FEBRUARY 2011 |
www.opp.org.uk
Canada sets buying records abroad
YOUR FEEDBACK FEEDBACK Your shout | 25 How to compare Costa Rica?
Latest numbers show that Canadians were the number one group of foreigners buying homes in the US during 2010, just like in 2009. They were also big buyers in countries like Mexico, Belize and the Bahamas. Same again in 2011? In the US the greatest number of sales took place in Arizona and Florida and
approximately 46% of all purchases were attributed to Canadians with most spending less than US$200,000. Whereas previously purchases were for second homes, in this price range the sales are more for investment properties. For example, a typical 3 bedroom home in the Phoenix area that was built within the last 10 years that, can be purchased for $100,000 or less. This home will rent in the $1,000-$1,100 plus month range. After paying Arizona’s low property taxes (averaging $1,000/year) you can see why Canadian investors are purchasing two to three homes at a time. You also have to take into consideration that most of these homes sold as high as $300,000 plus only 4 or 5 years ago. The upside for long-term investors is extremely good. The return on a cash
investment is 7% to 8%, or more. Canadians currently receive 1% to 2% in a savings account. The market for tenants is also in their favour due to the high rate of foreclosures that are taking place and leaving the previous owners in a position that they have to rent/lease/let. Canadians, account for 18% of sales to foreigners in the higher bracket homes
from $200,000-$500,000 and 6% of purchases in the $500,000-$1,000,000 plus. In Mexico, Canadians are getting away from the major resort areas and looking for smaller more personal locations. It is also interesting to note that a large portion of sales took place in some smaller resort areas, such as Loretto Bay, which is in the Southern part of The Baja. Over 50% of all the homes/villas in this town of 10,000 residents have been purchased by Canadians. In Belize you are fi nding a similiar situation as more and more Canadians are purchasing villas/condos in smaller areas such as Placencia. It is an English-speaking country with lots of tax benefi ts and incentives, great beaches, snorkelling, golf courses and very reasonable prices for 5-Star developments. Ray Levin.
raylevin@yahoo.com. Tel: 602-697-7202 in the US.
In Costa Rica, pricing property correctly, or making an off er based on a comparable market analysis is only possible if you use experienced and reliable professionals with expertise in the local market. In most countries, a comparative market analysis and an appraisal are the standard methods for determining a home’s value. In Costa Rica, no such thing exists. Costa Rica does not have public records of sales and the task of searching for
properties that are similar in size, construction and location is tremendously laborious and has to be done on a one-to-one basis. Indeed, not too long ago, selling a million dollar home was a challenge in Costa
Rica… most realtors used to call million dollar homes “white elephants” because they knew it would take many years before a buyer would purchase such property. Today, things have changed dramatically. Areas like Papagayo, the Central Pacific Coast, Escazu and Santa Ana, all sell well and a million dollar home that used to take three years to sell, now only takes six to twelve months if the price and location are right. Demand for luxury homes and million dollar homes has increased dramatically over the last year and it is forecasted that it will increase as more and more high-end buyers from the United States, Canada and Europe come to the country. The marketing of million dollar homes in Costa Rica is booming. High-end
homes generally require more time and marketing eff orts to attract the right buyer, especially when you have to fi rst sell the country and then sell the property! But high-end buyers searching for luxury homes in Costa Rica are happy to
pay because they know they are investing in an emerging market with all the conditions to turn into a second Hawaii. Costa Rica is now the number one destination for adventure tourism and has become the favorite new destination for second home ownership.
Yalile Alpizar, President - Costa Rica Luxury Estates.
yalilealpizarcostaricaluxuryestates.blogspot.com
Crazy claims aimed at the Australians thinking of investing in the USA
With Australian property prices looking very toppy and the Aussie dollar going through the roof, the latest delusional investing fad in Australia appears to be snapping up foreclosed US properties. I’ve been hearing stories about this for a while now, so I thought I’d look into it a bit. Here are just a few of the ridiculous sales pitches made on some of these websites. • “It’s no secret: USA property investment gives you a 10-20% net return... Even after your expenses are paid you will still make money with My USA Property” • “Once American banks start lending again, the USA market will recover. So you’d be wise to invest in an undervalued market now since every Australian dollar
buys more” (My USA Property) • “When you say “Go!” you set the wheels in motion for an exhilarating ride as your property grows in value giving you the possibility to create enough cash to fund the rest of your life in a few short years. Call us now!” (888 USA Real Estate) Apparently, in property land, it’s OK to promise fantastic rates of return without pointing out any of the risks involved in the investment strategy. It is indeed
true that in many parts of the US today, you can buy a house for less than the price of a new car in Australia. So ... if properties in the US are such a bargain, why is it that many of these American investors still don’t want to touch the property market with a ten foot pole? I’m not going to go into detail about what an absolute debacle the US property market is today, but let’s just take a look at the data from a recent report from the ratings agency Moodys. Moody’s notes that there is still a massive surplus of housing inventory on the market, and that foreclosures and defaults are still skyrocketing in many parts of the country. But there’s no guarantee that prices are ever going to return to these peaks again, at least for a very long time in some of these areas. In fact, one recent study (which I might examine in more detail when I get the chance) argues that the housing bust may have created new types of “declining cities” across the USA -- certain cities which grew rapidly in the boom, attracting huge population infl ows and investment -- but which are now facing the prospect of decades of stagnation thanks to a vicious circle of falling house prices, declining populations, rising vacancies, and increasing crime rates. Some Australian investors are already fi nding this out the hard way. From The Age: Sydney woman Kathy Graffi ti bought three properties in upstate New York in 2005 and estimates she has lost between $300,000 and $400,000 on her
investment. She bought two properties in Rochester and one in Buff alo for a total of $250,000, expecting rental yields of between 22-23 per cent. The rental income stopped in 2007 and Ms Graffi ti was forced to sell two of the properties at a signifi cant loss. She has been off ered $10,000 for the third property. And where is this cash coming from to fund these overseas follies? Usually, from either the Australian buyer’s line of credit based on the equity in their Australian property holdings, or cash from their self managed super funds. Does this sound like a smart idea to you? From: fi
nancialfollies.blogspot.com
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