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Tuesday, June 23, 2009
Tuesday, June 16, 2009
Australian house prices to rise by up to 20 per cent
By staff writers
NEWS.com.au
June 15, 2009 12:01am
AUSTRALIAN house prices will rise by nearly 20 per cent over the next three years, buoyed by the "current heat" in the market surrounding first home buyers.
That’s the forecast from research house BIS Shrapnel’s Residential Property Prospects report - based on data from the Real Estate Institute - released today.
BIS Shrapnel’s Angie Zigomanis said activity in the lower end of the market - buoyed by the boost to the first home owners grant and low interest rates - were generating “green shoots” of recovery.
The report says average house prices in most capital cities will grow by between 11 and 19 per cent over the next three years. In real terms (where prices are adjusted for inflation) the level of percentage growth is about half.
Mr Zigomanis, who said actual prices were more indicative than prices adjusted for inflation, predicts the boost to the first home owners grant combined with low interest rates would kick start further activity in the “upgrading” market.
Malcolm of Ankh Morpork “If the first home buyers are in the market buying, someone is selling it to them,” he said.
“We’re expecting that increased first home buyers activity to lead through to stronger upgrading demand for people upgrading to their next property,” he said.
Mr Zigomanis said once the (boost to the) first home owners grant expires, and first home buyers drop back out of the market, there’s enough activity in the market so it becomes self-sustaining.
The boost to the first home owners grant will finish at the end of this year.
Unemployment curbing property growth
But the research, based on Real Estate Institute data, said house prices would remain relatively stagnant until unemployment peaked around June 2010.
“Everything’s pointed at people jumping in the market”.
“At the moment we’re dealing with a confidence issue,” he said.
Weak economic growth and rising unemployment meant Australians were hesitant to jump into the market, he said.
The Government forecast in its May Budget that unemployment will rise to 8.5 per cent by mid-2011, leaving one million Australians out of work.
BIS Shrapnel predicts unemployment to peak “somewhere between 7 and 8 per cent” mid next year.
Mr Zigomanis said unemployment would impact house prices “more so from a confidence perspective”.
“Those people who have the means to buy property, and still have a job to buy property, they may be concerned about their employment outlook,” he said.
Outlook via region, according to BIS Shrapnel
Sydney
- Median house price $530,000 in June 2009
- New home construction at 50-year lows
- Total price growth forecast at 19 per cent to 2012
- Strongest growth at end of three year period
Melbourne
- Median house price $425,000 in June 2009-06-12
- A fall of 6 per cent for the financial year
- Pick up in “upgrader” activity expected
- Nearly 20 per cent increase in prices to 2012
Brisbane
- Median house price $391,000 in June 2009
- Down 7 per cent for financial year
- Interstate migration to boost modest price growth
- House prices to rise by 16 per cent to 2012
Gold Coast and Sunshine Coast
- House prices generally move in tandem with Brisbane
- Expected to grow by 14 per cent to 2011
- Price growth to lag slightly behind Brisbane
Adelaide
- Experienced double-digit growth to 2007
- Now down 3 per cent to $360,000 in June 2009
- Lowest median house price of mainland state capitals
- Incentives “having the greatest financial impact”
- Tipped to jump 19 per cent to 2012
Perth
- Market began slowing in 2007, ahead of eastern states
- Median house price tripled in five years to 2006
- Affordability improving; price decline stabilising
- Median house price $425,000 in June 2009
- House prices to increase by 12 per cent to 2012
Hobart
- Median house price declined marginally in 2008
- Increased interstate migration attributed to “tree-change” mentality
- Average house price $335,000 in June 2009
- To jump 15 per cent in the next three years to 2012.
Darwin
- Only capital city to record a rise in median house prices in 2008
- Average house price $470,000 in June 2009
- NT reliant on oil, gas; hasn’t weakened as much as other economies
- Gap in investments to kill short-term price growth
- To grow by 11 per cent in three years to 2012
Go to www.ipsinvest.com for Australian opportunities.
NEWS.com.au
June 15, 2009 12:01am
AUSTRALIAN house prices will rise by nearly 20 per cent over the next three years, buoyed by the "current heat" in the market surrounding first home buyers.
That’s the forecast from research house BIS Shrapnel’s Residential Property Prospects report - based on data from the Real Estate Institute - released today.
BIS Shrapnel’s Angie Zigomanis said activity in the lower end of the market - buoyed by the boost to the first home owners grant and low interest rates - were generating “green shoots” of recovery.
The report says average house prices in most capital cities will grow by between 11 and 19 per cent over the next three years. In real terms (where prices are adjusted for inflation) the level of percentage growth is about half.
Mr Zigomanis, who said actual prices were more indicative than prices adjusted for inflation, predicts the boost to the first home owners grant combined with low interest rates would kick start further activity in the “upgrading” market.
Malcolm of Ankh Morpork “If the first home buyers are in the market buying, someone is selling it to them,” he said.
“We’re expecting that increased first home buyers activity to lead through to stronger upgrading demand for people upgrading to their next property,” he said.
Mr Zigomanis said once the (boost to the) first home owners grant expires, and first home buyers drop back out of the market, there’s enough activity in the market so it becomes self-sustaining.
The boost to the first home owners grant will finish at the end of this year.
Unemployment curbing property growth
But the research, based on Real Estate Institute data, said house prices would remain relatively stagnant until unemployment peaked around June 2010.
“Everything’s pointed at people jumping in the market”.
“At the moment we’re dealing with a confidence issue,” he said.
Weak economic growth and rising unemployment meant Australians were hesitant to jump into the market, he said.
The Government forecast in its May Budget that unemployment will rise to 8.5 per cent by mid-2011, leaving one million Australians out of work.
