Scott Picken, CEO of International Property Solutions (IPS) believes a paradigm shift is occurring: 8 years ago, people would only invest in property in their own neighbourhood. Now, investors are starting to seek the best investments globally. IPS was created 5 years ago to facilitate international investments and provide an end-to-end solution to ensure that investors can invest with confidence!

Friday, June 11, 2010

We have moved our Blog onto our IPS website

Please go to http://blog.ipsinvest.com/ for all the news and information on South African and international property.

Monday, May 17, 2010

Saturday, May 15, 2010

Australian Property Report - April 10

Much talk of housing ‘bubble’ - but fundamentals sound
– Record population gains & inadequate supply growth
– Critical housing shortage worsening/demand momentum strong
– FHB replaced by investors, upgraders & offshore buyers
– Conservative lending/low delinquencies/no sub-prime/full recourse loans

Household sector well placed
– Economy & labour market solid, unemployment falling – no forced sales
- Low delinquencies reflect comfortable debt servicing
- Solid gains in real household incomes
- Growing skilled labour shortages/upward wages pressure

Financial system solid
– On balance sheet lending raises incentives re. sustainable serviceability
– Conservative lending = low delinquencies
– Full recourse lending cf. US = less incentive to default

Risks
– Rising interest rates/deteriorating affordability could cap price gains
– Policy reversal of 2009 FIRB changes?
– Change in immigration policy?
– Rising unemployment/recession?

Click here to download full report - http://www.ipsinvest.com/News_199_Australian_Property_Report_April_10.aspx

UK House prices in April rose by 0.5%

* House prices in April rose by 0.5%

Despite a fall in transactions, the monthly average price of all residential property sold in England & Wales in April 2010 was an estimated 0.5% higher than in March. This is the twelfth month in succession in which the AcadHPI has shown an increase.

* Annual price increase is 12.9%


The annual average price of all residential property transactions in England & Wales was 12.9% higher than a year ago when prices were still falling - a significant recovery albeit in a market still characterised by great uncertainty. This is now the sixth consecutive month in which the annual rate of change in house prices has been positive.

* Housing transactions fall by 5% in April


There were an estimated 50,650 properties sold in April 2010, which is 5% lower than the number of sales recorded in March 2010. The level of sales in April 2010 is the second lowest April figure since the Land Registry started reporting transaction numbers in 1995.

* London house prices reach a new record level

For the second month in succession the average house price in London has reached a new peak. There is now substantial evidence to show that the major movement in London house prices is taking place at the top end of the market, with more modest price rises being experienced elsewhere.

Click here to download report -
http://www.ipsinvest.com/News_198_UK_House_prices_rose_05_in_April_.aspx

Wednesday, May 12, 2010

Warren Buffet's latest shareholder conference

Sandi and I just returned from Omaha and the annual Berkshire Hathaway meeting with Warren Buffett.

Although we have been shareholders for years, I never carved out the time to attend.... DUMB! We will be going back next year.

I have always thought that if you are going to listen to somebody, make sure they are eating their own cooking and have created truly sustainable success. Clearly, Warren Buffett falls into this category and his insights are crystal clear, simple and make sense..... here are a couple that I found particularly useful:

1. The key to getting rich is to create a structure or set of rules that minimizes the "Everyone else is doing it" syndrome. If everyone else is doing it, be wary!

2. The primary key to successful investing is not the size of your circle of competence, but rather knowing where the perimeter is. Too many people drift away from what they know and in the process move from investor to speculator.

3. The biggest single cause of the recent meltdown on Wall Street is the Business Schools and MBA Programs throughout the country. Teaching people to invest for the short term instead of owning a piece of the business will always produce gyrations and spikes in stock prices.

4. The most recent rise in the stock market is primarily a result of low interest rates.... people can't stand sitting on the sidelines making 2/10th of 1% on their money. Money has started flowing back into stocks because there are no alternatives and most investors can't sit and do nothing when there is nothing to do that makes sense.

5. Given the recent level of government intervention on top of the previously existing debt obligations in the United States, inflation is very likely. So are higher taxes. Inflation and higher taxes are the result of an the US inability to live within its means, so collecting and printing more money is the most likely answer.

6. The real culprit in the recent economic turmoil in the US is not the US Treasury department, it's Congress. Too much money has been spent in comparison to the amount being collected and this imbalance will result in even more pain.

