WHERE TO INVEST IN Q2 2011?

17 May 2011

We recently published the second edition of our property barometer, a quarterly report that offers a summary and analysis of the key property markets around the world for foreign investors.

We recently published the second edition of our property barometer, a quarterly report that offers a summary and analysis of the key property markets around the world for foreign investors. We have identified several markets to watch for this quarter and have made some suggestions on which ones you should avoid.

In Q2 2011 we still remain optimistic about the London property market with mortgage financing becoming more competitive. Although interest rates are likely to increase in the second half of the year, there is still a huge under supply of real estate in London and overseas investors are now accounting for 48% of all prime central London property. Rents are at an all time high and supply levels are at and all time low, so it still makes for a very interesting market to monitor over the coming months.

Moving on to the US, we remain very confident about the New York and Jersey City market. Capital values in Jersey City are still 50% below their peak in January 2007. In Jersey City, just across the water from Manhattan, property is trading in the region of 25 – 30% of New York prices, with very strong rental yields, great transport infrastructure giving speedy access to Wall Street and downtown Manhattan. We have had lots of interest from our clients in Jersey City with properties selling faster than in Manhattan, inventory levels continually low and high yields of 6%.

Closer to home in Asia, I am still very confident about the Kuala Lumpur market as the government continues to implement economic stimulus packages, and forecasts capital value growth rates of between 7 to 10% this year. The Malaysian property market is also benefiting from a somewhat ‘lack of regulation’ compared to Singapore, Hong Kong and China.

Heading to Europe, the volume of sales to foreigners was up 40% in 2010 in Turkey. There has also been massive growth in the construction sector and the property market in Turkey has rebounded significantly compared to the rest of Europe. Property prices are set to increase with over 400,000 people immigrating to Istanbul every year which has created a housing shortage of 250,000 per annum. Turkey has the fastest growing economy in Europe, a trend that is likely to continue after Istanbul won European City of Culture in 2010 which is expected to spur a huge amount of investment in the coming months.

The regulations certainly slowed up the Singapore market significantly in the first quarter of the year. GDP has slowed from incredible growth in 2010 and developers are now releasing considerably less residential projects. We are still very favourable on the Singapore economy and we are looking for value in the real estate market but in the industrial sector rather than the residential. Industrial property is capable of achieving high rental yields of 4 – 6% with the cost of borrowing low at just 1% making it a very attractive investment market. We believe the Singapore industrial real estate sector to be one of the key markets to watch this quarter.

Further afield, Australia is having a tough time with a 30 plus year high for currency, interest and inflation which are challenging home sales. As such we are starting to see a slight correction in the market as property becomes quite expensive to hold given the cost of funding. As a result I think we will see quite sluggish second half of the year in Australia.

During the remaining months of this quarter I would advise seeking out investment opportunities in London, New York and Malaysia whilst keeping an eye on the up and coming real estate markets of Turkey and the Singapore industrial sector. For the reasons stated earlier, I advise to avoid the Australian property market during this quarter.

Kind Regards

Tim Murphy

To find out more about investing in global real estate please contact IP Global. 

IP Global

Written by IP Global

IP Global’s full-service approach is built on extensive market research and analysis combined with a significant financial commitment to every investment we offer. We are able to manage the entire investment process end-to-end, from sourcing, financing, and management to those all important exit strategies, making investment in real estate as straightforward as investing in more traditional asset classes. Our expertise, experience and strong record have produced over USD2.8 billion in international real estate investments in over 30 markets worldwide.

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