BIS Shrapnel predicts unemployment to peak “somewhere between 7 and 8 per cent” mid next year.
Mr Zigomanis said unemployment would impact house prices “more so from a confidence perspective”.
“Those people who have the means to buy property, and still have a job to buy property, they may be concerned about their employment outlook,” he said.
Outlook via region, according to BIS Shrapnel
Sydney
- Median house price $530,000 in June 2009
- New home construction at 50-year lows
- Total price growth forecast at 19 per cent to 2012
- Strongest growth at end of three year period
Melbourne
- Median house price $425,000 in June 2009-06-12
- A fall of 6 per cent for the financial year
- Pick up in “upgrader” activity expected
- Nearly 20 per cent increase in prices to 2012
Brisbane
- Median house price $391,000 in June 2009
- Down 7 per cent for financial year
- Interstate migration to boost modest price growth
- House prices to rise by 16 per cent to 2012
Gold Coast and Sunshine Coast
- House prices generally move in tandem with Brisbane
- Expected to grow by 14 per cent to 2011
- Price growth to lag slightly behind Brisbane
Adelaide
- Experienced double-digit growth to 2007
- Now down 3 per cent to $360,000 in June 2009
- Lowest median house price of mainland state capitals
- Incentives “having the greatest financial impact”
- Tipped to jump 19 per cent to 2012
Perth
- Market began slowing in 2007, ahead of eastern states
- Median house price tripled in five years to 2006
- Affordability improving; price decline stabilising
- Median house price $425,000 in June 2009
- House prices to increase by 12 per cent to 2012
Hobart
- Median house price declined marginally in 2008
- Increased interstate migration attributed to “tree-change” mentality
- Average house price $335,000 in June 2009
- To jump 15 per cent in the next three years to 2012.
Darwin
- Only capital city to record a rise in median house prices in 2008
- Average house price $470,000 in June 2009
- NT reliant on oil, gas; hasn’t weakened as much as other economies
- Gap in investments to kill short-term price growth
- To grow by 11 per cent in three years to 2012
Go to www.ipsinvest.com for Australian opportunities.
90% LTV mortgages are a rare breed in the UK
Permalink: 90% LTV mortgages are a rare breed
by Kay Murchie
In just two-and-a-half years, mortgages requiring a 10% deposit have almost vanished from the market making it even more difficult for first-time buyers to get on the property ladder.
First-time buyers have long since been described as a core part of the property market because without them, it is difficult for existing homeowners to move up the ladder.
Since the onset of the credit crunch, mortgages have been harder to secure without having a significant deposit.
Recent research from price comparison website moneysupermarket.com has revealed that there are now just 102 mortgages for people borrowing up to 90% of their home’s value, this is down from more than 3,000 different deals at the start of 2007.
Furthermore, first-time buyers are being hit with high interest rates with the average rate on a 90% loan-to-value (LTV) mortgage currently at 6.23%.
In January 2007, this was on average 6.2%, when the base rate stood at 5%, rather than the current historic low of 0.5%.
The margin above base rate has therefore increased to 5.73%, compared with 1.2% two-and-a-half years ago.
Louise Cuming, head of mortgages at moneysupermarket.com, comments: “The Government has failed to get mortgage lenders to open their books to first-time buyers.
“A 10% deposit is all most first-time buyers can hope to afford, so by pulling 90% LTV deals off the shelf, and increasing rates on the remaining deals, providers are keeping first-time buyers out of the market - which simply exacerbates market stagnation.’
The news is a blow to the property market which has experienced a raft of good news over the last 7 days.
Last week, the Council of Mortgage Lenders (CML) said the number of loans approved for house purchases in the UK rose by 16% in April compared with March.
Meanwhile, the Royal Institution of Chartered Surveyors (Rics) reported that new buyer enquiries rose for the seventh consecutive month in May, while completed sales were at their highest since August 2008.
Finally, the Halifax recently revealed that UK house prices experienced their biggest rise since October 2002.
Go to www.ipsinvest.com to view opportunities in the UK.
by Kay Murchie
In just two-and-a-half years, mortgages requiring a 10% deposit have almost vanished from the market making it even more difficult for first-time buyers to get on the property ladder.
First-time buyers have long since been described as a core part of the property market because without them, it is difficult for existing homeowners to move up the ladder.
Since the onset of the credit crunch, mortgages have been harder to secure without having a significant deposit.
Recent research from price comparison website moneysupermarket.com has revealed that there are now just 102 mortgages for people borrowing up to 90% of their home’s value, this is down from more than 3,000 different deals at the start of 2007.
Furthermore, first-time buyers are being hit with high interest rates with the average rate on a 90% loan-to-value (LTV) mortgage currently at 6.23%.
In January 2007, this was on average 6.2%, when the base rate stood at 5%, rather than the current historic low of 0.5%.
The margin above base rate has therefore increased to 5.73%, compared with 1.2% two-and-a-half years ago.
Louise Cuming, head of mortgages at moneysupermarket.com, comments: “The Government has failed to get mortgage lenders to open their books to first-time buyers.
“A 10% deposit is all most first-time buyers can hope to afford, so by pulling 90% LTV deals off the shelf, and increasing rates on the remaining deals, providers are keeping first-time buyers out of the market - which simply exacerbates market stagnation.’
The news is a blow to the property market which has experienced a raft of good news over the last 7 days.
Last week, the Council of Mortgage Lenders (CML) said the number of loans approved for house purchases in the UK rose by 16% in April compared with March.
Meanwhile, the Royal Institution of Chartered Surveyors (Rics) reported that new buyer enquiries rose for the seventh consecutive month in May, while completed sales were at their highest since August 2008.
Finally, the Halifax recently revealed that UK house prices experienced their biggest rise since October 2002.
Go to www.ipsinvest.com to view opportunities in the UK.
