For more information call +44 (0) 113 380 8930
The Florida Economy
As Emerging Real Estate is handling some fantastic property investment opportunities in Florida, we thought our investors would be interested in a profile of the state economy, its various sectors, and what this means for investors. Florida is doing really well at the moment and investors are being encouraged to take advantage of favourable market conditions.
Florida is the fourth most populous state in America and boasts the fourth biggest GDP in the country, reaching $748 billion in 2010 (the same year in which it became the fourth largest exporter of trade goods) and over $754 billion in 2011. Traditionally the economy of Florida relied on agriculture, with sugar, cattle & cotton the primary goods, but these days the focus is shared between different sectors, including construction, tourism, banking, healthcare & biomedical research, defence and the aerospace industry.
The current main economic strengths for Florida are international trade, tourism and the space industry, although there is still a significant contribution from agriculture as well as software, financial services and healthcare. It is believed that 40% of all US exports to their Latin and Southern American neighbours pass through Florida, and the space industry alone represents over $4 billion of the state economy, with 13,000 people employed at the Kennedy Space Centre and 33,000 jobs in the sector overall.
The University of Central Florida (UCF) released their latest economic forecast this month, focusing on 2013 – 2016 and the tone of the report was positive. The expected state-wide payroll growth was expected to fall below 1% but the figures actually put it at 1.8% for 2012 with predictions for 2014 a healthy 2.5% and 2.8% in 2015. Economic growth in Florida was 1.8% in 2012 and the report forecasts acceleration in growth throughout 2014 and 2015.
Unemployment is falling and the sectors that are expected to have the strongest growth over the next three years are construction, professional services, trade & transportation, and education & health. Increasing employment across the state means more potential professional tenants for investors who purchase Florida property primarily for the rental income and, with increases in the banking and professional services sectors, there are an increasing number of white collar workers looking for quality rental accommodation.
Tourism has a massive impact on the state economy with a record number of visitors in 2011 leading to Florida being named the top travel destination in the world, with over 87 million visitors per annum and an associated economic impact of over $67 billion. The continuing success of this sector is of particular interest to investors as tourism provides an excellent source of shorter term rental income. Travellers are increasingly opting to rent holiday homes rather than staying in expensive hotels and investors with Florida properties can take advantage of this, particularly in peak season.
The construction sector is predicted to show particularly impressive growth over the next few years, with job growth in the sector expected to achieve double digits in 2015 and 2016 and this is in part due to the improving real estate market. Residential property sales have been steadily increasing since the drop in 2007/08 and data released by Florida Realtors shows a housing market well on the road to recovery. Prices rose again last month and Dean Asher, President of Florida Realtors, confirmed that “Florida’s housing market continues to demonstrate its recovery – March marks the 15th consecutive month that the state-wide median sales prices for both single-family homes and for townhouse-condo properties rose year over year”.
Lastly, it is worth noting that national publications and think tanks have also been praising Florida with the state being voted the third most competitive state for businesses to operate in from a tax perspective, and Chief Executive magazine confirming it as the second best state for business. With competitive costs and a pro-business tax structure, it is predicted that more and more businesses will open in (or indeed move their central operations to) Florida and the future for the state looks very good indeed.
To discuss any of our exciting property investment opportunities in the sunshine state, please get in touch with the Emerging Real Estate team who will be delighted to help.
UK property market update
As there have recently been rumblings about the increased health of the UK property market and with hopes now high for a prolonged period of recovery, we at Emerging Real Estate thought we would take a look at the recent market news. Our national housing market looks set to improve through the course of 2013 as more than a million people are expected to move homes, driven by (and indeed leading to) increasing market activity. Prices are rising and first time buyers are finally returning to the market, helping to kick start the process from bottom up.
Figures from the Council of Mortgage Lenders (CML) show that first time buyer activity increased in February by 3%, representing a year on year increase of 17% on the same month in 2012. Lenders advanced 16,400 loans to first time buyers in February, up from 15,999 in January, and 43% of all mortgage lending for February related to first time buyers. The CML also reported that required deposit values had fallen, increasing affordability for some, although the average deposit value still remained a hefty 20%.