7. The problem in Greece is that it doesn't have its own currency to print its way out of the problem.... Nor do any of the other members of the Euro. The Greece problem is likely to be repeated several times in the coming months.

8. Long term, Warren and his long time partner Charlie Munger are HUGE believers in the US economy, which is why they just spent $29 Billion buying a railroad. Railroads will be the primary mover of goods in the foreseeable future. The better the US economy, the more goods that need to be moved. This is a long term "all in" bet on the United States economy.

For those of you who are unfamiliar with the spectacular investing results of Warren Buffett, consider this: In 1979, you could have purchased his stock for $290/share. Today it costs $120,000/share. You can read more about this incredible man and his investing philosophy by reading his annual Chairman's Letter to Shareholders.... You should read all of them (1977-2009):

http://www.berkshirehathaway.com/letters/letters.html

For those of you addicted to speed, please remember that it took Warren 12 years (1950-1962) to make his first million.... The lesson: The goal is not to get rich.... The goal is to get rich and stay that way!

Best,

Keith Cunningham

Monday, April 19, 2010

South African House Prices Rise Further In March: Absa

The average nominal value of medium-sized houses in South Africa increased 4.2% on a yearly basis in March, after rising by a revised 2.8% in February, a report from Absa Group showed Monday. This brought the average nominal value in this category of housing to around ZAR 965,300 in March.

Further, the report showed that cost of small houses moved up 9.6% annually, slower than the 7.3% growth in the previous month, while cost of large houses increased at a faster pace of 5.3%, following a 4.8% rise in February.

According to Absa, the South African economy is forecast to grow by a real 3.3% in 2010 on the back of the global economic recovery and steadily growing domestic demand. CPI inflation, currently at 5.7% annually is expected to average 5.3% in 2010.

Absa forecasts the residential property market to gather further momentum with the improvement in household sector finances in the course of 2010. Growth in the nominal value of houses is forecast to be 6%-7% higher in 2010 compared with last year.

Clarendon Mews Parow, Cape town, Western Cape

Priced from R399,900 No transfer fees.

Deposit - Only R5, 000.00

Rent Subsidy from Completion Feb 2011 to Feb 2013!

This development is situated in a popular area with great rental demand and close to all amenities.

Parow Valley really is one of the most convenient suburbs to reside in. Parow Valley has great shopping centres such as the Parow Shopping Mall, Shoprite Park, top primary and secondary schools for your convenience, places of worship, entertainment and night life for the outgoing and very popular chain stores like Woolworths, Edgars and Foschini for the shopping fanatics. All of your shopping needs can be catered for and you will spend many hours simply strolling through the massive malls which inhabit this stunning area.

A unique investment opportunity as transfer/completion will only take place in early 2011 so you will start accumulating great capital growth from now until the development is completed in 2011, you only start paying your bond payments when the development is complete and registered in your name in 2011.

1 bedroom units selling at R399,900.00 with monthly rentals of R3250 plus R1000 a month rental subsidy from the developers for 24 months. R4250 monthly rental income.

2 bedroom duplex selling for R 499, 900.00 with monthly rentals of R4100 plus R1000 a month rental subsidy from the developers for 24 months. R5100 monthly income.
Excellent location, walking distance to Parow Shopping Centre and Shoprite Park - close to railway station, public transport and schools.

Low risks make it a great time to invest in property in Australia

* ECONOMIST: Frank Gelber
* From: The Australian
* April 15, 2010 12:00AM

DO I sound bullish about property to you? If not, you're missing the point. To me, this is an extraordinary time for property investment.

Most of the risk has gone. Non-residential prices have fallen dramatically. They're below replacement cost. Development has stalled. Demand is returning. And we can't build until rents rise.

Risk hasn't been this low, or investment decisions more clear cut, for 15 years. Certainly, across cities and sectors, prospects aren't uniform. But by and large, we're looking at strong positive returns over the next five years, with some internal rates of return above 20 per cent.

The key is risk. Some think high return means high risk. Too many people look at risk as statistical without trying to understand where it comes from. For them, risk is variation, everything that they're not sure of.

We can do better than that. We can specify sources of risk associated with specific events.

Let's focus on three specific cyclical property risks: overbuilding and its consequences, excessive gearing and overvaluation.

First, overbuilding. Before the global financial crisis hit, I was worried about overbuilding during the boom leading to oversupply and significant falls in rents and prices, a classic boom/bust cycle. Buoyed by the inflow of funds, building was rising to unsustainable levels. As it turned out, the GFC did us a favour, curtailing construction early, before we oversupplied markets.