Wednesday, June 10, 2009
U.K. Housing Market Shows Signs of ‘Stabilizing,’ RICS Says
By Svenja O’Donnell
June 9 (Bloomberg) -- The U.K. housing market showed signs of “stabilizing” in May as the smallest balance of real-estate agents and surveyors in 18 months reported price declines, the Royal Institution of Chartered Surveyors said.
The number of respondents in the monthly survey saying home values fell exceeded those reporting gains by 44.1 percentage points, the best reading since November 2007, RICS said in a report today in London. Property sales per agent rose to 11.8 in the three months through May, the highest since August 2008.
With Nationwide Building Society and Halifax saying that home values jumped in May, evidence is mounting that the property slump is past its worst. That may help buoy the economy as service industries pick up, pulling Britain out of its worst recession since World War II.
“On the face of it, the housing market does appear to be close to bottoming out with activity picking up in a material way and prices at last stabilizing,” RICS spokesman Ian Perry said in the statement. “However, it is important to remember that the lack of supply has been as important in underpinning prices as the rise in demand.”
The number of properties on agents’ books fell to 58.4 last month, a drop of 35 percent from a year earlier and the lowest since May 2004, RICS said.
The survey showed optimism about future prices is increasing. A net 11 percent of respondents predicted declines, the best result since July 2007, the month before the financial crisis began.
Buyer Confidence
“Buyer confidence is growing daily,” said Luke Pender- Cudlip, an estate agent at Knight Frank in London. “Many think we have hit the bottom of the market.”
Lloyds Banking Group Plc’s Halifax business says that house prices jumped 2.6 percent in May, the most since 2002. Nationwide says they matched the biggest gain since 2006.
Retail sales at stores open least 12 months still fell 0.8 percent in May from a year earlier, the British Retail Consortium said in a separate report today. The economy shrank 1.9 percent in the first quarter, the most since 1979.
The Bank of England kept the benchmark interest rate at 0.5 percent last week and reiterated its plan to spend 125 billion pounds ($200 billion) in newly printed money in U.K. debt markets to aid the economy. The bank said yesterday it may widen the range of assets it’s buying to include secured commercial paper.
Go to www.ipsinvest.com for more information on investing in the UK.
Last Updated: June 8, 2009 19:01 EDT
June 9 (Bloomberg) -- The U.K. housing market showed signs of “stabilizing” in May as the smallest balance of real-estate agents and surveyors in 18 months reported price declines, the Royal Institution of Chartered Surveyors said.
The number of respondents in the monthly survey saying home values fell exceeded those reporting gains by 44.1 percentage points, the best reading since November 2007, RICS said in a report today in London. Property sales per agent rose to 11.8 in the three months through May, the highest since August 2008.
With Nationwide Building Society and Halifax saying that home values jumped in May, evidence is mounting that the property slump is past its worst. That may help buoy the economy as service industries pick up, pulling Britain out of its worst recession since World War II.
“On the face of it, the housing market does appear to be close to bottoming out with activity picking up in a material way and prices at last stabilizing,” RICS spokesman Ian Perry said in the statement. “However, it is important to remember that the lack of supply has been as important in underpinning prices as the rise in demand.”
The number of properties on agents’ books fell to 58.4 last month, a drop of 35 percent from a year earlier and the lowest since May 2004, RICS said.
The survey showed optimism about future prices is increasing. A net 11 percent of respondents predicted declines, the best result since July 2007, the month before the financial crisis began.
Buyer Confidence
“Buyer confidence is growing daily,” said Luke Pender- Cudlip, an estate agent at Knight Frank in London. “Many think we have hit the bottom of the market.”
Lloyds Banking Group Plc’s Halifax business says that house prices jumped 2.6 percent in May, the most since 2002. Nationwide says they matched the biggest gain since 2006.
Retail sales at stores open least 12 months still fell 0.8 percent in May from a year earlier, the British Retail Consortium said in a separate report today. The economy shrank 1.9 percent in the first quarter, the most since 1979.
The Bank of England kept the benchmark interest rate at 0.5 percent last week and reiterated its plan to spend 125 billion pounds ($200 billion) in newly printed money in U.K. debt markets to aid the economy. The bank said yesterday it may widen the range of assets it’s buying to include secured commercial paper.
Go to www.ipsinvest.com for more information on investing in the UK.
Last Updated: June 8, 2009 19:01 EDT
Tuesday, June 9, 2009
Why now is the time to invest offshore?
This is the latest RMB’s currency outlook for the next year or so:
Some major positives have emerged over the past month that justifies some of the ZAR’s sharp gains. In particular:
- The proposed MTN Bharti deal could bring in US$4bn of net inflows.
- The SARB has allowed more ZAR appreciation than we thought they would.
- The current account deficit is contracting more sharply than expected.
There are nevertheless reasons to be cautious of the local unit, notably:
- The degree of risk-taking seems overdone given the uncertainty over the timing and extent of a global economic recovery.
- After the recent rally the ZAR is probably already overvalued.
- While the underlying balance of payments position has improved, the longer-term issues of funding the current account deficit persist.
- We finally appear to be reaching a level where the SARB will act to restrict further ZAR gains.
- Comparisons with the ZAR rally from 2002 to 2005 are misguided given that circumstances are so different.
Reflecting the above, we maintain a bearish medium-term view of the ZAR but have adjusted our forecasts to account for the recent positives.
We now expect USD/ZAR to end the year at 9.00, with a trading range of 7.50 – 10.00, and to end 2010 at 10.00.
KEY ISSUES AND EVENTS IN THE MONTH AHEAD:
- Will the global risk-taking rally and weakness in the USD continue?
- The reserve figures this Friday will provide further indication of what the SARB’s policy is for the ZAR.
