Real Estate Investing

Britain’s real estate market may be like a parallel to the U.S. market, except theirs home prices have nose-dived at a rate in some cases by an astonishing 65%.  This decline is much worse than the average decline in the markets on this side of the Atlantic. 

A two-bedroom flat, bought for £215,000 in September 2005, recently sold at auction for £79,000; another went for £86,000. Nine others did not sell at all.

According to the New Statesman, a London newspaper established in 1913, buyers are being warned to stay away from the housing market,

As Britain wakes up to the nightmare of negative equity, we are facing a housing recession far worse than that of the early 1990s. Iain Macwhirter has a warning: don’t buy a house now, at any price. Just say no. You have been warned.

There are some real estate hot spots in this whole wide world, though.  Baghdad’s housing market is booming, says Terry McCarthy of ABC News.  As stability reaches the region, the strong desire for housing is at an all-time high.  And Iraqis have the money to make it happen - in black gold.

Not only is there pent-up demand that is just waiting for enough security to begin major development, but there is also virtually no new construction going on, so supply of properties is limited.  And with oil at $130 a barrel, compared to $50 a barrel last year, Iraq is not short of money.

Brazil is the number one spot to buy property right now because of quality workmanship and rapidly improving infrastructure.  Morrocco and Canada are also hot spots, according to Uruguay Coastal Properties.  They get their numbers from Property Showrooms, an online investment center for international real estate.

Photo from Rio de Janeiro Real Estate.

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.

We’ve discussed how the international real estate scene is faring. In many places, much better than the United States, to be sure! But where is the hottest hot spot in the real estate world? Not Mexico! Not Canada! Not even Iraq!

Vietnam has bragging rights - it is the hottest real estate market in the world, so says Orange County, Calif. realtor Michael Caruso. From individual locals to international developers, everyone is jumping on board. Condos and even entire cities are starting to dot the Vietnamese landscape, as many locals consider real estate one of the most stable investment options.

The developing economic picture in Vietnam is very long-term, and doesn’t seem to be going downhill anytime soon. It may be in large part because it has a lot to improve on, being primarily a low-cost manufacturing mecca akin to the historical roles of Mexico and Japan.

“Vietnam’s economy has grown on average 7.5% a year since year 2,000 and last year alone grew 8.5%,” Caruso writes. “Vietnam’s potential is being reflected in their office rents. Ho Chi Mihn City (formerly known as Saigon) has office rents at $49 per square foot, up 29% from a year ago. Manhattan (NYC), by he way is around $53 - $55 per square foot to give you a point of comparison.”

According to Caruso, 47 condominium projects were started over the last two years. Additionally, about 49 new office complexes are expected in the next three years. Of course, Vietnamese home prices are escalating in response to the incredible commercial real estate boom. NPR interviewed one young lady who paid the equivalent of $92,000 for her two-bedroom, one-bath apartment in a good neighborhood. The value of the property has grown triplefold over the last three years. Pretty impressive, to say the least.