By Stephen Harris of Overseas Property Professional.

Fears over Europe’s economy are set to make property cheaper for foreign buyers if the euro keeps sliding, with some firms hoping for a surge in sales.

A Euro 750 billion deal announced this week to halt the debt crisis affecting the eurozone has been greeted with scepticism by currency traders and fund managers. And stockmarkets in Asia and Europe have fallen as initial enthusiasm for the bailout wears off.

The UK’s slow progress in forming a government after its election last week has also shaken the pound but brokers believe sterling is still likely to rise against the euro later this year.

“The euro is overvalued at current levels and we will tend to see it move back to its long-term average against the pound and the dollar,” said Jeremy Cook, chief economist at World First currency broker.

“The Eurozone has a very inflexible system and another shock from somewhere like Spain or Greece is still a possibility. We could see the pound reaching €1.21 or €1.22 in the next three months.”

Magic number
Agents and brokers have claimed many UK buyers are waiting for the pound to rise above €1.20 before they spend their money abroad.

“We’ve already seen interest in buying property start to increase,” said Cook. “Some people have been putting off buying for a year – they have the finance and are all ready to go but want to get the best rate they can.”

But others in the market are sceptical this will make a real difference. “The same people are still looking for excuses – they’re waiting for something but they’re not sure what,” said Martin Sadler of UK-based agent Assetz.

Mark Bodega of currency broker HiFX said the investment aspect is secondary for most of the firm’s property clients. “There will always be those clients who will be holding off for a better rate but exchange rates are not driving buying decisions,” he said.

Fund Investment
Institutions and funds are also looking to take advantage of a weak euro, according to Oliver Georg, managing director of Behringer Harvard Europe.

“We’ve seen increased interest from North America as any US-denominated fund investing in property in Europe can get a substantial discount at the moment,” he said.

Finance Minister, Jim Flaherty, today announced that new mortgage restrictions would be implemented aimed at preventing housing speculators and ensuring that house buyers can handle their debt when interest rates inevitably rise.

Rob Carrick of the Globe and Mail explains further:

Olympics aside, the current favourite Canadian diversion is debating whether there is a bubble in the housing market. Those worried about the market plunging have urged Mr. Flaherty to raise the minimum down payment for a home and reduce the maximum payback period.

But the 35-year amortization, favourite of first-time buyers across this land, remains. So does the 5-per-cent down payment, which is heavily relied upon in high-cost cities like Vancouver, Calgary and Toronto.

All the measures announced by Mr. Flaherty affect mortgages covered by government-backed mortgage insurance, where the buyer puts less than 20 per cent down. The key change for typical home buyers is that, regardless of what term or type of mortgage they choose, they’ll have to be able to afford the five-year rate.

This is a sensible way of building some slack into the system as we look ahead to a cycle of rising interest rates. If someone chooses a variable-rate mortgage, where the interest rate can be as low as 2 to 2.25 per cent today, they’ll have to be able to handle the payment at the current five-year rate. Right now, the posted rate at the big banks is 5.39 per cent.

You won’t have to actually make the higher payments required by the five-year mortgage. You’ll just have to theoretically be able to carry them and still remain within the limitations lenders set out on how much of your gross income can be consumed by debt (it’s 42 to 44 per cent, just so you know).

Another reason why the changes won’t be jarring is that a huge number of homebuyers are actually choosing five-year mortgages these days. A study issued by the Canadian Association of Accredited Mortgage Professionals last month showed that fixed-rate mortgages accounted for 86 per cent of mortgages in set up in 2009 and, of those, 70 per cent were for a five-year term.

People who borrow to buy investment properties to either flip for a quick profit or to generate income are also affected by Today’s announcement. If you buy a property you’re not going to live in, then you’ll have to put down a minimum 20 per cent to qualify for mortgage insurance. That’s up from 5 per cent.

But not all lenders even require clients to have mortgage insurance if they put 20 per cent down. Stiff mortgage insurance premiums already discourage people from putting 5 per cent down on an investment property.

