International Real Estate Report

Global Resources for Local Markets
  • U.S. Investors Look Abroad
  • Property Ownership Restrictions Loosened for Vietnamese Nationals
  • Immigrant Population Increasingly Mobile; Good for Real Estate
  • Registered Traveler Goes International
  • Finland to Introduce Residential-only REITs in 2009
  • Europe's Best and Worst Housing Markets
  • Manage Your International Risk
  • Market Your Market at MIPIM Asia


FOREIGN INVESTMENT

U.S. Investors Look Abroad

While foreign investors look increasingly to the U.S. for property deals, U.S. investors feeling the U.S. credit crunch, are looking abroad for opportunities. An April 28 article in Investment News, citing a number of investment analysts, reports that many investors fear that the deepening crisis will lead to more layoffs and a sharp pullback in demand for real estate space in the U.S., causing occupancy, rents and values to tumble. In response, U.S. investors, opportunity funds and REITs have been scouting for real estate bargains in high-growth areas of the world where the local economies are growing and demand for real estate is escalating. Popular targets include in India, China, the so-called Asian Tigers (South Korea, Malaysia and Singapore), the Middle East, Scandinavia and Brazil, according to an analyst from REITology, part of New York-based StreetBrains LLC, who favors "cutting-edge cities," where gross domestic product growth is high and rural residents are migrating to urban centers, creating huge demand for real estate space. A number of high profile investors came together at the 13th annual New York University REIT Symposium last month, many noting the overseas opportunities and that REITs are an attractive way to go global given that the REIT assumes the risks related to disclosure and regulatory issues.


Property Ownership Restrictions Loosened for Vietnamese Nationals

REALTORS® working with ethnic Vietnamese should take note of a new regulations due from the Vietnamese government regarding property ownership by overseas Vietnamese returning to Vietnam. Current regulations say overseas Vietnamese must meet certain requirements--such as being scientists, cultural experts, or long-term investors in order to own more than one piece of property in the country. However, a new draft of the law says that Vietnamese nationals returning from other countries, as well as people with foreign passports who retain Vietnamese nationality, will be able to buy an unlimited number of houses in the country (investors take note!). In addition, overseas Vietnamese without Vietnamese nationality will be able to buy one house after living for six consecutive months in Vietnam. This new law is part of the government's effort to attract "Viet Kieu," (overseas Vietnamese), back to the country. There are over 3 million overseas Vietnamese living around the world with roughy half of these in the U.S. According to Thanh Nien News,so far about 140 Vietnamese expats have attained eligibility to purchase houses in the country; most in Ho Chi Minh City. U.S. REALTORS® working with investors and/or looking to make a referral to a broker in Vietnam should look to a member of the Vietnamese Real Estate Association (site under construction), NAR's association partner in the country.


CULTURALLY CORRECT

Immigrant Population Increasingly Mobile; Good for Real Estate

The immigration of young minorities will significantly alter the U.S. population, as well as the economy, in the coming decade according to a report published by the Mortgage Bankers Association Research Institute for Housing America. "Americas Regional Demographics in the 00 Decade: The Role of Seniors, Boomers and New Minorities," examines, among other issues, the rise of new minorities (Hispanics and Asians) propelled by the huge, recent immigration to the United States. TIME Magazine projects that by 2050, 19% of the U.S. population will be foreign born; the previous highpoint was 1910 at 15%. The MBA report shows how these changes are playing out with respect to key demographic attributes, their impact on migrant populations in the U.S., and how their rapid dispersal is affecting racial and ethnic diversity in different parts of the country. Trends include a greater dispersion of Hispanics than in the past with less than half of the U.S. Hispanic population living in the top 10 metro areas of the U.S., a drop of more than 5% since 1990. Minority populations also are increasingly younger and more mobile. These trends represent business opportunities for REALTORS® serving these groups. NAR offers a variety of resources to help brokers prepare agents to effectively serve the Hispanic and Asian populations, including free, downloadable pre-packaged sales meeting "tool kits."


Registered Traveler Goes International

The U.S. Department of Homeland Security (DHS) will begin testing the International Registered Traveler program in June. The pilot program, designed to prescreen travelers so to reduce time spent at security checkpoints, will operate for six months at airports in New York, Houston, and Washington, D.C. While initially only available to U.S. citizens and permanent residents, DHS eventually hopes to allow low-risk foreign visitors to participate as well--good news for the growing number of foreign investors of U.S. real estate and the REALTORS® serving these buyers! Under the program, registered travelers are may confirm their identities at automated airport kiosks using a machine-readable passport or permanent-resident card, and then provide their fingerprints, pose for a photograph and answer a few questions. Travelers then receive a receipt that allows them to skip passport control when returning to the country. The DHS-sponsored domestic Registered Traveler program is currently operating at 16 airports across the country. Read the press release from the DHS's U.S. Customs and Border Protection group.