- Will the SARB buy USD in the month if the ZAR continues to appreciate?
- The SARB Quarterly Bulletin on 18 June will provide detailed balance of payments data.
- The SARB is likely to cut interest rates by 50bp on 25 June, indicating that we are at the end of the rate cutting cycle.
- Any further details on the MTN deal and the proposed US$5bn loan from the World Bank to Eskom.
So, in short, if you are considering offshore investing, the time to do so is now!
If you want more information about Offshore Investment IPS would suggest going to www.ipsinvest.com to look at our great opportunities.
Some major positives have emerged over the past month that justifies some of the ZAR’s sharp gains. In particular:
- The proposed MTN Bharti deal could bring in US$4bn of net inflows.
- The SARB has allowed more ZAR appreciation than we thought they would.
- The current account deficit is contracting more sharply than expected.
There are nevertheless reasons to be cautious of the local unit, notably:
- The degree of risk-taking seems overdone given the uncertainty over the timing and extent of a global economic recovery.
- After the recent rally the ZAR is probably already overvalued.
- While the underlying balance of payments position has improved, the longer-term issues of funding the current account deficit persist.
- We finally appear to be reaching a level where the SARB will act to restrict further ZAR gains.
- Comparisons with the ZAR rally from 2002 to 2005 are misguided given that circumstances are so different.
Reflecting the above, we maintain a bearish medium-term view of the ZAR but have adjusted our forecasts to account for the recent positives.
We now expect USD/ZAR to end the year at 9.00, with a trading range of 7.50 – 10.00, and to end 2010 at 10.00.
KEY ISSUES AND EVENTS IN THE MONTH AHEAD:
- Will the global risk-taking rally and weakness in the USD continue?
- The reserve figures this Friday will provide further indication of what the SARB’s policy is for the ZAR.
- Will the SARB buy USD in the month if the ZAR continues to appreciate?
- The SARB Quarterly Bulletin on 18 June will provide detailed balance of payments data.
- The SARB is likely to cut interest rates by 50bp on 25 June, indicating that we are at the end of the rate cutting cycle.
- Any further details on the MTN deal and the proposed US$5bn loan from the World Bank to Eskom.
So, in short, if you are considering offshore investing, the time to do so is now!
If you want more information about Offshore Investment IPS would suggest going to www.ipsinvest.com to look at our great opportunities.
Webinars – the way of future!
Scott Picken, CEO of IPS talks about the future. “It is really exciting when something new comes to the market and it revolutionises the way things are done – for example the mobile phone and communication.”
Well Webinars are going to have the same impact on education and seminars. A Webinar, simply is an online seminar. It is going to revolutionise the way information is taught, learned and communicated.
From the comfort of your own home or office you can join the presenter for a fully interactive presentation. It is very easy to use, all you have to do is connect through the internet or (if your internet is slow) you can phone in and participate or both.
Think about it - no more sitting in traffic, battling to find parking, leaving work early or having to go to hotel over your weekend or in the evenings. Rather find a place which is comfortable to you and you can sit and enjoy yourself – for example at home after the children are fed. And even better it can be recorded and so you can watch it whenever you like!
A further exciting enhancement is that South Africa has been held back with this technology because of the speed and expense of our broadband (internet connection). However on the 27th of June 2009, Seacom’s 1280 Gbit/s cable which has been laid on the East Coast of Africa will be ready and join Africa, Asia and Europe. It will provide an alternative international route for SA telecom operators and service providers who previously had to make use of the Sat-3 cable along Africa’s West coast. Until recently, access to Sat-3 was controlled by Telkom, which kept prices artificially high. The cost access to Sat-3 has already fallen because of the threat of looming competition, but Brian Herlihy, Seacom CEO, expects prices to come down another 40% to 50% with Seacom’s arrival. This cable also has 10 times the ultimate design capacity of the West coast system, the latter only has a design capacity of only 120 Gbit/s.
Broadband is going to be substantially cheaper, faster and therefore more available to the man in the street. As soon as fast internet become the market norm as in most first world countries – Webinars will be the standard. However until that time you can still join into the presentations over the telephone, even if you don’t have a computer.
IPS (International Property Solutions), prides itself on the use of technology to bring its clients property solutions. Once again they have brought a first to South Africa, hosting a number of presentations on how to invest in South Africa, Australia and the UK. The IPS philosophy is to educate people so that they can make informed decisions and then provide them with solutions. IPS continues to hold a number of FREE seminars / webinars and many different topics of interest are covered. Go to http://www.ipsinvest.com/Events.aspx to view the up and coming presentations.
IPS has had very positive feedback from their clients and in both the last IPS webinars there were more people watching online than actually attended the physical event and they were spread all over the world. Think of the opportunities this presents!
Well Webinars are going to have the same impact on education and seminars. A Webinar, simply is an online seminar. It is going to revolutionise the way information is taught, learned and communicated.
From the comfort of your own home or office you can join the presenter for a fully interactive presentation. It is very easy to use, all you have to do is connect through the internet or (if your internet is slow) you can phone in and participate or both.
Think about it - no more sitting in traffic, battling to find parking, leaving work early or having to go to hotel over your weekend or in the evenings. Rather find a place which is comfortable to you and you can sit and enjoy yourself – for example at home after the children are fed. And even better it can be recorded and so you can watch it whenever you like!
A further exciting enhancement is that South Africa has been held back with this technology because of the speed and expense of our broadband (internet connection). However on the 27th of June 2009, Seacom’s 1280 Gbit/s cable which has been laid on the East Coast of Africa will be ready and join Africa, Asia and Europe. It will provide an alternative international route for SA telecom operators and service providers who previously had to make use of the Sat-3 cable along Africa’s West coast. Until recently, access to Sat-3 was controlled by Telkom, which kept prices artificially high. The cost access to Sat-3 has already fallen because of the threat of looming competition, but Brian Herlihy, Seacom CEO, expects prices to come down another 40% to 50% with Seacom’s arrival. This cable also has 10 times the ultimate design capacity of the West coast system, the latter only has a design capacity of only 120 Gbit/s.
