2009 November | Real Estate Business and Investing

Land and Condominium Investment in Asia Attracts Foreigners

Posted by admin | Posted on 30-11-2009

The condominium market in Asia is going through an extremely profitable phase. In the one hand, some property brokers go through hiccups in selling new condominium projects.

On the other hand, developers are not willing to break the development of new condominiums in Asia, at least for the next 1-2 years. The government allows foreigners the right to use land only, nothing more. In fact, their interest in the Asian property, particularly condominiums, is very strong, not to think about the prices that are fairly less than other countries.

Strong consumer purchasing power for condominiums has lead to surge in the national property loans. During the first semester of 2007 bank loans for the property sector progressed by 26.96%. Bank Indonesia reported that in June 2007 loans directed to the sector arrived at Rp130.9 trillion, compared to Rp103.1 trillion in June 2006.

The property loans as of June 2007 are split up into construction loans of Rp31 trillion, real estate loans of Rp17.4 trillion, as well as house and apartment ownership loans of Rp82.5 trillion. This has lead to the consumption loans during the first semester of 2007 rising by 18.4% to Rp249.4 trillion, compared to the first semester of 2006 of Rp208 trillion.

A reason behind the moderate response in the condominium market net take-up in Asia can be attributed to several factors, including the battle between condominiums and lavish houses in high-class locations with more competitive prices and privacy. On the other side, reduction in house ownership loan rates have urged customers to invest in landed houses, expecting large fixed capital gains.

Consumer purchasing power for condominiums is still strong. The trend of apartment ownership loan-directing in the first quarter of 2007 gives the signal that consumer purchasing power is solid. However, in general several factors such as supply and demand, huge fresh supply from delayed projects in 2006 have resulted in the condominium market reaching the alarming territory.

By 2007 end, fresh condominium supply is expected to reach 4,000 units, not to think about the alive and unsold 3,155 condominium units in the first and second quarters of 2007. Considering lower estimated sales rates of 20% in the third and fourth quarters of 2007, it is predicted that unsold supply of condominiums that are alive will increase rapidly in 2008 and 2009

This year’s drop of bank interest rates means 2007 is the year to buy property. Flooded supply in the market will result in the decrease in prices of new condominium. The trend of tenants moving from old-style condominiums to the new ones is expected to meet the wish of buyers who buy to lease. However, buyers aiming to lease condominiums should look at the trend of expatriates’ shrinking interest in renting condominiums.

Taking into account the alarming level, the condominium developers should rethink about their projects. Understanding market’s needs, including the supply and demand calculation for certain locations should be performed for the developers to sustain themselves in coming years. Too much attention in the momentum and constant development of new condominium projects without far sighted thinking will lead to the condominium market getting overheated.

Construction loans in the property sector reached Rp31 trillion in June 2007. Unnecessary fight in the property market will inevitably result in flourishing non-performing loans. The market data points to the fact that middle and upper-middle segments of condominiums are favored. It is important to understand that locations outside the central business districts or other high-class premises, where land prices are comparatively low, are prospects for the low-end condominium market. If you take care of state of the market and other related requirements you should be able to invest successfully in Asia.

Buying Condo Tips

Posted by admin | Posted on 30-11-2009

Category : Real Estate

When people want to buy real estate these days, they prefer to opt for Condominiums. There are a lot of advantages in buying a condominium instead of a regular house. Once you understand what these condominiums offer, you may change your mind too.

First of all, condominiums are sold at a much lower cost as compared to a house in the same locality. It may seem wiser to many people who buy condominiums if they are looking to live in a place where the real estate price is expensive. They would enjoy the same surroundings for a much cheaper price!

It is not just the price that seems attractive about a condominium. There are a lot of other benefits that come within the same price. Condominiums will remove the worries you may have of what you needed to do to maintain the front or backyard! There would be no hassle of a garden. You, as an owner, would be provided with parking and it hence spares you the despair of parking during winter or your driveway maintenance.

Most of these condominiums also have various recreational facilities like a gym or a swimming pool which is an added advantage for you as you would not have to look elsewhere for the same facilities. Some of them also have provisions for doing your laundry. This would avoid you the trouble of going out and finding a washer and dryer.

This option would also cut out on many other expenses. You would not have to think about repairing your roof due to some damage or other exteriors like getting a paint job done, or replacing your doors and windows. One would not have to think about the initial expenses at all that you would otherwise have to in case of buying a house. A house owner will have a lot of responsibilities like regular upkeep and maintenance of the house. Most people either have not enough time, capital or sometimes health to ensure the house is well taken care of. Condominiums would eliminate all this worry and you would not be so tormented.