Paul Smee from the CML confirmed that “First time buyers are continuing to take advantage of more favourable market conditions, helping to drive the underlying trend for resilient house purchase lending. We hope that the new initiatives announced by the government in the 2013 Budget will further stimulate first time buyer activity but also help those ‘second steppers’ looking to move into a new or existing home”. As the first time buyer lending rose, these so-called ‘second steppers’ saw their mortgage lending fall for the third consecutive month, representing a 3% fall year on year.
In terms of property values, these are increasing. Rightmove recently confirmed that sellers have upped their prices in the past few months with April alone seeing a month on month rise of over 2%. With asking prices up by an average of £15,717 since the start of 2013, May is predicted to show a new high in asking prices. Recent attempts to stimulate the housing market seem to be taking effect as mortgages become more readily available and rates continue to fall. Commentators are partly attributing this to the Bank of England’s Funding for Lending Scheme and the Mortgage Advice Bureau confirmed that “The total number of mortgages has risen more than 20% since the FLS was launched, while the average fixed rate has dropped more than 0.5%. We expect that trend to continue”.
The upcoming’ Help to Buy’ mortgage guarantee proposed by the Government may also help, with homebuyers to be given a free loan of up to 20% of the value of their new build property to allow them to access a mortgage with a lower deposit value. Persimmon, one of the UK’s leading housebuilders, confirmed that within two weeks of the scheme coming into effect, the number of visitors to their website jumped by 30% on the same period last year.
In other news, the Ernst & Young Item Club, using economic models from the Treasury, has predicted that a resurgence in the UK property market will be a key factor in the ability of the Coalition to keep the UK economy going in the months and years to come with their chief economic advisor, Peter Spencer, commenting that “although it’s not a long term strategy, stimulating the housing market and the high street will keep GDP growth positive”. The Item Club predicts that house prices will rise by over 2% next year and 5% the year after and that the number of property transactions will rise by 7.5% this year to number 1 million.
Any investor who is considering UK property purchases should also be encouraged by the recent news that Persimmon are to build 600 new homes purely for rental, in order to capitalise on the number of tenants that still outbalance the supply of available homes. Emerging Real Estate has some fantastic off-market UK investment properties available and we would be delighted to advise you on any of our exciting investment opportunities.
Turkey is seeing continued success in its property and tourism sectors during 2013. The future looks very promising for this fascinating country as property prices and rental values rise, foreign investment continues to increase and tourism figures remain on the up. In addition, interest rates have dropped and construction activity is rising once again. The easing of restrictions on foreign property investors has had a major impact on their real estate market and tourism is booming again as travellers seek out rewarding holidays with shorter flight times.
The Turkish property market is enjoying strong growth this year with data from REIDIN showing national residential sales prices for existing, rather than new build, homes increasing by 17.1% year on year to January. Even when inflation is taken into account the figure is an impressive 9.13%. New home values still rose by 1.8% after inflation but the increases in existing home values are more substantial, up by almost 19.5% in Istanbul and a staggering 22.6% in Antalya. In the previous year of 2011 – 2012, data from The Central Bank of the Republic of Turkey showed existing home prices increased by 11.5% (or 5.1% after inflation) and new build homes up by 12.5% (or 6% after inflation).
Property values from an investor perspective however are still quite low which means investors are still able to secure a bargain. Residential rents rose by over 15% year on year to January 2013 with national gross rental yields at around 6.2%. With tourism figures rising there will be no shortage of holidaymakers looking for a property to let as well as a plentiful supply of domestic residential tenants.