Broadband is going to be substantially cheaper, faster and therefore more available to the man in the street. As soon as fast internet become the market norm as in most first world countries – Webinars will be the standard. However until that time you can still join into the presentations over the telephone, even if you don’t have a computer.
IPS (International Property Solutions), prides itself on the use of technology to bring its clients property solutions. Once again they have brought a first to South Africa, hosting a number of presentations on how to invest in South Africa, Australia and the UK. The IPS philosophy is to educate people so that they can make informed decisions and then provide them with solutions. IPS continues to hold a number of FREE seminars / webinars and many different topics of interest are covered. Go to http://www.ipsinvest.com/Events.aspx to view the up and coming presentations.
IPS has had very positive feedback from their clients and in both the last IPS webinars there were more people watching online than actually attended the physical event and they were spread all over the world. Think of the opportunities this presents!
Wednesday, June 3, 2009
How to save or make R10 million?
There are three types of people in the world...Those who make it happen...Those who watch it happen...Those who wonder what happened...", which are you?
A classic example of this recently was an investor who recently bought four units in London. One of the fundamental laws in property is to make sure you buy from a motivated seller to ensure that you get below market value properties. IPS had a developer who was offering a 26% discount from the prices in 2007. However we knew they were determined to get a few more sales to get their bank funding and so we managed to negotiate a further 15% discount for our client as long as he invested in 4 units. That is a saving of 41% or roughly £672,400.00 which, taking the average exchange rate is over a R10 million saving.
This is on the backdrop of marketing conditions which are changing. The most respected property index is the Financial Times Property Index which references all property in the United Kingdom. In their most recent report (May 09), Dr Peter Williams, Chairman of Acadametrics said, “On an annual basis, the average price of all completed transactions in England and Wales is now 14.2% lower than a year ago. All ten regions in England and Wales are showing prices falling on an annual and monthly basis.”
Martin Gahbauer, Nationwide's Chief Economist, said, ““The price of a typical house rose by 1.2% in May, providing further evidence of some improvement in housing market conditions over the last few months. At £154,016, the average house price is still 11.3% lower than a year ago, although this marks a significant improvement from the annual decline of 15.0% recorded in April. The 3 month on 3 month rate of change – a smoother indicator of short-term price trends – rose from -3.0% in April to -0.5% in May and now stands at its highest level since January 2008.”
Therefore property has fallen from peak to trough, but conservatively you can work on about 15%. If you can purchase property at a discount of 25% then you are buying property below market value and this ensures a good investment, because the property market could even fall further and you have built in a buffer. If you can manage a 40% discount then you have a 25% buffer!
Secondly, I believe the most important element is the income component. You need to be buying property in a good area with good rental demand. There are great yields at the moment – anywhere up from 6%, with low borrowing costs starting at 3.85%, which ensures great cashflow positive properties. If you focus on income and have a great cashflow, then the fact that you bought off a very low base will ensure a great investment in the future when the banks start lending properly again to the man in the street and the market recovers.
Until this time, foreign investors are taking huge advantage of the opportunities available in the UK, in particular London. In the past 2 weekends, developers have sold over 100 apartments to investors in Hong Kong alone as an example. The reason for this huge demand is the weakness of the Sterling and most importantly the fundamentals of the investment opportunities.
For South Africans, over the last 12 months the Rand (6.53%) has been one of the best performing currencies against the US Dollar, where both the Pound (19.43%) and the Aussie Dollar (17.18%) have devalued. Now is a fantastic time for South Africans to really take advantage of the strong Rand to invest in first world assets, income and currencies at great values! Scott Picken says, “I do ask people when they say they are worried about the market. Is there more chance of the Rand devaluing by 10% or the property market devaluing by 10% further in the future?”
Finally, many developers have their yearend in the next few weeks and it is very important for them to finalise sales before their accounting periods end. Now is one of the best times of the year to be negotiating with developers as they are very motivated sellers. There are some great opportunities coming to the market!
Go to www.ipsinvest.com to find out about our next seminar / webinar where Scott Picken, CEO of International Property Solutions (IPS), will be sharing his experience of everything he found on his recent trip to London and most importantly the opportunities which are available.
Next Offshore Information Events
These events are available online and also through the telephone:
UK
• 11th June, Thursday, Online and Telephone, 19:00 – 20:00pm
o Click here to register - https://www2.gotomeeting.com/register/531075995
• 13th June, Saturday, Online and Telephone, 10:30 – 11::30am
o Click here to register - https://www2.gotomeeting.com/register/281109874
• 16th July, Thursday, Online and Telephone, 19:00 – 20:00pm
o Click here to register - https://www2.gotomeeting.com/register/759971075
Australia
• 13th June, Saturday, Online and Telephone, 09:00 – 10:00am
o Click here to register - https://www2.gotomeeting.com/register/903485227
• 17th June, Wednesday, Online and Telephone, 19:00 – 20:00pm
o Click here to register - https://www2.gotomeeting.com/register/246161531
• 15th July, Wednesday, Online and Telephone, 19:00 – 20:00pm
o Click here to register - https://www2.gotomeeting.com/register/189489898
A classic example of this recently was an investor who recently bought four units in London. One of the fundamental laws in property is to make sure you buy from a motivated seller to ensure that you get below market value properties. IPS had a developer who was offering a 26% discount from the prices in 2007. However we knew they were determined to get a few more sales to get their bank funding and so we managed to negotiate a further 15% discount for our client as long as he invested in 4 units. That is a saving of 41% or roughly £672,400.00 which, taking the average exchange rate is over a R10 million saving.