The final mortgage change restricts the ability of existing homeowners to refinance their mortgages to take on more debt. The new ceiling is 90 per cent of the value of your home, compared to the current 95 per cent

Written by Toby Barlow last year for the New York Times – an interesting observation of the state of the real estate market in Detroit and how people are snapping up derelict homes for $100. Remember though, that you get what you pay for, and before you charter a flight to Wayne County Airport, perhaps a little research into Detriot’s inner city neighbourhoods wouldn’t go amiss. For some though, one man’s trash is another man’s treasure.

Though housing markets are on the upswing and presales back in force, the assignment trade is starting to stage a comeback – but with nowhere near the strength it had in 2006, according to an article in this week’s Business in Vancouver publication, written by Peter Mitham.

“For those that persevered and bought on the basis of a floor plan and show suite, the investment rewards were sweet, with news of presale units appreciating in the range of 50% to 100%,” said Nicola Way, manager of the online listings site AssignmentsCanada.ca.

But inquiries from realtors looking to list assignments have increased in the past quarter in tandem with the uptick in markets. They’re up 30%, according to Way, with listings on AssignmentsCanada.ca rising 20% over the same period.

“Assignments become more attractive as price points increase,” she said. “With the BCREA posting the highest level of sales in six years for the month of October, and the average Metro Vancouver house price up 15% compared to October 2008, all of this spells good news for assignment listings as they can be more competitively pitched against rising prices.”

According to the second annual Expat Experience survey commissioned by HSBC Bank International, expats in Canada have the best quality of life and found it to be one of the easiest places in the world to integrate with the local population.

If you’re looking to work overseas, head to Canada, Australia or Thailand, as recession-hit Britain was found to be one of the worst locations to live for expatriates.

Australia and Thailand also came in the top three in the survey of 3,146 people working in 30 different industries and 50 countries, even though Thailand was one of the countries worst-hit by the recession for expats.

“We have seen that there is a distinct trade-off between income and overall quality of life, as many of the top performers … scored toward the bottom of this report’s league table (of the best places to make and save money),” said Betony Taylor, spokeswoman for HSBC Bank International.

“What is clear is that the locations where salaries may not be as high, such as Canada and Australia, are where expats are really enjoying not only an increased quality of life but are also finding it easy to fit in to their new communities.”

Last year Germany, Canada and Spain were the top three countries deemed to have the best lifestyle for expats.

This year Britain was one of the lowest ranked locations when it came to lifestyle after being named as one of the most expensive places for expats with the recession taking its toll.

About 44 percent of expats in Britain are considering returning home, compared with only 15 percent of expats overall.

About 41 percent of expats in Britain find it difficult to find somewhere to live, most find the quality of their accommodation drops after moving to Britain, and a third claim their health has deteriorated since moving there.

“Despite this, the UK does hold the crown for being expat entertainment capital of the world, with over half (58 percent) of expats in the UK saying that the quality of entertainment had increased,” said Taylor.

She added that 62 percent of expats also said that employment prospects were the main reason keeping them in the region.

Results from a different section of the survey, which was conducted by research company FreshMinds, released earlier found Russia was home to the highest proportion of expats earning more than $250,000 with 30 percent of international workers there banking that amount, followed by Hong Kong and Japan.

The lowest-paid expats live in Australia and Belgium with the majority — 63 percent and 61 percent respectively — earning less than $100,000.

Source: Reuters

Vancouver is the world’s best place to live, a survey by the Economist Intelligence Unit (EIU) has found.

The Economist Intelligence Unit’s livability shows cities in Canada, Australia, Austria, Finland and Switzerland as the ideal destinations thanks to a widespread availability of goods and services, low personal risk and an effective infrastructure. The report placed Vancouver as the most livable city in the world, with Vienna taking second place followed by Melbourne, Australia. The survey said “In the current global political climate, it is no surprise that the most desirable destinations are those with a lower perceived threat of terrorism.”

The main uncertainty for people living in those cities was climate-related, the EIU said.

