Investor Bull: Data Reveal U.S. as Top Choice for Property Investment

Online, August 16, 2013 (Newswire.com) - US housing is up 9.3%, consumer and investor confidence is at a high, and home construction is rising sharply---a sign of a recovery based on "solid foundations", The Economist said in its recent roundup of global real estate.

In a list of 18 countries with highest home price increases measured using two yardsticks--- ratio of prices to disposable income per person and ratio of prices to rents---Hong Kong posted the biggest increase in the last year with 24.5% while Spain remained at the bottom with prices down by 7.7%.

Although countries with emerging economies posted modest increases (Brazil up by 12.8% , India 10.7%) and China posting moderate increase of 3.3%, the article pointed out the strength of the US in the global property arena. The business periodical found house prices in the US are undervalued by 8 per cent when compared to rental prices, and 21 per cent undervalued when compared to household incomes. The report further confirmed the growing trend of property devaluations in Northern Europe with the UK showing overvaluations of 18.9% and 10.5% accordingly.

While the Canadian housing market remains a "large bubble now looks set to burst", U.S. house price rises are accelerating with an impressive 10.17% increase during the year to end-Q1 2013, according to S&P/Case-Shiller--- the biggest year-on-year increase since Q1 2006. Quarter-on-quarter (q-o-q), the national home price index rose by 3.94% (3.3% in real terms) in Q1 2013.

In June, U.S. home prices surged 11.9 percent from a year earlier, reflecting stronger demand amid a tight supply of homes for sale.

UK AND THE EUROZONE

By contrast, Standard & Poor's expect home prices to continue to fall in the Eurozone until 2014 as a result of high unemployment and low consumer confidence caused by the recession in the region. In its July report, Standard & Poor expects some of the steepest declines coming in core Eurozone countries such as the Netherlands and France. Standard & Poor's also raised concerns over the impact that increased base rates or discontinuation of cheap bank lending would have upon these markets - in particular that of the UK.

Among the 17 countries comprising the Eurozone, only Germany will see house prices rise 3 per cent in both this year and next year, as a result of "a better-than-European-average economic outlook, low interest rates and strong national and international demand for homes as a safe capital investment", S&P said.

In the UK, homes are still considered to be overvalued yet prices are expected to rise 2.5 per cent this year and 2 per cent in 2014. Thanks to government support, mortgage lenders can already get cheap funding, letting them offer more housing loans. However, inventory is still tight and construction remains sluggish (only 101,920 new homes started to be built in the 12 months to March 2013, down by 3 per cent compared with the year before) causing fears of an unsustainable housing bubble.

"If house prices are going up purely because we have not built enough homes, it delays getting people into a home, that in itself is not a good thing", says Local Government minister Brandon Lewis on BBC Radio Four's Today programme.

U.S., A FOREIGN BUYER'S HAVEN

The Economist roundup of global real estate also showed that the recovery in the US has been driven by investors rather than owner-occupiers although interest on the part of homeowners is increasing. A study by the National Association of Realtors showed foreign buyers spent $68.2 billion on homes during the 12 months ended March 31.

Canadian buyers topped the list of foreign buyers with 23% while Chinese buyers came second with 12%. At a median price of $425,000, the Chinese are also buying more expensive homes than other foreign buyers, who spent a median of nearly $276,000 on U.S. homes. And nearly 70% of those pricey Chinese deals were made in all cash.

International home sales in the U.S. declined in the past year, but are at their second highest level in recent years and are over six percent of total existing-home sales in value.

According to the National Association of Realtors 2013 Profile of International Home Buying Activity, interest in U.S. properties continues to grow, signalling that America continues to be regarded by international buyers as a great place to own property.

Twenty-seven percent of Realtors reported having worked with international clients this year and the most important factors influencing international clients' purchases reported by Realtors® were that the U.S. is viewed as a desirable location and that the real estate market is regarded as a profitable investment.

For more information about property investment in the U.S. email:[email protected].