GLOBAL MARKETS

Finland to Introduce Residential-only REITs in 2009

Finland's Finance Ministry will propose introducing residential Real Estate Investment Trusts (REITs), but excludes commercial REITs. The move is designed to lower the tax burden of the average tax payer, but not to cut down on commercial taxes. Some investors see a residential-only REIT as too low-yielding and argue REITs are designed for high cashflow yields. The current proposal (sans commercial properties) could be in effect by January 2009. RAKLI, the Finnish commercial property association, reported to Property Finance Europe that the property community and the Finnish government have held several discussions on this topic, but that the government has remained resistant to a commercial REIT. This has prompted RAKLI to join forces with Finnish research group KTI to produce a study on the experience of other nations with REIT regimes to support a lobby for the inclusion of commercial real estate. According to KTI, the Finnish government has turned down REITs due to three concerns: potential loss of tax revenues, possible transgression of EU state aid rules, and the balance of tax competition between Finland and other countries, in particular its Nordic neighbors, none of which yet have REIT regimes. REITs are in place in Germany, UK, Italy and France. Learn more about the Finnish market by reading Finnish property news from KTI, or download RAKLI's 2006 Finnish Property Market report" (54 pg. PDF).


Europe's Best and Worst Housing Markets

Recent home prices in Europe, as in the U.S., indicate that things in Europe are slowing down. Ireland's housing market has taken one of the worst hits, with prices dropping 7% in 2007 after rising 12% in 2006 according to data from the Royal Institute of Chartered Surveyors (RICS). Spain is also feeling the pain where home price growth slowed to 3% in 2007 from 9% the previous year. While not good news for the global economy, Americans can take some solace in that Europe's woes are not a direct response to our own subprime mortgage situation and the ensuing global credit crisis. Rather, Forbes says rising interest rates by the European Central Bank (ECB) are largely to blame for the downturn in the region. Further, Forbes says not to expect stabilization anytime soon, as unlike the U.S. Federal Reserve, "the ECB is loathe to cut borrowing rates, which means the effects of the credit crunch have yet to be felt." This bad news for Germany, Europe's largest economy where in spite of a small economic renaissance, its housing market has been slow to catch up. A slowdown in the French economy is also hurting its housing market, with a similar situations in the United Kingdom, Belgium and the Netherlands. There is good news from Europe. Poland, the EU's fastest-growing housing market, shows a growth in home prices at 28% in 2007. Cyprus and Iceland follow, according to RICS, with home price inflation at 15% and 9%, respectively. Unfortunately, overall, there is more slowdown than growth in the region. That said, REALTORS® working with prime or luxury property have less to worry about, as buyers for these properties don't typically take out mortgages and thus are not impacted by the ECB rates. But for Europe as a whole--including countries outside the EU--housing markets will be determined by the region's dubious economic fortunes. Read the full April Forbes story.  


BUSINESS RESOURCES

Manage Your International Risk

Whether an agent or broker, if your're working with international clientele, you need to be conscious of risk factors associated with international transactions. "Risk Reduction: International Business Factors Affecting Your Local Market," is a three-hour course from NAR. Previously available to associations, firms and real estate schools employing professional trainers, the course is now available online through REALTOR® University for access by individual brokers and agents. The course provides basic information regarding the requirements of working with international clientele in the local market, and provides important data--including information regarding U.S. legal regulations--which will reduce professional liability. Beyond the importance of understanding means to minimize your risk, completion of the course can also be an effective personal marketing tool--letting prospective clients and customers know you have the knowledge to complete an international transaction thereby reducing their risk as well. Review the course information or register, or see the full catalog of courses at REALTOR® University.


Market Your Market at MIPIM Asia

NAR is the sponsor of the 2008 USA Pavilion at the MIPIM Asia property marketing show in Hong Kong, November 19-21. With the U.S. dollar at historic lows against most other major world currencies and global investors looking to the U.S. for real estate bargains, the MIPIM Asia show is a great venue to promote investment in local and regional U.S. markets--particularly to Asian investors. NAR will promote overall U.S. investment and the role of a REALTOR® in a commercial transaction in U.S., but not specific regions or markets. REALTOR® associations are encouraged to partner with local economic development groups to promote investment. In 2007, the Washington state and the Hawaii Associations of REALTORS® organized exhibitions, both resulting in business development opportunities for members. New this year is a 2-day tour of Japan, featuring highly-targeted conferences and networking events to give international investors and REALTORS® an inside overview of opportunities available in this global hot spot. Download information on exhibiting, or contact Patric Dolan to discuss available space. For REALTORS® interested in participating without a booth, download the NAR discounted registration form (limited number of discounted registrations available to NAR members).

Report compiled by NAR International Operations, narglobe@realtors.org.

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