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JANUARY 2012 |www.opp.org.uk


YOUR SHOUT


US cancellations rates rise sharply Best of the Blogs


BEST OF THE BLOGS | 23


By Diana Olick on Realty Check at www.cnbc.com For the past several months, realtors across the USA have been reporting an ever-increasing number of cancelled existing home sale contracts. The latest Realtors Confi dence Index now puts the cancellation rate at 20%, way up from the historical norm of around 4% to 6%. “On-time settlements were reported as declining from 65% to 47%,” according to the Realtors. But it’s not why you think, or at least not why I thought. Inability to get a mortgage was reported by just 9% of respondents to the Realtor survey. Bigger issues were failed inspections, buyers with cold feet and adverse economic conditions. I’m sure appraisals fi gured in there as well. It begs the question then, are these are just delays or true cancellations? With so much of the current housing market comprised of distressed property sales, and with the Realtors unable to capture so much of that share in their data, uncertainty is certainly understandable if not mandated. I read a report recently citing analyst Stephen Kim of Barclays Capital, who is upgrading builders and raising price targets on the premise that we will see a housing “rebound” in 2012. “In the absence of a government homebuyer incentive, prices for non-distressed home sales have stabilised for almost a year. In our opinion, this is the most important trend in the housing industry right now,” notes Kim. “We are amazed at how little attention it has been getting from the media and Wall Street. This stability on the part of non-distressed prices has occurred despite a very high share of distressed activity and continued declines in overall prices.” I’m not sure where he’s getting that stabilisation. CoreLogic reported home prices in September, excluding distressed sales, fell 1.1% in September. Their chief economist Mark Fleming cites a supply and demand imbalance and adds, “Distressed sales remain a signifi cant share of homes that do sell and are driving home prices overall.” Realtors tell me that this market, distressed or not, is skittish and undependable. A 20% cancellation rate for existing sales is shocking and does not suggest a rebound on the horizon. At best, I’m looking for simple stabilisation.


Distressed property is turning Best of the Blogs


By Fly2Let on www.fl y-2let.co.uk/news Cash-rich overseas property investors looking to pick up a bargain in the current property slump could fi nd something in the latest distressed property list produced by the below-market-value property specialist IPS. But consider the quality of the development, the availability of fi nance, the location, the capital growth prospects and the rental market fi rst before purchasing an investment property says IPS. In Ireland, prices nationally declined by 8.5% in the fi rst six months of this year, which means prices even in the capital Dublin are more than 50% below their peak in 2007. Falling rental yields and distressed sale auctions are now commonplace in the country ... so


now could be the time to pick up some bargains. The USA is where the sub- prime crisis began and there are signs that this market has reached rock bottom and prices are beginning to pick up. Moody’s has just downgraded Hungary’s rating to Junk status and this comes on top of rising interest rates with the base rate now standing at 6.5%. The fi rst signs of the impact of these higher interest rates on mortgages are now being felt in a rise in the supply of distressed property, meaning this market is a little uncertain. IPS warns that buying a property in Greece could be aff ected if the country has to return to the Drachma. It could cause a current property values to halve if the country drops out of the euro. And property prices remain in freefall in the Bulgarian capital, in the ski resorts and even on the coast. And there are still issues surrounding ownership of properties with tales of unfortunate investors sitting outside the gates of properties they once owned. IPS predicts this market has further to fall in 2012. In Cyprus falling property prices, lack of clear data, transparency and corruption, oversupply and poor quality developments are hampering investment potential. And oversupply and an economy on the brink of needing a bailout has put huge pressure on Spain’s property market with prices falling since 2008, even in fashionable resorts like Marbella. It is now possible to buy a property at 60% below market value with 100% fi nance. IPS is advising landlords to invest now to grab a bargain in coastal areas as properties are unlikely to get cheaper.


Alternative property looks good Best of the Blogs


By www.propertywire.com/news/europe/uk-real-estate-investment Alternative property sectors could offer attractive opportunities for real estate investors in 2012, according to Phil Clark, head of property investment at Kames Capital. Clark, who heads the property fund management team at Kames Capital, has said that alternative property sectors - such as student accommodation - could offer some appealing opportunities in what will be a challenging 2012. “My view is that 2012 will be every bit as challenging as 2011, however, there are still many good opportunities for property investors to make well informed decisions. In particular I believe investors should consider a greater exposure to alternative sectors such as residential property, student accommodation or healthcare property. One of the key attractions of these alternative sectors is they generally have a high income yield, an ability to track inflation and have low vacancy rates,” he explained. Clark believes investors should look at the fundamental drivers which make them attractive compared to some commercial properties. “Investors need to give greater credence to the opportunities and investment attractions such as basic demand, which make the alternative property sectors stand out from other commercial property investments.” And, he added, “student accommodation demand for the best universities is leading to typical annual vacancy rates of less than 2%.”


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