This is on the backdrop of marketing conditions which are changing. The most respected property index is the Financial Times Property Index which references all property in the United Kingdom. In their most recent report (May 09), Dr Peter Williams, Chairman of Acadametrics said, “On an annual basis, the average price of all completed transactions in England and Wales is now 14.2% lower than a year ago. All ten regions in England and Wales are showing prices falling on an annual and monthly basis.”
Martin Gahbauer, Nationwide's Chief Economist, said, ““The price of a typical house rose by 1.2% in May, providing further evidence of some improvement in housing market conditions over the last few months. At £154,016, the average house price is still 11.3% lower than a year ago, although this marks a significant improvement from the annual decline of 15.0% recorded in April. The 3 month on 3 month rate of change – a smoother indicator of short-term price trends – rose from -3.0% in April to -0.5% in May and now stands at its highest level since January 2008.”
Therefore property has fallen from peak to trough, but conservatively you can work on about 15%. If you can purchase property at a discount of 25% then you are buying property below market value and this ensures a good investment, because the property market could even fall further and you have built in a buffer. If you can manage a 40% discount then you have a 25% buffer!
Secondly, I believe the most important element is the income component. You need to be buying property in a good area with good rental demand. There are great yields at the moment – anywhere up from 6%, with low borrowing costs starting at 3.85%, which ensures great cashflow positive properties. If you focus on income and have a great cashflow, then the fact that you bought off a very low base will ensure a great investment in the future when the banks start lending properly again to the man in the street and the market recovers.
Until this time, foreign investors are taking huge advantage of the opportunities available in the UK, in particular London. In the past 2 weekends, developers have sold over 100 apartments to investors in Hong Kong alone as an example. The reason for this huge demand is the weakness of the Sterling and most importantly the fundamentals of the investment opportunities.
For South Africans, over the last 12 months the Rand (6.53%) has been one of the best performing currencies against the US Dollar, where both the Pound (19.43%) and the Aussie Dollar (17.18%) have devalued. Now is a fantastic time for South Africans to really take advantage of the strong Rand to invest in first world assets, income and currencies at great values! Scott Picken says, “I do ask people when they say they are worried about the market. Is there more chance of the Rand devaluing by 10% or the property market devaluing by 10% further in the future?”
Finally, many developers have their yearend in the next few weeks and it is very important for them to finalise sales before their accounting periods end. Now is one of the best times of the year to be negotiating with developers as they are very motivated sellers. There are some great opportunities coming to the market!
Go to www.ipsinvest.com to find out about our next seminar / webinar where Scott Picken, CEO of International Property Solutions (IPS), will be sharing his experience of everything he found on his recent trip to London and most importantly the opportunities which are available.
Next Offshore Information Events
These events are available online and also through the telephone:
UK
• 11th June, Thursday, Online and Telephone, 19:00 – 20:00pm
o Click here to register - https://www2.gotomeeting.com/register/531075995
• 13th June, Saturday, Online and Telephone, 10:30 – 11::30am
o Click here to register - https://www2.gotomeeting.com/register/281109874
• 16th July, Thursday, Online and Telephone, 19:00 – 20:00pm
o Click here to register - https://www2.gotomeeting.com/register/759971075
Australia
• 13th June, Saturday, Online and Telephone, 09:00 – 10:00am
o Click here to register - https://www2.gotomeeting.com/register/903485227
• 17th June, Wednesday, Online and Telephone, 19:00 – 20:00pm
o Click here to register - https://www2.gotomeeting.com/register/246161531
• 15th July, Wednesday, Online and Telephone, 19:00 – 20:00pm
o Click here to register - https://www2.gotomeeting.com/register/189489898
Tuesday, June 2, 2009
‘Strong vote of confidence’ as largest SA bond is snapped up
‘Strong vote of confidence’ as largest SA bond is snapped up
INTERNATIONAL investors have given SA a big vote of confidence by snapping up its largest dollar-denominated bond to date, despite the severe global lending crisis.
SA raised the amount on a 10-year issue it planned to raise offshore this year to $1,5bn from an initial $1bn after it was oversubscribed more than five times, the Treasury’s director-general, Lesetja Kganyago, said yesterday. “This is our most spectacular deal in history … we have had the most remarkable reception from investors despite the difficult financial environment,” he told Business Day.
It was the largest dollar-denominated issue since SA re-entered global markets in 1995, he said.
The annual coupon for the bond was 6,875% which was SA’s third- lowest on record, Kganyago said. The lower the coupon, the less expensive the bond is for SA’s government.
The new issue was priced at a spread of 375 basis points over US Treasuries, tighter than the guidance of 387,5 basis points initially offered by banks — also a success signal.
“This demonstrates a resounding vote of confidence in the policies we have been implementing in the past 15 years … we have had a lot of new investors subscribe,” Kganyago said.
“We can take comfort from the fact that even in this difficult environment we can have such a huge investor base. We are on a very solid wicket,” he said.
Kganyago was speaking after a road show to market the deal in Germany, Britain and the US.
SA last issued dollar-denominated bonds in May 2007 when it sold $1bn of 15-year securities. The 2022 bond yields 6,831%, or 345 basis points more than US treasuries.
The size of this new issue will help take pressure off domestic capital markets, which the government will tap to finance its budget deficit this year. Kganyago said it was too soon to say if the shortfall, which the Treasury forecasts at 3,8% of gross domestic product (GDP), would be exceeded.
SA’s budget balance swung back into the red with a shortfall of 1% of GDP last year after two years of small but historic surpluses.
Kganyago said the bond’s foreign investors ranged from pension funds to asset managers. “We managed to deepen support from investors who have a very strong relationship with SA and to attract new investors.”
