International Real Estate Report

Global Resources for Local Markets
  • Investors Keep Close Watch on China's Market
  • USA Remains Strong Magnet for FDI
  • Cultural Understanding Can Save Sales
  • Happy 50th Birthday E.U.!
  • Keep an Eye on the "Gateway"
  • REALTOR® Benefits Program Goes Global
  • International Shipping Aided (but not replaced) by Technology


FOREIGN INVESTMENT

Investors Keep Close Watch on China's Market
Multiple interest-rate hikes and government policy changes have had some cooling effect on China's previously red-hot market. During 2006 in an effort to curb speculation and regulate the property sector, the Chinese government increased interest rates on loans, implemented minimum downpayments for homebuyers, and placed restrictions on foreign investors. Regardless, the country's strong economic growth, rapid urbanization, and growing number of high-income earners continue to buoy the property market. International property adviser DTZ was cited in Asia Times Online, saying foreign investors welcome control measures, evidenced by the fact that more investment projects were completed with foreign funds in the second half 2006 than in the first half; this after a slew of measures were announced to cool down the overheating property sector. According to DTZ's latest Asia Pacific Property Market Overview, the Chinese real estate market continued to attract an increasing level of foreign investment in 2006, with building transactions involving foreign investment jumping 38% to 40 cases from 2005, while the total consideration surged 67% to $3.8 billion from $2.7 billion. Shanghai and Beijing remain top destinations for building investment (73% of the total number of transactions in 2006), but interest in other cities has increased, particularly in Shenzhen and Guangzhou. DTZ's annual report looks at key supply, demand, rent and yield trends in commercial and residential property markets in ten Asia Pacific countries. To learn more or to order, access DTZ's Research catalog and search on "Asia Pacific Property Market Overview."


USA Remains Strong Magnet for FDI
Figures released by the Commerce Department in March show the American economy is ripe with foreign investment. Inbound foreign direct investment (FDI) in 2006 rose by 67% over 2005 levels. The Organization for International Investment (OFII) sees this as a "remarkable vote of confidence in the U.S. economy and the American worker," according to the OFII president. OFII's own analysis of the government's figures are extremely positive. According to the organization, FDI in the U.S. increased 74% during the last decade. In addition, the $183.6 billion in FDI last year was the highest level since 2001. However, the 2006 figure is still only about 57% of what it was in 2000. FDI typically tracks the expansion and contraction of the economy, experts say. From 1997 to 2000 FDI soared from $105.6 billion to $321.3 billion. But in 2001, dropped to $167 billion, no doubt in response to the 9/11 terrorist attacks and subsequent economic uncertainty. Since then, it has ebbed and flowed with the economy. The upswing in 2006 may be a strong indicator of a rebounding U.S. economy. The 2006 figures show that foreign businesses are still very much interested in the U.S. market, despite proposed new regulations and tighter government scrutiny of foreign takeover deals. Another factor impacting FDI is the relatively weak U.S. dollar compared to the British pound, euro and other currencies. The U.K., France, the Netherlands, Germany and Japan account for 67% of all direct investment in the U.S., according to OFII.


CULTURALLY CORRECT

Cultural Understanding Can Save Sales
The HGTV website recently featured an item from Scripps Howard News Service reporting on a Houston real estate broker who lost a $700,000 sale because her Asian clients noticed a carpet seam running through the location where the would-be buyers were to place their bed. To the couple, the seam represented a potential division in their marriage or in their lives and, therefore, they opted to forfeit $20,000 in earnest money to void the transaction. As the number of immigrants into the U.S. grows, REALTORS® (and homesellers) need to understand cultural influences on homebuyers. The Real Estate Center at Texas A&M University reports that immigrants (most of whom are Asian or Hispanic), arrive in the U.S. at a rate of approximately one million households per year, and at age 25-44, represent 50% of the prime homebuying market. A Fannie Mae Foundation study projects that one in five immigrants is likely to purchase a home, compared to one of eight native-born Americans. NAR offers a wide range of resources to help agents understand the importance of cultural influences, including CIPS designation courses, the Expand Your Market three-hour course, and office sales meeting "took kits."


