing and real estate prices across the board are likely to increase once the bill is passed.

Currently, banks offer loans with fixed interest rates, but the new mortgage system will provide purchasers with interest rates that are flexible to adapt to market conditions. As a result, the system is predicted to cause banks to reduce their loan interest rates. Tax advantages under the bill should come into effect within two years.

News of the mortgage bill was received enthusiastically by potential buyers who have been anticipating its passing for some time. It is predicted that these buyers will now take advantage of Turkish mortgages, which will further bolster Turkey’s healthy real estate market.

German Property to Attract 50 Billion Euros of Foreign Investment

A report by PricewaterhouseCoopers LLP has predicted that foreign investors are set to spend around 50 billion Euros on German residential and commercial real estate within the next two years.

Key German cities (Berlin, Frankfurt, Munich and Hamburg among them) will be targeted by companies such as GE Real Estate, an arm of General Electric Co., the world’s second-biggest company. Companies are drawn to invest in Europe’s largest economy due to the fact that yields are higher and rents are lower than the European average. Analysts predict that rents will continue to rise and that vacancy rates will fall in many of Germany’s principal cities.

General Electric Co. plans to double its assets in the German real estate market to 2.3 billion Euros by 2008 in a bid to profit from the rising rents and prices. The GE Real Estate arm currently has 54 billion US Dollars in assets and operations throughout 24 countries worldwide.

The growth of the German market is largely driven by the influx of foreign capital; PricewaterhouseCoopers reports that foreign companies invested more than 41 billion Euros in German property in the last two years. It is also thanks to a strong economy and relatively low borrowing costs. The German government raised its forecast for economic growth for 2007 from 1.4 per cent to 1.7 per cent.

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China’s Real Estate Market Continues to Grow Despite Cooling Measures

The real estate market of mainland China is continuing to attract attention from overseas investors, as the measures taken to contain its rapid price growth result in an increasingly healthy market.

During 2006, the government imposed a number of measures intended to calm the market, from introducing higher interest rates on loans along with minimum down payments for purchasers, to limiting overseas property purchases. The property market has remained healthy and lucrative, however, due to a combination of rising numbers of high earners, economic growth and accelerated urbanisation. Changes in the market are continuing to attract foreign investors, including reform to market regulation and the land auction system, as well as the expected revaluation of the Yuan.

If anything, overseas investors were happy with the moves to restrict an overheating of the market, and are continuing to purchase properties en bloc, and joining forces with partners – foreign or domestic – for new projects.

Shanghai has been the destination for a large chunk of the foreign investment into China. A short time after last year’s measures were introduced, Morgan Stanley confirmed their purchase of the 32 storey Chateau Pinnacle Tower A for 760 million Yuan (around 98 million US Dollars). Gateway Capital has bought a three storey apartment block in the city with 100 units, for around 77 million US Dollars.

Shanghai and Beijing attract the greatest amounts of en bloc investment, with 73% of transactions in 2005 and 2006 going into these cities. This is largely due to the high quality, completed developments available in these two established cities.

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EU Membership Boosts Property Prices In Romania

Recent entry into the European Union has been a catalyst for a property boom in Romania and Bulgaria. Both countries have seen some properties double in price in the past three years and experts predict that the boom will continue for some time, in both cases due to an increase in tourism, foreign investment and domestic demand.

Many Romanians are looking to move out of the small apartments that were so prevalent under the rule of Ceausescu - last year alone 80,000 people signed up for mortgage deals. In Bulgaria, 31,000 people applied for mortgages in 2006. Agricultural land in Romania is also sought after and some experts are predicting price increases of up to 40% this year as a result of interest from foreign developers.

Apartments in Romania rose in price by an average of 8 to 10% in 2006 while those in Bulgaria increased by an average of 15 to 20% over the same period. However, the increases in the capital cities of Bucharest and Sofia were significantly higher – return on investment rates in these areas were some of the largest in Europe.

