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RE/MAX President on global property trendsMany of the world's key cities report strong residential property growth this year, although some markets remain under pressure due to the general flat economic climate. Overall, home prices declined year-on-year in 2012 in the majority of international markets. Depressed market conditions have, however, opened up major opportunities for savvy global property investors.
That is according to Vinnie Tracey, President of RE/MAX LLC, based in Denver, Colorado, USA, who will be visiting South Africa during September. Tracey says that even though the US housing market hit bottom at the beginning of this year, for several months now, home sales and prices have been continuing to rise higher than the levels seen in 2011. "It won’t be a perfect "V" shaped recovery, but the worst is behind us and, barring unexpected economic news, we should do better in 2012 than 2011. We expect that 2013 will be even better."
Peter Gilmour, Chairman of RE/MAX of Southern Africa, says further recovery of the South African market has taken place this year. "While challenging conditions have prevailed during the first half of 2012, RE/MAX of Southern Africa has seen a marked increase in the number of property sales achieved per agent."
RE/MAX of Southern Africa reported a 12% increase on registered sales in the first half of 2012 compared to the first half of 2011, which far outstrips the national average of less than 5%.
Looking to Europe, which has possibly felt some of the worst effects of the global recession on property, Tracey notes that most of Europe has experienced a fairly stable housing market, but economic problems have created troubled markets in places like Greece, Italy, Spain and Portugal. "It will take longer for these locations to recover, with their housing prices still falling by double digit percentages."
Tracey points to the CNBC five year residential real estate growth statistics which show China (+111%), Singapore (+50%), Canada (+29%), Norway (+29%), Malaysia (+28%) and Switzerland (+27%) to have the best residential real estate growth along with Austria, Brazil, Germany, Turkey and the USA. On the other hand, Greece, Portugal, Spain, Italy, Ireland and Australia have shown a poor performance over the past five years.
"RE/MAX has just entered the Chinese market and we see a great future there," says Tracey. "The market has experienced a recent boom and is now correcting a bit, but foreign investment continues to be substantial."
The new RE/MAX franchise rights for China which include the Mainland, Hong Kong and Macau, have raised the overall RE/MAX country count to more than 85 - a larger global footprint than any other international franchise real estate company.
Looking at new market trends emerging in the US and globally in the aftermath of the recession, Tracey says that although lending standards have remained very strict in the US, mortgage rates are at historic lows, and investors and foreign buyers have stepped in to help the recovery. "Many are paying in cash, which is somewhat unique for the US market," he says. "In many cities, there is now a shortage of inventory, and if not corrected, could lead to lower sales in future months."
Gilmour says South Africa is trading under similar conditions with a marked increase in activity in the property market due to a stronger demand from buyers and the fact that financial institutions have a greater appetite for risk. The drop in interest rates to a 39-year low has also had a positive effect. "The increased demand for property during 2012, as more buyers are able to meet the criteria required for bond approval, means that while there are still opportunities in the market in general, some regions have reported a shortage of certain types of properties that are available."
Tracey notes that distressed property sales in the US remain between a third and half of all sales, while higher priced home sales are still a bit slow. "As the market recovers and lending loosens, upper-end homes will start to sell and median prices will rise accordingly."
Similarly in South Africa, Gilmour says that while distressed properties are not expected to hit the 50% mark, the number of distressed homeowners will more than likely increase during 2012. "Times have been tough, and they are bound to get tougher yet," says Gilmour. "Homeowners will continue to struggle to meet their financial requirements, and more homes are due to come onto the distressed property market this year as a result."
However, Gilmour believes that the distressed property situation will correct rapidly from the beginning of 2013, assisted by steady price increases in the lower price ranges and a resolve from homeowners to reduce their levels of debt.
Tracey says there are a few countries, like Canada, which did not have a dramatic downturn in housing and continue to do well today. "The US market should continue to improve this year and perform much better next year. We feel there is a pent-up demand for housing that will be unleashed as confidence is restored among consumers. Canada may be due for a slight correction, as prices have been soaring there, but the overall fundamentals of their market remain unchanged. Barring a recession in Europe, some countries will follow the US into a recovery, but a few, like Greece and Spain, have to restore some economic confidence and they may take longer to recover."
According to Gilmour, the South African property market should remain on its current path of consistent improvement over the next 12 to 18 months; however he says factors such as the high household debt-to-disposable-income ratio coupled with the fact that South Africans have a poor savings culture are holding the market back.