The worst places were Algiers in Algeria, and Port Moresby in Papua New Guinea because “many aspects of daily life present challenges”, the EIU said.

The survey has produced a mixed picture of the world’s cities. London was ranked in the 10th group, on a par with Dublin and Los Angeles, but one place below Manchester, four behind Berlin, five lower than Tokyo, and six off Helsinki, Frankfurt and Stockholm.

In Latin America, “no city manages to present ideal living conditions, neither do any fall into the category where extreme difficulties are faced”, the EIU said.

Montevideo in Uruguay, Santiago in Chile and Buenos Aires in Argentina offer the region’s best conditions. Bogota in Colombia and Caracas in Venezuela score the least favourably.

In Asia, cities in Japan, South Korea, Singapore, China and Taiwan all score well, as do Australia’s main hubs.

Africa and the Middle East fare less well, with the EIU citing concerns about terror attacks, and economic and political instability.

Some of the worst performing cities include Harare in Zimbabwe and Lagos in Nigeria.

Top 10 Cities

Vancouver
Melbourne
Vienna
Geneva
Perth
Adelaide
Sydney
Zurich
Toronto
Calgary

Bottom 10 Cities

Tehran
Douala
Harare
Abidjan
Phnom Penh
Lagos
Karachi
Dhaka
Algiers
Port Moresby

Source: BBC News

The cost of emigrating to the USA has increased by almost a fifth in the past six months alone, according to research from Foreign Currency Direct.

Currency fluctuation has increased the cost of living in Canada by only 3 per cent in the last six months which means that with sterling strengthening against the Canadian dollar, British expats living there are enjoying more for their pound.

The average cost of a property in Canada has risen by only £5,599 in six months, a long way from the £32,303 increase in the US.

The average Spanish property now costs £31,576 more to a British buyer than it did in November last year, yet the cost of living in Canada has gone up by just 3 per cent, representing the smallest change of all expat hot spots.

Britons who are already overseas and receiving income from property or pensions in sterling have seen some serious price hikes.

The pound reached record lows against the euro in January, and living as an expat in Europe is now a fifth more expensive than it was in November last year.

Brits emigrating to or living in the USA have seen the average property price rise by £32,303 since November last year, and the cost of groceries, services, meals out and leisure activities has gone up by £373 over the same period.

In February, British expats were enjoying some cost of living reductions as the pound was stronger against the Australian and New Zealand dollar, but even these expats are now seeing their cost of living rise as sterling struggles against other world currencies.

How much impact these currency fluctuations has had depends on which country you are living in, with the USA and France now the most expensive expat destinations.

Peter S Ellis, chief executive of Foreign Currency Direct, said: “Recent exchange rate fluctuations have had a considerable impact on the cost of buying a property and living overseas.

“Despite the euro maximising exchange rates across Europe, the cost of living still varies considerably across the region, meaning that exchange rate fluctuations have a magnified impact in more expensive regions.

“When considering a move abroad it is important to consider not only current exchange rates, but also any likely future currency changes and the cost of living in your preferred country.”

Mr Ellis added: “In the last year Foreign Currency Direct has seen a 29.3 per cent increase in the number of our clients transferring funds to and from Canada and New Zealand, suggesting that Brits are taking advantage of the increasing affordability of these destinations.

“But many British expats are moving their money and their homes back to the UK from Europe as they can no longer afford to live in Europe and can currently take advantage of the strength of the euro when converting their money back to pounds.”

British expats in Europe and America are struggling to stretch their income to meet their needs as the cost of living abroad rockets on the back of the sterling slump but Canada’s attractiveness as a viable, affordable destination remains high.

On April 15th, the British Columbia Real Estate Association (BCREA) reported residential sales dollar volume on the Multiple Listing Service (MLS) in BC declined 35% to $2.3 billion in March, compared to the same month last year. Residential unit sales declined 25% to 5,464 units during the same period. The average MLS residential price in the province was $424,122 in March, down 12% from March 2008.