Something else that may be of interest is that condominiums would be much simpler to resell in case the need arises. Suppose you do not want to sell it but instead only want to relocate keeping the place, you can just rent or lease the condominium. People would prefer a condominium to a house due to the fact that it is more convenient and hence would allure many more prospective tenants. Areas around the waterfront are also quite popular for condominiums if you wish to be close by the waters. People who own waterfront properties generally decide on condominiums as they provide accommodation to many more than what an independent house can provide. Condominiums are a more viable option for people who intend to build houses for the purpose of selling them. This is so because they are cheaper and one piece of land can provide place to many more condominiums than houses which in turn is more profitable for the owner.

So as you may have realized, condominiums are gaining popularity these days and there are abundant reasons explaining the same.

Global House Price Downturn Accelerated At End Of 2008 According To The Global Property Guide

Posted by admin | Posted on 12-11-2009

Category : Business

It has been a dismal year for house prices, according to the Global Property Guideâ€™s latest survey of publicly-available house-price time-series for the year 2008. And seen from a global perspective, the downturn is still accelerating.

The collapse of the worldâ€™s housing markets can be seen from three points of view, and unfortunately, all of them reinforce the bad news.

During 2008, the downward price momentum accelerated, as compared to 2007.

Only 2 countries saw positive momentum in 2008 (a slower downward house price movement than last year, or faster upward movement), while 28 countries saw their housing market momentum deteriorating, compared to the previous year. The two countries with a positive momentum were Germany and Switzerland.

During 2008, house prices fell in most countries.

During 2008 only 8 out of 32 countries saw house prices rise, after adjustment for inflation, while 20 countries experienced house price falls.

In contrast, during the year 2007, the downturn was just beginning, and only 6 countries saw house prices fall, while 24 countries saw house prices rise (all figures inflation-adjusted).

Many house-price falls during 2008 were extremely severe. Countries with house price falls of over 10% during 2008 were Latvia (Riga) (37%), Lithuania (Vilnius) (27%), the US (20%), the UK (18%), Iceland (16%), Ireland (12%), and the Ukraine (Kiev) (12%) (all figures inflation-adjusted).

During the final quarter (Q4) of 2008, the downward price momentum significantly accelerated, as compared to Q3, suggesting that the situation is deteriorating.

During 2008â€™s final quarter, 9 countries saw house price falls of 5% or more during just that quarter. Price drops of more than 10% during this single quarter occurred in three countries – in Latvia (Riga), which saw price falls of 15%, in Ukraine (Kiev) (13%), and in Hong Kong (15%). Other countries with Q4 house-price falls of 5% and over, included the UAE (8%), Lithuania (7%), Iceland (7%), Singapore (6%), Bulgaria (5%), and the UK (5%) (all figures inflation-adjusted, except UAE).

These price falls were much greater than during the previous quarter, Q3. During that previous quarter, only two countries experienced house-price falls (inflation-adjusted) of 5% or more, and no countries experienced house-price falls of more than 10%.

REGIONAL SURVEY BY GLOBAL PROPERTY GUIDE

Europe has major problems

The Baltic countries of Latvia and Lithuania suffered the hardest price falls both in nominal and real terms. In Riga, Latvia, the average price of standard-type apartments plunged 37% during 2008. Prices have been going down in Latvia since late 2007, after a remarkable increase of about 70% in 2006. The most alarming decline took place in the 4th quarter, when prices declined by 15%, the steepest quarterly drop in real terms in any country. These price falls were triggered by increased interest rates, and by the tightened credit rules which Latvia imposed in 2007.

Average prices of apartments in Vilnius, Lithuania, fell by 27% during 2008. House prices started slowing in mid-2007, and crashed in early 2008.

House prices in the UK plummeted by 18% in 2008. Although mortgage interest rates dropped slightly, to 4.48% in December 2008, the number of loan approvals for house purchases fell 58% in 2008.

There is serious trouble in Iceland (house price fall of 16% during 2008), Ireland (12%), Ukraine (12%), Malta (9%), Portugal (8%), France (8%) Finland (7%), Norway (6%) and in Spain (6%).

North Americaâ€™s woes

In the US, the centre of the global financial crisis, in 2008 house prices fell 20% according to the Case-Shiller house price index, which emphasizes urban areas. OFHEO and FHFB figures, which are associated with Fannie Mae and Freddie Mac loans and have somewhat lost credibility, suggest a smaller decline of 6% and 3% respectively, during 2008. The US government recently approved a $ 787 billion economic stimulus package, of which $275 billion will be allocated to rescue the ailing housing market.

Canada has been much less affected than the US.

Pacific heads down

Both Australia and New Zealand saw house price declines during 2008, of 7% and 8% respectively.

Asia no longer insulated

Housing markets in Asia have not been insulated. Singapore, Hong Kong and Philippines recorded house price falls during 2008.