Tourism is expected to grow through the course of 2013 with tourist numbers for the year expected to exceed 33 million, representing a 5% increase year on year. This would bring tourist revenue up to $25 billion US for the first time. The World Travel & Tourism Council confirm that tourism revenue contributed almost 11% to the national GDP last year and early signs for this year are very good - Istanbul alone has seen a 23.8% year on year rise in their visitor numbers this quarter. The city has also been recently awarded the title of European Best Destination 2013 by the European Consumers Choice who said “The only city in the world to straddle two continents, Turkey’s fabled city of Istanbul at the historic crossroads between East and West is the perfect choice for a refreshing, exciting and cultural city break with a difference”. Turkey is also attracting attention from golfers after the Golf Travel Insights 2013 Report, compiled by KPMG, placed Turkey in fourth spot in the list of most popular golf travel destinations. Turkey boasts some outstanding courses and, as an emerging market, is able to offer more competitive packages.
Keen to take advantage of the favourable market conditions and capitalise on the increasing numbers of tourists, British investors came third on a recent list of foreign buyers with Germany topping the list of foreign nationalities purchasing Turkish real estate. The number of foreign investors looks set to increase again following the news that foreigners who buy real estate will be granted a full years’ residency in Turkey – previously it was just 3 months. This new legislation around the Law of Foreigners and International Protection will provide a further boost following the introduction last year of a bill that eased restrictions on the purchase of land or property. This bill led to almost 11,000 properties being bought by foreigners in less than a year.
If you would like further information on investing in Turkey, or indeed any other emerging market, please contact us at Emerging Real Estate where our team would be delighted to help.
Property investment in UK v USA
Here at Emerging Real Estate we recognise the value of property investments both here and abroad. The UK and the US – predominantly Florida – are both hot property markets for 2013 so in this blog we will look at each and how they compare from a property investment perspective. The trials and tribulations of both the UK and USA property markets over recent years have been well documented. The western world has been in a period of economic turmoil since 2007 and the troubles in the Eurozone, not to mention our own double dip recession, impacted upon both markets in a number of ways. The situation is yet to improve for many owner occupiers and first time buyers but the picture for investors is much rosier.
The UK is fast becoming a landlord’s paradise – with first time buyers still unable to secure finance without unattainable deposits, and owner occupiers often therefore unable to sell thanks to the lack of new blood in the market, landlords and investors are reaping the rewards of ‘generation rent’. The first quarter of 2013 has seen average rents continuing to rise across the country and Londoners have again been hit the hardest with reports this week confirming that average rents in Central London have reached a staggering average of £5000 per month with even a tiny studio renting at £1400 per month. As a result Central London is now seen as a ‘no go’ for most families but investors who have bought properties in the exclusive boroughs are making a small fortune. The situation is most extreme in SW1 where average rents are now an astronomical £6171 per month.
It isn’t just London where money is to be made though. Many investors are moving out to other regions and cities where the initial outlay is much lower but the rents are still rising. The 2013 Q1 biggest year on year rent increases for example were seen in Wales and East England, both up by 5.5%. All figures point to the same story. RICS confirmed this week that tenant demand around England & Wales continues to outstrip supply and average rents will increase by a further 2% this year. Prudential’s property arm has bought 534 homes in the South East to rent out, keen to capitalise on the UK’s investment market. Property investors this year could certainly do worse than investing in UK buy to let properties!
The Florida market has many similarities to the above as the global economic crisis hit the region hard but the real estate sector has shown real resilience in the past couple of years. Investors are reaping the rewards as the demands for quality rented accommodation outstrip supply here as well. In 2012 American home ownership fell to its lowest level since 1996 according to the Census Bureau. Many cities have far fewer rental properties available than tenants and rents have therefore risen. As with the UK this is excellent news for investors and with average US interest rates at just 4% for a 30 year fixed term mortgage, rents should more than cover the monthly payments.
Many industry commentators in the US have noted that we are currently seeing an optimum combination of conditions for property investment – mortgage rates are low, property prices are starting to rise again but remain extremely attractive, and there is a ready supply of tenants waiting to snap up quality accommodation. Predictions from the National Association of Realtors show that average apartment rents will continue to increase this year by a very healthy 4.6%, following the 4.1% increase seen last year.