Market experts believe that Romania and Bulgaria’s EU membership has been the main contributing factor to the price growth both countries are experiencing; investors are attracted to the countries due to their heightened credibility since EU entry.

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Demand for Bulgarian Real Estate Moves Up a Gear

Following its accession into the EU at the beginning of the year, Bulgaria is seeing the development of a new generation of resorts and a shift in its reputation as an investment destination. This is attributed to the enthusiasm about Bulgaria’s potential, felt globally since its EU accession.

Signs of Bulgaria’s move towards more upmarket resorts include a Hotel Kempinski which has opened at one of the country’s top ski resorts, where rooms are fitted with Wi-Fi and guests have access to a vitamin bar, spa and cigar lounge. The prices of nearby apartments are in excess of £320,000 each. In one of Bulgaria’s popular Black Sea holiday spots, a spa resort has been developed by the high-end interior design firm Yoo, in which apartments are on the market for approaching £200,000 each.

As Bulgaria’s real estate market has become increasingly established and transparent, it is considered to be in a position to take on a more sophisticated product, and accordingly to attract the right sort of market for that.

Although in the past, issues existed regarding such matters as land ownership, which prevented many companies from entering into the real estate arena before now, reforms made ahead of its EU accession mean that Bulgaria represents a safe bet for developers as well as their clients. Accordingly, agents are reporting significant increases in levels of sales in the region of a 400% increase from 2005 to 2006.

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Europe’s Housing Markets Bullish in 2006, Reports Royal Institute of Chartered Surveyors

Europe showed significant house-price increases throughout last year, even given a rise in interest rates, according to the Royal Institute of Chartered Surveyors (RICS) European Housing Review 2007. The report shows that the housing markets of Europe across the board were booming throughout last year. Europe avoided the slow-down experienced by the United States’ real estate market and remained highly buoyant even after the rate rises by the European Central Bank (ECB). Many European property investors are enjoying capital growth in double figures.

The respected RICS review goes on to report that the interest rate rise of 1.5% in the 2005 to 2006 period also failed to dampen the European mortgage lending markets. Eight out of the 12 eurozone countries saw mortgage lending rise by double digits during 2006. The Institute’s chief economist states that rising employment and income levels have helped cushion the blow of rising interest rates and that the forecast for 2007 is positive, given that most of the eurozone countries started the year on firm footing economically.

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Increase in Online Activity Among Real Estate Investors

As the market in international real estate continues to grow, investors are exploring the capacity of the internet to give them access to the latest information and insight into their chosen market.

The role of the internet in real estate has developed since ten years ago when property listings first went online on real estate agents’ sites, giving increased accessibility to different markets around the world. As new internet tools are being devised, potential buyers can look online to find out the local news in the area of their property, and even ‘look around’ the area by taking a virtual tour.

Perhaps the development with the most impact is the growing popularity of blogs, through which interested parties can read daily news and opinion on real estate issues. It is predicted that the “gold rush” of blogging is in its early stages, and in fact it has only been in the last year that web activity among the real estate community has really taken off. Professionals and investors are increasingly referring to particular blogs regularly as a way of keeping up with market trends and speculation.

The growing popularity of online resources in the real estate community means that the available information is moving into different formats; podcasting is an audio format that has quickly picked up a following in the recent months, and real estate podcasts are proving to be a popular media for information as well. Video has also begun to appear on some sites, for example showing virtual walk-throughs of properties, although this type of technology can exclude some clients without the technology to support the format.

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Bulgaria’s Ski Resorts Become Property Boom Towns

Bulgaria has been experiencing a large uplift in tourist numbers in recent years and the World Trade Organisation forecasts that by 2010 the number of annual visitors to the country will exceed 20 million. Ski resorts in Bulgaria, such as Bansko, Borovets and Pamporovo, have become some of Europe’s fastest growing resorts for winter holiday sports. Bansko, for instance, has seen the creation of a new motorway linking it to the airport, a golf course built alongside the town and a new ski lift system within the resort. All this regeneration has been attracting more and more tourists and to cater to this demand there has been an explosion of new properties in and around the resort. Existing properties in such areas have seen significant price increases.