Singaporeâ€™s private residential prices dropped 9% during 2008, in sharp contrast to the 26% price increase of experienced during 2007. The developed countriesâ€™ economic troubles adversely affected Singaporeâ€™s exports, and during 2008, output in the manufacturing sector, particularly of electronics, precision engineering and chemicals, shrank by 10.7%. Singapore was officially in recession in Q3 2008.

Hong Kong has been badly hit by the crisis. House prices were down by an average of 6% in 2008. But during the last quarter, Hong Kong experienced a severe decline in prices of 14%.

In Makati, Philippines, prime 3-bedroom condominium prices fell by 2% during 2008, after an 11% price rise during 2007. Nevertheless construction of high-rise residential buildings continues, with residential condominium stock rising by 7% during 2008, according to Colliers Philippines.

Japan recorded modest Tokyo condominium price rises of 1.2% during 2008. On the other hand, land prices in Japanâ€™s six major cities fell by 6% y-o-y to Sep-2008.

In Shanghai, China, house price rises slowed to 5% y-o-y by the end of 2008, after peaking at 30% y-o-y to May 2008. However Shanghai is likely to be somewhat exceptional, and Xinhua News Agency reported house prices declines in 70 major cities during 2008. Shenzhen suffered the hardest fall, with prices down by 18% during 2008

UAE on shaky ground

In Dubai, UAE, despite the bleak global picture, saw surprisingly large dwelling price rises of 41% during 2008. However during the yearâ€™s final quarter, prices fell by 8% in nominal terms. This downturn is attributable to strongly tightening lending criteria, an increase in interest rates, multiple layoffs, and alarm among buyers.

Forecast: No recovery in 2009

History suggests that in a crash, housing markets take many years from peak year to full recovery. In view of this and of the pessimistic IMF forecast for the global economy, no real recovery is likely in the global housing markets this year.

The IMF has predicted that the world economy will grow by 0.5% in 2009, the lowest level in 60 years. GDP in advanced economies is expected to decline by 2% during 2009. The United Kingdom and Japan will be hit the hardest. Output in the UK may contract by 2.8%, while Japanâ€™s may fall by 2.6%.

Growth in emerging economies is expected to slow to 3.3% in 2009, down from 6.3% in 2008. Developing Asia is forecast to be the least affected, with growth of 5.5%. Chinaâ€™s economy is predicted grow by 6.7% in 2009, but this is a substantial decline from 9% growth during 2008.

We cannot be optimistic for five reasons:

â€¢ Valuations still clearly remain stretched in most countries, in terms of price/rent ratios.

â€¢ Economic growth is slowing or negative in many countries, which is negative for housing values.

â€¢ There are no signs that banks are becoming more willing to lend.

â€¢ The unprecedented nature of the financial systemâ€™s collapse has greatly added to the difficulties facing the worldâ€™s housing markets.

â€¢ Some national governments are experiencing difficulty in refinancing their national debt, putting their currencies under pressure. Currency instability is likely to aggravate housing sector problems in countries where many loans were taken out in a foreign currency.

The positive news is that the US government and several others are acting with vigour, as has the IMF. Nevertheless, there is a long tough road ahead.

###

Description of the Global Property Guide:

The Global Property Guide (http://www.globalpropertyguide.com) is an on-line property research house, specializing in analyzing residential property valuations around the world.

Terms of Use:

On-line newspapers, magazines, sites, etc wishing to use material from this press release MUST provide a clickable link to www.globalpropertyguide.com Sites and newspapers found not to be providing a link to us will be removed from our press list.

Requests for Comments:

Requests for comments are best made by telephone to +(63) 917 321 7073. UK-based callers should telephone before lunchtime. Our local time is Hong Kong time, i.e., standard time + 8.00

Economics Team:

Prince Christian Cruz, Senior Economist

Phone: (+632) 750 0560

Email: prince@globalpropertyguide.com

Publisher and Strategist:

Matthew Montagu-Pollock

Phone: (+632) 867 4220

Cell: (+63) 917 321 7073

Email: editor@globalpropertyguide.com

Address:

Global Property Guide

http://www.globalpropertyguide.com

5F Electra House Building

115-117 Esteban Street

Legaspi Village, Makati City

Philippines 1229

info@globalpropertyguide.com

Back to the Drawing Board for Home Loan Modifications – Loan Modification Help Center

Posted by admin | Posted on 12-11-2009

Category : Loans

A growing recognition that the Obama Administrationâ€™s Home Affordability and Stability Program (HASP) is not working in its current design has fingers pointed all over Washington D.C. trying to place blame on mortgage servicers, investors and the administration itself. At hearings this week in Washington, comments ranged from encouraging to total frustration as expressed by Senator Jeff Merkley (D-Ore.) who said, â€œItâ€™s just hard to explain to the working families in America how it is we could move so fast with extraordinarily complicated deals with the huge financial institutions, and we are moving so incredibly slowly, mired in paperwork, in rules, in talking to banks back home.â€