GLOBAL MARKETS

Happy 50th Birthday E.U.!
March 25th marked the 50th anniversary of the signing of the 1957 Treaty of Rome, which established the European Economic Community (EEC). E.U. membership has greatly impacted property markets, particularly in Eastern Europe where investors view E.U. membership as a sign of stability and have funnelled money into markets awaiting accession. Adoption of the euro currency also boosts the market, based on confidence in the strength of the euro. Property values have risen in anticipation of E.U. membership and post-E.U. accession. Good or bad? Depends on your perspective and whether you stand to benefit from a market boom or can no longer afford property that your family has occupied for years. As countries seek to meet E.U. standards, markets are opened up to foreign buyers, creating booming second home markets and new investment opportunities. Consumers may soon have a greater hand in the E.U. property investment market. E.U. Internal Market Commissioner Charlie McCreevy has announced plans to set up an advisory group on how to improve the European market for mutual real estate funds and at how consumers could have more choice in tapping funds that invest in property. Many individual state funds exist, but cannot be sold across national borders. A report is expected in early 2008. The European Fund and Asset Management Association (EFAMA) has been lobbying McCreevy to include real estate in harmonized pan-E.U. funds. McCeevy addressed NAR's Irish partner, The Irish Auctioneers & Valuers, on March 30. Read his speech.


Keep an Eye on the "Gateway"
Dubai, with its well-financed developers, has been the much talked about UAE property market in the past couple years, but now another UAE emirate, Abu Dhabi, is drawing attention, along with a different approach to overseas expansion and a new business model. Abu Dhabi's four largest real estate developers announced in March a new jointly owned company to expand into overseas markets. This is a different approach to the Dubai developers whose rapid expansion overseas was pursued on an individual basis. Aldar Properties, Sorouh, Reem Developers and Al Qudra Holding, have formed an alliance in order to establish a private stock company which will invest in the global property market. The new firm will be known as Al Maabar (which means The Gateway) and will look at developments and projects in selected regional and wider international markets. To date, few other details have been made public, including the group's financial assets, but it's assumed to be substantial. One of the group's first announced project is a one billion USD residential and tourism project in Marrakesh, Morocco, known as Atlas Garden project. Read a 2006 feature on Abu Dhabi's property market, or track Abu Dhabi property news.  


BUSINESS RESOURCES

REALTOR® Benefits Program Goes Global
One of NAR's newest partners under the REALTOR® Benefits program is with the Panama Real Estate Association (ACOBIR) and Prima Panama S.A. to provide NAR members and their customers and clients a cost effective, simple way to discover and purchase real estate in Panama. ACOBIR is NAR's alliance in Panama. Prima Panama S.A. offers a unique Concierge Service Program to assist REALTORS® and their clients interested in purchasing or leasing real estate in Panama. This special offer is available to NAR members, clients and customers of NAR members, and staff of national, local, and state associations of REALTORS®. A special benefit is that REALTORS® will receive a 1% referral fee. Program features include travel benefits and discounts, free use of prepaid cell phone while in Panama, a help line with English-speaking customer service representatives, free legal consultation, subscription to lifestyle publication, and more. Learn more about this new program for REALTORS®. NAR hopes to introduce similar benefit programs in other with other countries in the future.


International Shipping Aided (but not replaced) by Technology
Doing cross-border business is certainly easier, faster and cheaper with the advent of e-mail, electronic signatures and online transaction platforms, but periodically (or with some clients) there is a need for sending physical documents or materials. On the flip side, with REALTORS® more frequently participating in global conferences and expos (combined with tighter airline luggage/carry-on regulations) there's an increasing need to ship marketing materials abroad. Fed Ex offers online tools and resources to plan and facilitate shipping to destinations worldwide. Some countries required different types of documentation and failure to adhere to local guidelines could mean your contract won't be received, or that your marketing brochures get held up in customs, only to be released after the conference ends. If you do find yourself having to go to a local customs office to retrieve your shipment, take plenty of local currency, as you may need to pay custom fees and some offices won't accept credit cards. Taking along a local who speaks the language may also help; particularly in less developed markets. The key is to research shipping requirements in advance. Visit Fed Ex's Global Trade Manager website to estimate duties and taxes, download international shipping documents, estimate delivery time, and more.

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


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