The increase in appetite for SA debt is remarkable in the context of its newly elected government, widely perceived to be more left-leaning with more leaders from trade unions and the South African Communist Party.
The Treasury picked Barclays, JPMorgan and Standard Bank to arrange the deal.
Go to www.ipsinvest.com for more information.
INTERNATIONAL investors have given SA a big vote of confidence by snapping up its largest dollar-denominated bond to date, despite the severe global lending crisis.
SA raised the amount on a 10-year issue it planned to raise offshore this year to $1,5bn from an initial $1bn after it was oversubscribed more than five times, the Treasury’s director-general, Lesetja Kganyago, said yesterday. “This is our most spectacular deal in history … we have had the most remarkable reception from investors despite the difficult financial environment,” he told Business Day.
It was the largest dollar-denominated issue since SA re-entered global markets in 1995, he said.
The annual coupon for the bond was 6,875% which was SA’s third- lowest on record, Kganyago said. The lower the coupon, the less expensive the bond is for SA’s government.
The new issue was priced at a spread of 375 basis points over US Treasuries, tighter than the guidance of 387,5 basis points initially offered by banks — also a success signal.
“This demonstrates a resounding vote of confidence in the policies we have been implementing in the past 15 years … we have had a lot of new investors subscribe,” Kganyago said.
“We can take comfort from the fact that even in this difficult environment we can have such a huge investor base. We are on a very solid wicket,” he said.
Kganyago was speaking after a road show to market the deal in Germany, Britain and the US.
SA last issued dollar-denominated bonds in May 2007 when it sold $1bn of 15-year securities. The 2022 bond yields 6,831%, or 345 basis points more than US treasuries.
The size of this new issue will help take pressure off domestic capital markets, which the government will tap to finance its budget deficit this year. Kganyago said it was too soon to say if the shortfall, which the Treasury forecasts at 3,8% of gross domestic product (GDP), would be exceeded.
SA’s budget balance swung back into the red with a shortfall of 1% of GDP last year after two years of small but historic surpluses.
Kganyago said the bond’s foreign investors ranged from pension funds to asset managers. “We managed to deepen support from investors who have a very strong relationship with SA and to attract new investors.”
The increase in appetite for SA debt is remarkable in the context of its newly elected government, widely perceived to be more left-leaning with more leaders from trade unions and the South African Communist Party.
The Treasury picked Barclays, JPMorgan and Standard Bank to arrange the deal.
Go to www.ipsinvest.com for more information.
Where to for the South African economy?
What every bungee jumper knows
By Cees Bruggemans, Chief Economist FNB
1 June 2009
As monthly output releases paint a grim picture of an economy in freefall and operating way below resource capacity, financial data releases (falling inflation, constrained credit extension, narrowing trade deficit, firming Rand) keep reinforcing the case for more policy support.
Eventually freefall bottoms out and recovery commences.
Yet imagine global policy not being supportive, with our industrial and mining exports subjected to unlimited decline. Or an economy in which government spending tails off with failing tax collections, steadily increasing unemployment, progressively more anxious households seeing income curtailed and asset values declining, forcing spending cutbacks and reduced borrowing, with businesses seeing their markets disappearing, losses mounting and defensively cutting their inventories, investment, labour force, costs.
Without end until the very end.
That is genuine freefall, like a bungee jumper in full flow, except there are no ropes tied around the ankles to check the descent before final disaster strikes.
As every bungee jumper knows, the sport isn’t a suicide pact. Ankles are supposed to be expertly secured with a flexible lifeline that stretches and then snaps back before real damage is done.
Just so the modern economy, securely attached to safety harness and flexible rope, ready at any time for unexpected freefall, with safety measures activated to create bouncing return to safety.
As shock takes the economy into its grip, inviting spending cutbacks by consumers, businesses and foreign importers and giving rise to waves of output curtailment, policy support swings into action.
Modern governments don’t panic as tax revenues start to fail, maintaining their spending while covering their expanding funding shortfall through borrowing, indeed stepping up their spending assists to economic agents in need (unemployment support).
The most flexible shock absorbers are currency and interest rates, their aggressive adjustment supporting exporters, indebted households and producers generally.
Such actions globally underwrite international demand and export potential, once inventory cutbacks have been fully absorbed.
Thus spending and output freefall eventually slows, ends and recovery snapback commences.
Demand starts to rise again, supported by higher government spending and interest-sensitive purchases as business and household expectations lose their anxious edge.
Household income stabilizes, corporate earnings start benefiting from productivity gains, companies cease cutting back and increase spending levels, eventually also raising employment.
With the budget deficit approaching 5% of GDP, and with interest rates cut by 4.5% in six months, prime now at 11%, the downward draft in output is being checked.
Most importantly, policy actions globally are even more aggressively supportive, while defensive output cutbacks in response to banking and credit shocks late last year were probably overdone, even if realistic at the time.
All of this creates recovery potential, even beyond the natural output recovery following inventory disruption.
In our mining, manufacturing, electricity and transport sectors (especially their export-related activity), the output declines probably mostly ended four months ago as global activity started its stabilisation.
In household consumption-related sectors such as motor trade, residential building, retail, wholesale and hotel trades, there is probably still a gradual descent in output underway as income and borrowing curtailment and increased saving keep cutting into spending levels.
But policy support is still steadily expanding its reach and ere long should check also these declines. But there are one negative and one positive operating.
Returning global risk appetite and improving emerging market and commodity prospects are improving our terms of trade (export prices improving relative to import prices, increasing our national income) while redirecting growing volumes of foreign capital our way.
SARB is probably not fully sterilising excess inflows, with government preoccupied with its growing budget deficit, borrowing requirement and national debt, its willingness to supply sterilization bonds limited.