If considering more of a lifestyle investment, Florida is a more attractive option than the UK for obvious reasons – given our long cold winter the hot & sunny climate of Florida is a huge draw, both for investors themselves and their prospective tenants. Florida offers two rental options, either renting your property out to local residents for an all year round income, or to holidaymakers looking for a property to rent over the summer months. The latter can also be lucrative given that peak season weekly rates in Florida can be almost as much as monthly rents for a residential home. With over 70 million visitors each year, Florida is one of the worlds’ top tourist destinations with its tourist industry worth over $57billion and the state GDP ranks fourth out of the fifty US states. Property prices are rising thanks to a low inventory of homes for sale so capital appreciation can also be achieved. Indeed, property values are expected to rise in 2013 by between 3.5 and 9.7%.
Emerging Real Estate is handling exciting opportunities in both the UK and the US. We have off-market heavily discounted properties in the UK, often coming with a fully managed rental service to make things even easier for the investor. Our Florida properties are perfect for lifestyle investors as well as those looking for a rental income and offer net rental yields of up to 7.7%. To discuss any of these opportunities, or those in other emerging markets, please contact us for further details.
Considering the BRIC economies
As Emerging Real Estate is marketing some exciting developments in Brazil, we thought we would take a look at a general overview of the BRIC economies, the history of the group membership and their growing role on the world stage. The BRIC acronym refers to the countries of Brazil, Russia, India and China, with the alternative BRICS acronym also including South Africa, and notes an economic power shift away from the developed G7 countries towards these developing economies.
The term BRIC was first used back in a 2001 in an academic paper entitled “Building Better Global Economic BRICs” published by Goldman Sachs. Jim O’Neill, global economist for Goldman Sachs, argued that the four countries had such huge potential that their economies combined would overtake those of the richest nations by 2050. In 2003 Goldman Sachs predicted that Brazil and Russia would dominate the global raw materials market with China and India dominating the manufactured goods and services sectors.
The BRIC group held their first formal summit in 2009 to focus on better economic cooperation between them and efforts to revitalise the global economy. In 2010 South Africa applied for admission to the BRIC group and once it was accepted the term BRICS began to be used. Following this the BRICS Forum was established in 2011 to encourage cultural and commercial cooperation between the member countries.
As the global economic downturn continues to make life difficult for many of us and the economic headlines continue to describe shrinking economies and double or even triple dip recessions, it is important to note that in reality this largely just applies to Western Europe and the US. The BRIC(S) economies have proven to be much more resilient and it is widely predicted that the economies of these countries will overtake those of the G7 members by the year 2027 – even without South Africa they already account for over 25% of the global land area and 40% of the global population and their economies have proved to be amongst the fastest growing emerging markets in the world. Recent statistics suggest that 55% of the global economic growth since 2009 can be attributed to BRICS countries.
South Africa took their turn in hosting the annual BRICS summit last week at which member nations were discussing a wide range of issues including the potential establishment of a BRICS development bank to rival the IMF, but questions have been asked about their own economic performance. Brazil, Russia, China and India all now sit comfortably in the top ten of the world’s global economies but South Africa, while the biggest economy in Africa, sits at 29th. South Africa however argue that while the size of economy was important when Goldman Sachs coined the term BRIC, the new BRICS grouping has a more political lean and allows an African country to join with like-minded others in expressing dissatisfaction with global Western dominance of the world political stage and institutions such as the IMF and UN.
It is clear however that some of the member economies are performing better than others. The UN has recently published their 2013 Human Development Report, which confirms that BRICS are likely to soon overtake the Western economies, stating that “By 2020, according to projections developed for this report, the combined economic output of three leading developing countries alone – Brazil, China and India – will surpass the aggregate production of Canada, France, Germany, Italy, the UK and the US”.
Brazil, along with China, is performing especially well. Their energy industry has risen in profile to the extent that they are now being touted as one of the future largest oil producers in the world, and they are also making great strides in tourism, partly of course thanks to their upcoming hosting duties with the 2014 World Cup and 2016 Olympic Games.
Emerging Real Estate has some fantastic property investment opportunities in Brazil that we are very excited about. There is a huge shortage of housing in Brazil and social housing is a major priority. We would be delighted to assist you in expanding your portfolio to include these properties and we look forward to hearing from you.