01 Mar 2013
While some international investors are reportedly looking to Africa for yields and income, South African investors looking to buy property offshore should be eyeing the United States as this is the top international property investment hotspot for investors and is currently one of the countries where the best returns on investment can be made.
This is according to Rick Yohn, regional vice president of global business and franchising solutions at RE/MAX LLC in Denver, Colorado, who explains that the US property market is emerging out of the recession, with housing economic reports all reflecting an upward trend.
“The number of distressed properties in the US has also decreased as the banks have developed systems to handle this type of property sale more efficiently.”
He explains that in some areas of the US, property prices are at the same levels that they were at during 2000 and 2001.
All indications are that the prices will not drop further, meaning that the time is ripe for investment as the property market is at the bottom of the cycle in the US and will slowly start moving up in the year ahead in terms of both demand and prices.
He points out that location will, as always, be vital to an investment decision.
For example, he says property in San Fransisco is still expensive, but areas that were the hardest hit by the recession, such as California (with the exception of Silicon Valley, the southern region of the San Francisco Bay area in northern California), Georgia, Los Angeles, Texas, Nevada, Florida and Arizona are showing exceptional investment opportunities.
Value growth in some of these areas topped up to 20 percent during 2012, and we expect strong appreciation trends to continue through the course of 2013 as property markets in these areas start to recover, he says.
According to Scott Picken, chief executive officer of International Property Solutions, average yields in the US between 15 and 20 percent and vacancies of less than three weeks.
Picken is excited about the US property market because one can buy between 40 to 60 percent of replacement value.
“We don’t care what the highs of 2007 were, but we are interested in the fact we can buy property for more than 50 percent of what it costs to replace that building and this is a significant indication of value,” he says.
He says they have started investing heavily in the US market and are currently buying properties in Memphis, Atlanta, Orlando and New York.
Yohn says that property markets in Central and Latin America are also showing positive signs that they will continue to grow in the year ahead, despite government uncertainty in some areas.
Property markets in central African countries such as Kenya and Uganda are presenting good opportunities and Yohn expects to see good growth in these areas during 2013, while he says a wait and see approach is being taken on projections around the performance of property in the northern African countries, as this will largely depend on political stability and other factors.
He says Australia has seemingly survived the global financial crisis relatively unscathed thanks to the fact that its mining sector, which continued to deliver strong mining exports to China throughout the recession, kept the economy afloat.
According to Adrian Goslett, chief executive officer of RE/MAX of Southern Africa, another factor contributing towards Australia’s resilience to recessionary trends was the fact that, very much like South Africa, they had much more stringent regulations in place surrounding banking practices.
In South Africa, the National Credit Act was introduced in 2007, just months before the global financial crisis hit.
These kinds of regulations ensured that both Australia and South Africa were sheltered from the worst of the knock-on effects of the sub-prime crisis in the US, he points out.
Goslett says it must be noted that from around 2008 to 2010, the housing markets in both these countries slowed as their economies did still feel some of the sub-prime crisis backlash.
Yohn notes that since 2011, the property markets in both Australia and South Africa have shown strong signs of recovery and are currently performing well from a global perspective.
“We expect to see them continue on their current upward trend in the year ahead,” he adds. – Denise Mhlanga
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