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13 Global Property Hotspots for our 13th Year
April 28, 2017Article by Paul Avery
To celebrate the 13th birthday of Property Frontiers, we’ve come up with a list of what we believe are the most exciting property hotspots in the world right now. Some are obviously booming, others lurk under the radar, and one or two just might pop up as project launches later this year. Here is what made our shortlist, and why:
- Prices are still 46% down on their pre-crisis peak – and among the most affordable relative to earnings in the UK (Hometrack). The business environment is buoyant, with demand for office space up 165% in H1 2016 and a hefty cut to the corporate tax rate coming in 2018, yet residential building is almost at a standstill across the city (CBRE, Deloitte). The need for housing is a much more stable driver of price growth than liberal mortgage lending (as in 2008), so expect this resurgence to last.
- Prices are up 75% over the last four years, with the fastest growth in the world during Q3 2016 (FT). The financial downturn hit Iceland especially hard, halting new building even during its swift recovery, while demand got a boost from a dramatic upswing in tourism. Though the fundamentals don’t look particularly unsteady, this boat may have sailed already.
- Toronto leads the Teranet / National Bank of Canada index with unbelievable 24.8% price growth in the year to March – a glaring sign that the Canadian market is overheated. But Vancouver (which topped the UBS Real Estate Bubble Index last year and still posts a big increase on last year’s prices) is the first to correct itself. Sales volumes in January dropped 39.5% compared with last year and prices are calming down due to a new tax on foreign buyers (CREA). Sounds like a great time to invest? Certainly not. But Vancouver is worth watching to see what a well-executed correction looks like and how it will impact the market in the much longer term.
Dallas, United States
- Median house prices in Dallas were up 19% in the last year, but even if that inflation slows the yields are worth attention (Realtor.com). An estimated 30,950 new rental units are needed from Aug 2015-2018, though just 6,495 homes in total were under construction at the start of that period, explaining why occupancy in Dallas is at 94-96%, and rents are rising by 6% per year (U.S. Dept. of Housing). The recession in Texas was mild and bounced back hard, with unemployment now at 3.8% and job growth at 3.5% with plenty of big name company relocations (Forbes). 1,200 people move to Texas every day for the jobs and the absence of state income or capital gains tax (Market Watch). While Trump’s wall and tax cuts may reduce Texas’s regional advantage, it remains one of America’s hottest propositions.
- The long shot that everyone is waiting for must surely open up sooner or later. If Raúl hands over power to someone more market-friendly, as has been suggested, we may see some surprise movement later this year. For now though, housing transactions (particularly between Cubans and non-Cubans) are conducted in something like a black market, and commercial speculation is getting dangerously foamy. That probably won’t stop investors when the floodgates open.
- Bright spots in Latin America are few and far between, and Peru is not immune to stagnation and scandal. However, social and economic reforms are heading in the right direction, lifting many people out of poverty and safeguarding dependable economic growth. The property market plummeted in 2014, and some segments have been slow to recover. But cautious investment is returning to slake the demand for housing, and prices are recovering sustainably with it. We still think Peru is probably the best opportunity on the continent.
Punta Cana, Dominican Republic
- Foreigners have unrestricted access to real estate in the Dominican Republic. Property is still rather cheap, with a decent new build apartment selling for under $100,000, and pricier options qualifying buyers for investor citizenship programmes. Prices are reliably rising by around 10% each year, driven by economic growth of 7%, and tourism growth of 9%, in 2016 (World Bank, Offshore Living). The main obstacle to investment right now is an income tax rate of 27%. Although it is common to offer below asking price to recoup tax bills, long term investors will be keeping an eye out for regulatory change in the years to come.
Galle, Sri Lanka
- New regulations arriving this year permit the ownership of freehold property by non-residents and allow foreigners to obtain mortgages. The timing is perfect to capitalise on the property market’s swift upward trajectory, with house prices rising by 14.3% in 2015 (Lanka Property Web). While oversupply threatens to dampen the capital’s long-running boom, price growth is slowly spreading South along the coast, to places like Galle, where supply is tighter and beautiful beaches beckon. The new rules arrive at a perfect moment, combining lasting political stability and consistent economic momentum of 5% per year (ADB). With tourism rising at an annualised rate of 21% since the end of the civil war in 2009, beachfront buys look a good bet (SLTDA).
- This is a high-tech economic zone in one of the smaller but fastest growing economies in Asia (6.4% annualised in Q3 2016). Direct international flights to the local (and expanded) airport doubled between 2012 and 2015 due to business and tourism demand. Slow property market growth after a speculative bubble burst in 2011 is now starting to pick up again. Just in time, foreign ownership of Vietnamese property became legal in 2015, though only with renewable leasehold and with some restrictions around the foreign-owned share of developments. The new rules are not yet widely understood or universally agreed, and buyers may need to visit to set up bank accounts and sign documents. But as these procedures gradually crystallise, Vietnam will warrant a closer look.
- For investors in tropical resorts, Lombok and the nearby Gili Islands are a strong prospect. They are beautiful, unspoilt in parts, and well positioned to benefit from the tourist overflow from crowded Bali. Property prices are also much cheaper than on their famous neighbour. The market is largely driven by tourism, which is rising by 14% every year in Lombok, and set to grow faster if rumours that low-cost carriers are planning routes prove true (Howarth HTL). Foreign ownership rules are somewhat murky, so detailed research is a must – but Indonesia could well be the next Asian country to welcome international buyers.
Gold Coast, Australia
- With historically low mortgage interest rates and well-known hotspots like Sydney and Melbourne becoming oversaturated, the Gold Coast could be the next up-and-comer. Its recovery lagged a few years behind the major cities, but is posting steady growth in the run up to the Commonwealth Games, which it will host in 2018 (and which should add value through tourism and infrastructure spending). The drawback for international investors is the perpetual difficulty of buying as a non-resident.
- Foreign ownership in development zones like Muharraq is extremely liberal, with a very favourable tax environment (or lack thereof) to boot. These conditions will do a lot for investor yields, rumoured to be in the region of 7-12% (Gulf Insider). Bahrain is experiencing a bit of the Dubai effect, though further behind on the curve, and bearing up well considering the dampened price of oil. Although demand for rentals and buyers may struggle to keep up with the huge number of projects under development, a carefully considered choice could have great rental potential.
Abidjan, Ivory Coast
- Pockets of violence and unrest are seen to be largely in the past, and the economy is now catching up for lost time: GDP growth dipped from 9% in 2015 to 8% in 2016, still one of the fastest rates on Earth (World Bank). The construction sector is extremely active, with commercial demand high in the business hub of Abidjan. The city will be the focus of government spending to close a housing gap that currently stands at 600,000 units (Oxford Business Group), and private investors are taking a keen interest.
To register your interest in any of these global hotspots, please get in touch today by email or call +44 1865 202 700.