Tourists visit Bansko because of the 65km of skiing on offer, as well as its picturesque setting and medieval village. Attractions such as these have ensured its popularity among tourists over the past couple of years in particular. The resulting growth in the buy-to-let sector has been boosting the property market of ski resorts like Bankso and encouraging more newly built properties in such areas. Investors have been quick to notice this trend and are looking to purchase while there are still bargains to be had.

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New Mortgage System Considered for Emerging Markets

The mortgage market in Mexico is rapidly growing, and the country is now to test a system currently used by lenders in Denmark. If the system is successful, which it has been in Denmark, then other emerging markets may choose to adopt it themselves.

Mortgages in Denmark are similar to those in America, with a combination of fixed interest rates with the option for borrowers to repay their mortgage early if they choose. This protects the borrower from the risk of changing interest rates, but also puts more risk onto the lender. Whereas the American system deals with this risk by a complex system of analysis of the market, demographics and credit factors, the Danish system works in a way perhaps more suited to emerging markets. Danish mortgages are financed through issuing bonds under the ‘balance principle’, whereby the bonds match the loans in terms of maturity and cashflows.

The market for Danish mortgage-backed securities is popular with investors, and is the second-biggest such market in Europe; measured as a share of GDP it is larger than America’s, but also more stable, hence its potential as a system to be used by emerging markets.

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Super-Rich Bring Liquidity to UK Housing Market

The real estate market in the United Kingdom, and London in particular, is experiencing great liquidity due to the number of highly affluent buyers looking for luxury housing. Both international billionaires and local City bankers are choosing to invest large portions of their substantial wealth into the real estate market, while at the same time gaining a top-end property in a globally accessible location.

There is a recent glut of super-rich buyers who are looking for a luxurious, high-end home in the United Kingdom which they can use as an international business base. These same property purchasers feel safe in investing some of their considerable fortune in the tangible world of real estate.

The Centre for Economics and Business Research reports that nearly £9 billion (equating to nearly $17.5 billion) was paid out in bonuses this year to London’s City executives, and a good deal of this is being ploughed into the real estate market. This is significantly increasing the flow of capital into the luxury sector; the value of property in this sector could increase by 25% this year. This rise is partly due to a lack of supply of high-end, top quality multi-million pound houses and apartments in the United Kingdom. The balance between supply and demand is to be redressed, however, by the amount of developers starting to build properties to the specifications and standards expected from the super-rich.

Research from the Halifax Bank reveals that real estate in London is currently worth £724 billion, a 26% increase from last year.

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Real Estate Sales Move Online in Dubai

The real estate market has always been proactive in its use of the Internet, and as overseas property investment becomes increasingly popular, the Internet makes the market more accessible to investors worldwide. Now, a site owned by the Dubai government has taken the next step in putting the real estate business online, allowing its clients to go as far as arranging mortgages online and putting down a deposit on their chosen property by credit card. In the time it takes to make a decision and fill out the online forms, clients can secure their property, and only move ‘off-line’ for the last stage in the process - signing and exchanging documents - which is still done in person.

In many real estate markets the buyer needs to see the property before committing, but as many buyers are now global investors, more interested in the bottom line of return on investment than in getting a feel for the neighbourhood, it is no longer necessary for the buyer to visit the property at all. Indeed, in the market of real estate investment, there is often no more than a plot to see at the time of purchase. This sort of market is perfect for the global accessibility afforded by the Internet.

The effects that this advancement in the use of the Internet will have on the real estate market will be interesting. However, whether Dubai is the place in which the canny investor wants to put their money is perhaps questionable. Its popularity with overseas investors since 2002, when foreigners became free to purchase real estate, is undeniable, but it is forecast that as many properties are completed this summer, supply will outweigh demand causing house prices to stabilise or even fall.

