INSIGHTSERIES

SEPTEMBER 2017

Welcome to our new Global Market Roundup, a quarterly review of the latest trends, data and intel in global property, for Property Frontiers investors.

In this issue, several governments introduce measures to curb aggressive house price growth, tourism boosts hotel industries across the world, and weaker non-tangible assets embolden the case for property.

Growth in the global market was more equally spread, if less aggressive, last quarter. The proportion of countries recording a positive change in house prices in the year to June was at its highest level since before the financial crisis, at 89%. The average rate of growth was 5.6%, down from 6.5% last quarter. (Knight Frank)

GLOBAL MARKET ROUNDUP

Global Market Roundup | September 2017+44 1865 202 700 | info@propertyfrontiers.com

The London residential market continues to lose its mojo, with new data indicating that only 37% of listings result in a sale and that applications for buy-to-let mortgages have halved compared with last year. However, a dip in new landlord instructions is expected to support rental price growth, and commercial assets remain in demand – particularly from Chinese buyers, who account for £2bn of the £2.4bn transactions under offer in the City. (HomeOwners Alliance,

UK Finance, Knight Frank)

Despite sluggishness in the capital, UK annual house price growth picked up, to 5.1% in July. Price rises in the Midlands and Northern Ireland balanced out a dip in London in the year to September (see map). The share prices of housebuilders are up despite losses among estate agents, pointing to the benefits of exposure to land in locations outside of the capital, as well as the rising popularity of new builds. (ONS, Rightmove, FT)

Overseas visitors to the UK have spent over £10bn so far this year – 11% more than in the same period last year and further evidence of the Brexit boom in the hotel industry. The number of tourists from the United States was up a massive 34% y-o-y in June.

(Telegraph)

The Euro continues its tear against the dollar, reaching record highs that reflect the area’s modest economic resurgence (annualised 2.2% GDP growth last quarter) and an expected tapering of quantitative easing. European property has Become 13% and 7% more expensive for dollar and sterling holders respectively over the course of the year so far. (Eurostat, XE)

European regulators are weighing up whether to loosen solvency restrictions on real estate investments by the insurance industry, a move that could double capital flows into European property to an estimated €500bn. Money has already been pouring into funds in top-performing capitals including Vienna, Zurich, Madrid, Berlin, and Amsterdam, but the gap between institutional activity and local needs could give rise to a correction. (Bloomberg, FT)

Iceland retained the title of hottest residential market in the world for the third quarter in a row, with annual growth to June of 23.2%. (Knight Frank)

Source: The Guardian

EUROPE

The Philippine economy expanded by 6.8% last year, overtaking both Singapore and Malaysia in overall size, and muting criticism of the country’s controversial president. A boost in infrastructure spending and a rethink of property taxes are both reportedly in the works.

The pace of investment in Chinese housing hit its lowest level so far this year in July, as price gains for new stock fell into single digits (9.7%) for the first time in eleven months. Yet prices are still rising in year-on-year terms in every Chinese city. (Reuters)

China is at the forefront of a drive to control and contain runaway East Asian property markets. Regulatory curbs, increased mortgage rates on first-time buyers, and even caps on the price of new homes are being employed to stabilise the Chinese market. In South Korea, capital gains levies for owners of multiple homes and tightened lending rules are coming into force as rising household debt is beginning to threaten the wider economy. A typical two-bedroom new home in Beijing costs 69 times the average local income, while

construction investment in South Korea is rising four times faster than economic growth. (Fortune, FT)

Although Hong Kong posted the highest twelve-month house price growth in Asia (21.1% to June), India is still ahead over the longer term, with five-year price appreciation of 69.7%.

(Knight Frank)

Despite the shortening odds of a nuclear apocalypse and the fact that buying and selling houses is illegal, the property market in North Korea is booming on the black market. According to defectors, a typical home in Pyongyang cost $2,000 in 2004 if you knew the right people, but has since shot up to over $120,000, not including “broker” commission of up to 30%. (Radio Free Asia, Better Dwelling)

ASIA-PACIFIC

Source: The Economist

Global Market Roundup | September 2017+44 1865 202 700 | info@propertyfrontiers.com

Investor interest in Canadian cities has lost steam since local governments and the central bank applied the brakes with rate hikes, stress tests, and foreign buyer taxes. Rampant growth remains untethered to local incomes and other fundamentals, with the national composite index up 13.1% in the year to August. Yet in Toronto, which leads the city tracker with 23.9% annual growth, transaction volumes were down 34.8% y-o-y in August and talk has turned to whether the bubble will eventually deflate or burst. The former currently looks more likely, though lesser-known Canadian cities are still tipped for good growth. (Teranet - Bank of Canada,

Toronto Real Estate Board, FT)

Foreign buyers in the United States purchased 49% more residential property by value this year than last, totalling $153bn. Canadian investors,

flush with equity yet nervous of a bubble at home, doubled their spend to $19bn, while China remains the highest roller at $31.7bn (see image). Overall, US home sales volumes fell 1.3% in July, owing to a tight inventory of existing properties.

(National Association of Realtors, CNBC)

US equities markets have lost their record-breaking pace as tax cuts look ever less likely to materialise and geopolitical scares spark market volatility and a consequent rush to safe haven assets.

Latin America is beginning to resurface on investors’ radars, with two of its biggest economies on a steadier political footing: the reformist agenda of Argentina’s ruling party fared well in primary elections in August, while business investors have begun

betting on the end of Brazil’s economic downturn. Construction activity in Argentina was up 13.2% in July, and office vacancy rates in Sao Paolo are back below 2013 levels, ending a long period of poor sentiment.

(Indec, CBRE, Economist)

Source: National Association of Realtors

↑CHINACANADAUKMEXICOINDIA

$31.7 BILLION

$19 BILLION

$9.5 BILLION

$9.3 BILLION

$7.8 BILLION

US RESIDENTIAL PROPERTYSALES TO FOREIGN BUYERS

$153BILLION

49%INCREASE

AMERICAS

New projections confirm that Africa’s population is likely to double by 2050, to 2.6bn from 1.1bn today (see chart). This presents both challenges and opportunities for housing markets including that of Nigeria, where the current shortage of 18m units widens by a further 700,000 each year. The rate of urbanisation to Africa’s cities is estimated at 40,000 people every day.

(Population Reference Bureau, World Bank,Nigerian Bureau of Statistics)

The blockade of Qatar by its Gulf neighbours is beginning to hit the housing market: prices dropped 3.6% in the year to July. This compounds the effects of a slump in demand from energy industry workers, but the market may yet be saved in the build-up to the 2022 World Cup.

(Financial Tribune, Doha News)

Source: The Economist

The Middle East and Africa topped the global tourism rankings, with 10.4% and 7.6% growth in arrivals in the first half of the year respectively. North Africa was the fastest growing

sub-region in the world, posting a 17.8% increase. Business confidence in the global hospitality industry has reached its highest level in a decade.

(UN World Tourism Organization)

The Dubai residential market is displaying signs of bottoming out, with non-oil sector growth, local sentiment, and construction contracts all picking up in advance of Expo 2020. Most big consultancies expect single figure declines in prices (5% - 10%) and rents (5% - 7%) to persist through to the end of the year, but the slowing rate of decline paves the way for a gradual recovery across the UAE in 2018. The Emirate of Sharjah lost no time in announcing its biggest ever new mixed-use project, valued at $6.5bn and designed to house 70,000 people. (Cluttons, JLL, Phidar, The National)

MIDDLE EAST & AFRICA

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