Real Estate Investing

So what is in your five-year plan? Does it involve international real estate investing? If so, you may want to take a look at a recent Forbes article projecting the “up-and-coming” real estate markets around the world. The article analyzes housing conditions in capital cities and business centers of several countries, based on “economic expansion, inflation rates, strength of individual property rights and access to lending in emerging markets.”

So a second home or, say, a vacation rental purchased in one of the following locales could yield big rewards down the road.

Tel Aviv, Israel’s strongest real estate market, is on the rebound from an extended period of deflation. In 2007, things started turning around with a 2% increase in housing prices. Gross domestic product increased simultaneously just over 5%, and is expected to see a 3.8% growth this year. All things that bode well for economic development and the real estate market.

Kuala Lumpur, the capital of Malaysia, has seen economic growth rivaling that of nearby Southeastern Asian countries but some of the area’s lowest inflation and consumer prices, according to Forbes. The housing demand in Kuala Lumpur is so great that builders are running to keep up and prices are as much as 70% higher than initial asking price in some cases.

Santiago, Chile and Aman, Jordan have seen economic inflation and development grow proportionately. This means, as Forbes put it, “economic expansion represents a greater value in the real estate market because it speaks to what people can afford in the loan market.”

Forbes’ article took an extensive look at the overall economic health of these developing countries, because that is extremely important in determining the likely returns on real estate investments. For instance, the article points out that Latvia and Estonia excited investors in 2006 when home prices grew 66% and 24%. But considering the economic instability of those countries, it is little surprise that prices depreciated 7% and 14% in 2007, taking the wind out of investors’ sails. No one can predict world events, which is practically what you’d have to do to feel comfortable investing in smaller international markets. It is by no means a stable investment, but could be an interesting and possibly a profitable one if you have some serious cash to gamble.

So we’ve discussed the flourishing real estate markets of Mexico and Canada. In other international real estate news, one story may come as a bit of a surprise to many — the Baghdad real estate market is heating up. In fact, many Iraqis are trying to find homes, but are unsuccessful because the demand so far outweighs the supply. Amidst the rubble of a war-torn city, it seems a new type of war is emerging — a bidding war. According to the Los Angeles Times:

“Lured by news of decreased violence, thousands of displaced Iraqis returning to Baghdad’s safer neighborhoods are fueling a bit of a real estate frenzy. Last year, home prices plummeted and rents dropped as Iraqis left town in search of more stability. But now, some say it’s almost impossible to find a place to live with sales prices doubling in certain neighborhoods and the most affordable homes being snatched up as soon as they’re placed on the market.”

In Baghdad, homes are more expensive than in America, but the average middle-class income is considerably lower. The article cites a 750-square-foot home in a lower-middle class neighborhood as going for $150,000, whereas a “typical middle-class income” is listed as $400 per month. These numbers don’t quite seem to add up, and makes one wonder whether Iraqis will soon be dealing with something like the American foreclosure epidemic.

The Iraqi culture is inclined to save up money for purchases. However, this is not as feasible an option nowadays, the article points out. Many Iraqis undersold in the recent past to quickly escape the escalating terrorist attacks. They scored quick cash for their escape and are now returning with all their money gone.

Take, for example, the plight of former military officer Alla Mussa, 38, who recently returned from Egypt with his wife to find a home in their native country. According to the L.A. Times:

“To buy a home, he sold his land in a middle-class neighborhood for $41,000, hoping he could put the money toward a home. He has saved an extra $17,000, but even that’s not enough. ‘Maybe if I sell my car, I can get an extra $5,000,’ he said. ‘With my wife, I am roaming, searching for my house, but the supply is low. I have very few choices.’”

Some of the home qualities Iraqis are seeking parallel the concerns of American home seekers, like a safe neighborhood. In fact, to maintain affordability, many Iraqis are trading square footage in exchange for neighborhood safety. Other desirable housing qualities, like bullet-proof glass, are quite different from what most Americans would value. At any rate, while there are still certain neighborhoods of Baghdad that are not safe at all, the bigger picture of a healthier real estate market may be a good sign that the country is getting on its feet.

 

Well, it’s nice to see that our neighbors are prospering. Even though the U.S. housing market isn’t doing terrible, per se, the markets of Canada and Mexico are absolutely flourishing!

 According to The Real Estate Bloggers, Mexico is seeing a boost in its market because of several factors, including new lending rules and a shortage of 6 million homes. By and large, Mexicans do not finance their homes, although new Mexican president Felipe Calderon has set a goal of 10 million new mortgages by the year 2010. Still, most Mexicans currently inherit their homes, build them by hand or buy them with cash. The falling interest rates and other factors are expected to drive the number of Mexican mortgage lendees higher than the current six percent.

“The trend could even slow immigration from Mexico by generating millions in jobs and personal savings as a fresh supply of loans gives many their first chance to own a house,” the Associated Press reports.

In Canada, meanwhile, the natives are comfortably immune to the much-publicized American real estate nosedive of late 2007. In fact, last year proved the strongest year ever for Canadian real estate. The Bank of Canada recently issued an interest rate cut, and average home price in 2007 reached as high as $307,265, an 11-percent increase over the previous year. Average home price in the fourth quarter of 2007 saw an even larger year-to-date increase at 12.1 percent. According to the Canadian Real Estate Association, summing up the nation’s real estate activity in 2007:

“There were 520,747 homes sold, a 7.6% increase from 2006. The previous record was set in 2005. Sales for 2007 marked the first time 500,0000 homes sold in one year. Activity also represented the largest year-over-year percentage increase since 2002.”

Ann Bosley, president of CREA, said lower interest rates will help keep housing affordable in light of price increases in the seller’s market. However, consumer confidence could be swayed by the U.S. real estate scene, thus affecting the Canadian market, Bosley said. Maybe instead, with such prosperous real estate markets so close by, the American market will be boosted through something like an osmosis effect.