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Beijing Enforces Limits on Foreigner Property Purchase

The Chinese government has reformed its property purchase system by limiting the number of properties a foreigner can buy to one, as part of their attempts to cool a potential housing boom in the country.

A warning was issued by the government in July last year that restrictions would be enforced to limit a rise in house prices and maintain a sufficient amount of low-income housing in the country. Leaders are concerned that an investment boom could prompt a sharp rise in inflation, and also that excessive investment in real estate, supported by accessible lending, could lead to a debt crisis as developers of unprofitable projects fail to make repayments.

Chinese families were first permitted to buy their homes by the communist government in the 1990s. Property buyers are issued seventy year deeds for the properties, as the government officially owns all land in the country. The largest proportion of mainland China’s foreign population live in Beijing, many of whom are Western and Asian businesspeople and diplomats, among others.

Foreign property owners in Beijing are not permitted to rent out their property, and will need to prove that they have lived for at least a year in the country, either working or studying. These new regulations also cover those from Hong Kong and Macau in their definition of a foreign buyer; although these areas are Chinese territory they are considered by regulators to be foreign economies. The reforms have also banned some projects altogether, such as luxury villas, in a move intended to increase the amount of affordable housing available.

Figures from the Chinese government show that investment from developers on real estate projects, including office buildings as well as residential properties, rose by 21.8% last year. Due to these recent reforms, developers will now be liable for a 60% VAT on new projects.

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Cut in Spain’s Capital Gains Tax To Bolster the Spanish Overseas Investment Market

As of the beginning of this year, Capital Gains Tax (CGT) has been reduced from 35% to 18% for non-residents selling their Spanish property, and this cut is predicted to attract more foreign investors to the Spanish real estate market.

Also, a mature market such as Spain is a good opportunity for a long-term approach to investment. However, it is not the place for ‘flippers’, for those investors wanting to make a large profit, and make it quickly. The profits are to be made by doing careful research into the right area, one where bargains can still be found, and into the right kind of property.

Spain has recently received some controversial press in terms of the property market, with accusations of overpriced property and overdevelopment in some regions and corruption scandals on the Costa del Sol. However, the significant reduction of CGT is sure to appeal to investors who are happy to put their money in a mature and established market that offers a lifestyle that is always in demand.

This cut in CGT is undeniably good news if the UK resident buying in Spain remembers they are still liable for CGT in the UK, which can be 40% after allowances for those paying a higher rate of tax. Any UK resident wanting to keep their Spanish purchase from the tax authorities is highly unwise to do so: the British and Spanish tax authorities now cooperate fully.

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Cricket World Cup Sparks Interest in St. Lucia Real Estate

With the Cricket World Cup (CWC) due to start in a couple of months, many Caribbean countries are hoping to benefit from the exposure and St. Lucia, where one of the semi-finals is to be held, is at the forefront of the investment activity that is being generated. New projects amounting to £400 billion have already been granted planning permission on the island, and 107 projects in total are taking advantage of a new law passed to encourage construction. The Cricket World Cup Incentives Act allows properties to be built and furnished without paying import duty, and any income earned from the property for up to 10 years after the World Cup will be tax free.

If the CWC is successful, it is hoped that St Lucia will receive similar investment benefits to those seen in the host cities of events like the Olympic Games, where property prices have risen dramatically following the event.

However, potential investors are advised to exercise caution. Despite the claims of many developers, there are fears that international demand for property on St Lucia will not be enough to support the construction boom, potentially causing prices to plummet after the CWC rather than rise. Also, the excitement over the anticipated investment boom has led to unscrupulous behaviour in some instances. In one example a developer was collecting deposits for land they did not own, and in another, land was advertised in Britain that had no planning permission and was unlikely to obtain it since it was in a World Heritage Site. There are also fears that the island’s high crime rate is likely to deter potential buyers. There were 37 murders on St Lucia last year, out of a total population of 160,000, giving the island one of the highest homocide rates in the world. Those that are banking on the World Cup being a success will be hoping the event passes without being blighted by any major incidents.

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