The Rand can firm, breaking through 8:$, with potentially more to come, checking exporter income gains, but also reinforcing downward pressure on our inflation.
Positively, this along with tightened bank credit criteria may yet create further downward interest rate potential, prime possibly moving towards 10%.
GDP output (and national income) may hit bottom in 2Q2009 or 3Q2009, and be in recovery mode from 4Q2009, recording 1%-2% decline in 2009 followed by 2%-3% growth in 2010.
Formal employment may fall back towards 9 million during 2009-2010 before starting to expand again.
The budget deficit as share of GDP may peak next year, thereafter starting to narrow again.
As inflation falls through 2010, prime may hug 10% for two years before renewed commodity price surges and inflation pickup sets in motion a new tightening cycle.
The Rand will be a plaything of global forces, potentially facing a longish period of firmness as global growth and risk appetite return, our appetite for forex accumulation is limited, and our risk profile not particularly threatening once everything (trade deficit, banks, external indebtedness, capital flows, growth, asset returns, liquid markets) are taking into account.
Our bungee jump is approaching its low point. Without assists gravity would keep pulling us towards destruction. Instead, prepare to bounce shortly.
Cees Bruggemans is Chief Economist of First National Bank.
Go to www.ipsinvest.com for more information.
By Cees Bruggemans, Chief Economist FNB
1 June 2009
As monthly output releases paint a grim picture of an economy in freefall and operating way below resource capacity, financial data releases (falling inflation, constrained credit extension, narrowing trade deficit, firming Rand) keep reinforcing the case for more policy support.
Eventually freefall bottoms out and recovery commences.
Yet imagine global policy not being supportive, with our industrial and mining exports subjected to unlimited decline. Or an economy in which government spending tails off with failing tax collections, steadily increasing unemployment, progressively more anxious households seeing income curtailed and asset values declining, forcing spending cutbacks and reduced borrowing, with businesses seeing their markets disappearing, losses mounting and defensively cutting their inventories, investment, labour force, costs.
Without end until the very end.
That is genuine freefall, like a bungee jumper in full flow, except there are no ropes tied around the ankles to check the descent before final disaster strikes.
As every bungee jumper knows, the sport isn’t a suicide pact. Ankles are supposed to be expertly secured with a flexible lifeline that stretches and then snaps back before real damage is done.
Just so the modern economy, securely attached to safety harness and flexible rope, ready at any time for unexpected freefall, with safety measures activated to create bouncing return to safety.
As shock takes the economy into its grip, inviting spending cutbacks by consumers, businesses and foreign importers and giving rise to waves of output curtailment, policy support swings into action.
Modern governments don’t panic as tax revenues start to fail, maintaining their spending while covering their expanding funding shortfall through borrowing, indeed stepping up their spending assists to economic agents in need (unemployment support).
The most flexible shock absorbers are currency and interest rates, their aggressive adjustment supporting exporters, indebted households and producers generally.
Such actions globally underwrite international demand and export potential, once inventory cutbacks have been fully absorbed.
Thus spending and output freefall eventually slows, ends and recovery snapback commences.
Demand starts to rise again, supported by higher government spending and interest-sensitive purchases as business and household expectations lose their anxious edge.
Household income stabilizes, corporate earnings start benefiting from productivity gains, companies cease cutting back and increase spending levels, eventually also raising employment.
With the budget deficit approaching 5% of GDP, and with interest rates cut by 4.5% in six months, prime now at 11%, the downward draft in output is being checked.
Most importantly, policy actions globally are even more aggressively supportive, while defensive output cutbacks in response to banking and credit shocks late last year were probably overdone, even if realistic at the time.
All of this creates recovery potential, even beyond the natural output recovery following inventory disruption.
In our mining, manufacturing, electricity and transport sectors (especially their export-related activity), the output declines probably mostly ended four months ago as global activity started its stabilisation.
In household consumption-related sectors such as motor trade, residential building, retail, wholesale and hotel trades, there is probably still a gradual descent in output underway as income and borrowing curtailment and increased saving keep cutting into spending levels.
But policy support is still steadily expanding its reach and ere long should check also these declines. But there are one negative and one positive operating.
Returning global risk appetite and improving emerging market and commodity prospects are improving our terms of trade (export prices improving relative to import prices, increasing our national income) while redirecting growing volumes of foreign capital our way.
SARB is probably not fully sterilising excess inflows, with government preoccupied with its growing budget deficit, borrowing requirement and national debt, its willingness to supply sterilization bonds limited.
The Rand can firm, breaking through 8:$, with potentially more to come, checking exporter income gains, but also reinforcing downward pressure on our inflation.
Positively, this along with tightened bank credit criteria may yet create further downward interest rate potential, prime possibly moving towards 10%.
GDP output (and national income) may hit bottom in 2Q2009 or 3Q2009, and be in recovery mode from 4Q2009, recording 1%-2% decline in 2009 followed by 2%-3% growth in 2010.
Formal employment may fall back towards 9 million during 2009-2010 before starting to expand again.
The budget deficit as share of GDP may peak next year, thereafter starting to narrow again.
As inflation falls through 2010, prime may hug 10% for two years before renewed commodity price surges and inflation pickup sets in motion a new tightening cycle.
The Rand will be a plaything of global forces, potentially facing a longish period of firmness as global growth and risk appetite return, our appetite for forex accumulation is limited, and our risk profile not particularly threatening once everything (trade deficit, banks, external indebtedness, capital flows, growth, asset returns, liquid markets) are taking into account.
Our bungee jump is approaching its low point. Without assists gravity would keep pulling us towards destruction. Instead, prepare to bounce shortly.
Cees Bruggemans is Chief Economist of First National Bank.
Go to www.ipsinvest.com for more information.
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