Property hotspots... and notspots

Property hotspots... and notspots

Tate Modern art gallery, London

25 August 2011

WHERE’s the savvy property investor looking at? And where should be avoided with a bargepole?

IP Global, the property investment firm, has just published its quarter three 2011 property barometer. Here’s what it shows...

Southwark, London

This market is hot, hot, hot, according to IP Global. Over the last 12 months, prime London rents have risen by 10% and now stand at an average of 4% higher than their 2007 peak.

The inner-city suburb of Southwark is currently undergoing extensive regeneration around London Bridge. Notable projects include the Shard, soon to be the tallest building in Europe. The area is known as London’s cultural quarter, with attractions such as the Tate Modern art gallery, the Globe Theatre and Borough Market. The regeneration of Southwark will attract more affluent residents to the area, which will result in boost to property prices. Over the last five years, capital values have already risen 33%, outperforming London’s average performance by 73%.

Manhattan, New York

New York continues to make a strong case for investment and looks considerably more attractive than the rest of the US, says the barometer. Government incentives such as the Lower Manhattan Development Corp’s $2.78 billion financial action plan and residential tax abatements in the financial district are bolstering investor demand.

The downtown area saw the strongest demand in 2010, accounting for 37% of all units sold in Manhattan. Sales of flats in Manhattan are up 33.2% from the 964 recorded in the first quarter of 2011. “We expect this market to continue to perform well on the back of a continued supply/demand imbalance and sustained demand from overseas buyers,” says IP Global.

Kuala Lumpur, Malaysia

Robust economic growth in 2010 of 7.2% has resulted in higher residential property prices this year. The Real Estate and Housing Developers’ Association of Malaysia predicts prices will increase between 15% and 30% in Kuala Lumpur during 2011, with consensus estimates collected from a range of market observers suggesting increases of 7% to 10%, on the back of  strong economic growth and continued high transaction volumes.

Despite concerns over an oversupply of flats in certain locations, Kuala Lumpur continues to be one of IP Global’s primary markets, “We expect performance to remain robust throughout 2011,” it says.

Santiago, Chile

The Chilean economy is thriving on the back of high prices for copper – Chile’s main export – as well as good fiscal policy and a speedy recovery from last year’s earthquake. The economy is expected to grow 6-7% this year.

Chile’s economic surge has been reflected in the residential property market, with property values in Santiago jumping 59% over the last two years. The rental market has performed equally well, with rents up 50% in the same period. Investors are achieving yields of 6%-plus.

“The recent capital growth supported by the most-developed secondary mortgage market in South America makes this market one to monitor,” adds IP Global.

Hong Kong

The Hong Kong government has been trying to cool the property market by capping the amount that people can borrow to fund property purchases. That has led to a 58% drop in sales at ten of Hong Kong’s biggest residential developments.

Home prices have risen 11% so far this year, according to government estimates. The measures should lead to a slow-down in growth to a “stable and robust level” over the rest of 2011, according to the barometer.

Las Vegas, Nevada

In April, Las Vegas house prices fell for the seventh consecutive month, dropping 0.9%, leaving them down 6.2% compared with the same time last year.

“That is worse than the average year-on-year decline for 20 major US cities, which averaged 4%,” says the barometer. “Nevada has the highest foreclosure rate in the United States, with almost one in every 103 homes receiving some type of foreclosure filing. The high unemployment rate of 12.4% continues to harm the local market, with many construction jobs still being lost. While this continues, a recovery in the residential market is unlikely.” This makes Las Vegas one to steer clear of.

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