However, Cameron Muir, BCREA Chief Economist, noted “While fewer MLS® residential sales were recorded last month compared to March 2008, home sales actually climbed 24% from February to March on a seasonally adjusted basis, the second consecutive month of gains.”

A significant increase in affordability helped fuel demand for BC housing last month. “Reduced mortgage interest rates have effectively doubled the impact of lower home prices on affordability,” added Muir. While the average sales price in BC declined 12% from a year ago, the monthly payment on the average priced home was 24% lower. “Housing is now more affordable than at any time in the last three years,” noted Muir.

The 2009 edition of The Wealth Report, the third such collaboration between the UK’s Knight Frank estate agency and Citi Private Bank, indicates that whilst luxury house prices have fallen around the world, the appetite of the super-rich for property remains undimmed.

There were wide variations in performance. Hong Kong saw the sharpest annual drop (-24.5%), but prices for residential properties in Bangkok rose 22.5%. Additionally, some previously buoyant markets have turned very quickly. Dubai, which recorded annual overall growth of almost 11%, saw prices fall by 19% in the last quarter alone.

According to PIRI, prime property in Monaco is the most expensive in the world costing an average of €55,000 per square metre for the best properties. London and Manhattan are placed second and third respectively.

The first Knight Frank World Cities Survey illustrates that New York and London are likely to remain the world’s leading financial centres, but Asian cities are catching up. In the same survey, London takes poll position for global influence by securing top-five positions in four key ranking criteria – “economic activity”, “political power”, “knowledge & influence”, and “quality of life”.

Despite house price falls, the Knight Frank/Citi Private Bank Attitudes Survey shows that almost 55% of High Net Worth Individuals (HNWIs) plan to increase their exposure to residential property over the next two years.

The REBGV posted the following report on Friday, April 3, 2009 demonstrating a surge in house sales in March, 09.

VANCOUVER, B.C. The Metro Vancouver housing market experienced a movement away from volatility and toward stability to start the spring season.

Home sales in March 2009 returned to levels witnessed at the beginning of the decade, with 2,265 sales recorded across Metro Vancouver for the month, a 53 per cent increase over February but a 24.4 per cent decrease over March 2008, when 2,997 sales were recorded.

Since 1999, March sales have increased 31 per cent, on average, over the month of February. March 2009 marks the second consecutive month that sales have outperformed the ten-year average for this month-over-month comparison.

“There’s more confidence in the housing market today than we were seeing late last year. Sales activity is rising to more typical levels given the season, and the number of homes being listed for sale is levelling off,” said Scott Russell, president of the Real Estate Board of Greater Vancouver.

New residential listings on the MLS® declined 22 per cent in March 2009 to 4,385 compared to March 2008. This is the fifth month in a row that new listings have decreased year-over-year and the third consecutive month where those declines exceeded 20 per cent.

Despite these trends, total active listings at the end of March 2009 had still reached 14,579, a 19 per cent increase compared to the end of March 2008.

“REALTORS® are seeing an increasing level of interest from first-time buyers who are attracted to low interest rates, good supply of housing, greater affordability, and a considerably lower overall cost of servicing a mortgage compared to recent years,” Russell said.

Sales of detached properties in March 2009 declined 19.6 per cent to 897 from the 1,116 units sold during the same period in 2008. The benchmark price, as calculated by the MLSLink Housing Price Index®, for detached properties declined 15.1 per cent from March 2008 to $649,342.

Sales of apartment properties declined 28.8 per cent last month to 976, compared to the 1,370 sales in March 2008. The benchmark price of an apartment property declined 13.5 per cent from March 2008 to $337,099.

Attached property sales in March 2009 decreased 23.3 per cent to 392, compared with the 511 sales during the same month in 2008. The benchmark price of an attached unit declined 11.2 per cent between March 2008 and 2009 to $420,563.

For more information please contact:
Craig Munn, Assistant Manager of Communications
Real Estate Board of Greater Vancouver
Phone: (604) 730-3146
E-mail: cmunn@rebgv.org