With predictions for 3.5 million foreclosures by the end of this year and 9 million by the end of 2012, the fact that the program has initiated less than 150,000 loan modifications as it enters its fifth month has industry experts trying to figure out what went wrong and what can done to fix it. While there isnâ€™t yet a full spectrum solution to the issue, the problems of the program have become well defined. They include: Â

1)Â Â Â When the program was announced in February, there was little to motivate lenders and servicers to hire staff, provide training to processors in the nuances of the programâ€™s guidelines, and build infrastructure to support the flood of requests. While itâ€™s true that the plan provides incentive payments to lenders and servicers, at $1,000 per year for a successful loan modification, the incentives arenâ€™t enough to offset the costs of implementing a full scale department which, in effect, generates only losses.

2)Â Â Â Executing loan modifications results in recordable losses for lenders and investors. In the Spring Congress, hearing the pleas from the mortgage industry, ended the long standing requirement that mortgages be marked to market periodically to reflect losses on the books of lenders and investors. If loan modifications were being handled quickly and efficiently the resulting losses would leave many in the industry short on capital requirements and/or struggling for survival.

3)Â Â Â Investors, even with the passage of the safe harbor bill, can still stand in the way of modifications. Congress passed the bill in May to give servicers more freedom in choosing the concessions they grant in a loan modification and to protect them from lawsuits served by the investors that actually own the mortgages. The problem is that the pooling and stripping of mortgages by insurance companies, pensions and Wall Street institutions can make determining who owns what a job in itself. Even when ownership is clearly defined, servicers and their investors are trying to avoid adversarial relationships as much as possible so getting a sign off on loan modifications can either bog down the process or result in non-approval of the loan modification.

4)Â Â Â The defeat of the cramdown provision in the administrationâ€™s foreclosure initiative, which would have allowed judges in bankruptcy court to decide on principle reductions, gives lenders and investors the last word on a modification. Had the provision passed, the threat of having principle balances reduced by an uninterested third party would encourage more approvals and greater concessions in loan modifications. â€œYou have got to have some leverage, something to hold peopleâ€™s feet to the fire,â€ said Center for Responsible Lending spokeswoman Kathleen Day. â€œIf you tell the industry this [judge] can do the loan mod if you donâ€™t, that is going to get their attention.â€ Defeated in the Senate, revisiting cramdowns is seen as a political nonstarter but other actions like the threat of the repeal of certain tax advantages could prove to be a motivator for getting loan modifications done.

5)Â Â Â The program is now being criticized for being too complex and for not strongly emphasizing principal reductions. There is talk now of abandoning the original guidelines and replacing them with blanket programs intended for any one that originated a mortgage that they clearly couldnâ€™t afford between 2005 and 2008. The simplified plan would focus on principle reductions to bring home values closer to the principle balances of the mortgages on the properties. Despite its simplification, the tentative design of that plan has its own issues as well. The first is that statistics are already showing that buyers that clearly couldnâ€™t afford their homes have already been foreclosed. The second is that a massive round of write-downs on properties and mortgages would devastate the financial industry.

6)Â Â Â The program is fighting the wrong battle. According to Nicolas Retsinas, director of Harvard Universityâ€™s Joint Center for Housing Studies, the original plan was well designed for the issues that started crisis but the cause behind most foreclosures has now changed. The original targets of the program including stated income, negative amortization, and other loans that buried homeowners have largely run their course while growing unemployment is now the fuel behind foreclosures occurring on prime, jumbo prime, and fixed interest loans. â€œThe issues have changed, and in some ways the solutions havenâ€™t kept up with the problems,â€ Retsinas summarized. â€œThe most effective intervention would be to put people back to work.â€

Another mistake made by the administration was the dismissal of private efforts by law firms that negotiate loan modifications on behalf of homeowners. By encouraging homeowners to take on the labor intensive and complex task of doing home loan modifications on their own the administration put thousands of people in a position where they were negotiating terms on mortgages that they didnâ€™t understand in the first place. With untrained and overworked processors on the other end of the phone itâ€™s no wonder many loan modifications never got off the ground.

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Land and Condominium Investment in Asia Attracts Foreigners

Buying Condo Tips

Global House Price Downturn Accelerated At End Of 2008 According To The Global Property Guide

Back to the Drawing Board for Home Loan Modifications – Loan Modification Help Center

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Global House Price Downturn Accelerated At End Of 2008 According To The Global Property Guide

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