The initial setback to development came from the funding squeeze. Now, the problem is making financial feasibilities work. Commercial and industrial commencements have halved in real terms since the peak and are struggling. During the boom the risk of overbuilding was high. Now, it has evaporated and there is the prospect of a shortage.

Second, gearing. This is not only an individual property investor risk but can also create market risk. The financial engineering boom put enormous pressure on corporate Australia to gear up. And the Real Estate Investment Trust sector, with relatively stable cash flows, was a prime candidate.

It was hard to resist. And the REITs didn't, gearing up from 14 to 40 per cent in the blink of an eye, with some more classic financially engineered operations heading above 90 per cent.

Gearing compounds returns in the good times, but multiplies losses when returns don't cover interest. Of course, the GFC triggered falls in property prices which, with gearing, compounded the fall in net assets.

Initially, shell-shocked investors did nothing. The REITs, without equity injections, were forced to try to sell assets. But, with few investors, markets didn't clear and prices fell. Only later were the less affected REITs able to raise equity, mainly through new rights issues, gradually reducing gearing to levels that are allowing them to resume normal operations and think about development and investment.

The third risk is overvaluation.

Increased gearing in the boom, plus additional equity, hugely boosted investable funds, all chasing a limited amount of property. Yields got away from us. Weight of money caused yield compression and caused prices to overshoot.

The risk was that yields would correct, that prices would fall. And they have. The risk of further price falls is low.

Contrary to the present heightened perception of risk, all three types of risk have receded. We're too cautious.

To me, it's safe to invest.

I worry more when I can't understand value. My benchmark is replacement cost -- we can't stay below it for long when we need to develop. This stage of the cycle presents an undervalued market with emerging demand and little new supply.

At BIS Shrapnel we're looking at internal rates of return in some sectors up to 20 per cent. Most risks are on the upside. What would you do? I know what I'll do.

Frank Gelber is chief economist for BIS Shrapnel fgelber@bis.com.au

Lifting rates will not stem rising market in Australia

# Terry Ryder
# From: The Australian

SOMEWHERE amid the fuzzy logic that drives the Reserve Bank's interest rate policy is the notion we have a housing price bubble and that raising interest rates will deflate it.

Glenn Stevens and his cohorts are wrong on both points. There is no bubble and history shows that lifting rates does little to quell a rising market.

Of course, it's difficult to know what Stevens and his faceless friends on the RBA board are thinking. They meet, decide to increase the cost of our mortgages, issue a press release and then disappear into the city.

Stevens should be compelled to face a press conference after each decision and justify the increasing pain he is inflicting on families and businesses. The economy is recovering, no doubt, but it has not yet recovered. Many businesses are still doing it tough, especially retailers.

The RBA appears to be reacting to extremes: the massive numbers that express future export deals by resources companies and activity at the top end of the housing market, all of it magnified by the tabloid media.

It is overlooking the mainstream where most action happens: ordinary businesses that employ of the bulk of the workforce and the everyday property market where 95 per cent of deals happen. Neither of these spheres is going ballistic.

I haven't seen anyone define what the term housing bubble means, but I assume it describes a market inflating out of control with prices increasing in an extraordinary way. I'm convinced most journalists and commentators wouldn't have a clue what it means and don't care whether it's true or not.

James Packer spends $12 million buying houses next to his Vaucluse mansion so he can build a swimming pool and this is presented as evidence the market is out of control. A small number of Chinese investors buy at the top of the Sydney market and they're blamed for pushing prices beyond the reach of families.

We do not have prices rising exceptionally in the mainstream market. According to the usual research suspects, house prices across the nation rose an average of 11 or 12 per cent in the past year. This is being represented as extraordinary, when it is merely average based on the standards of the past decade.

We saw much larger price rises in the 2003-2004 up-cycle and again more recently.

In 2007, the houses price indexes from the Australian Bureau of Statistics showed prices rose 12.5 per cent in our capital cities, including 14 per cent in Canberra, 18 per cent in Melbourne, 20 per cent in Adelaide and 22 per cent in Brisbane.

Why, suddenly, is a rising real estate market a problem?

Why is Stevens so concerned about a recovering property market? And where did he get the idea that lifting interest rates will scuttle it? There's no evidence that lifting interest rates correlates with a fall in dwelling prices.

We started in 2007 with the official interest rate at 6.25 per cent, compared with 4.25 per cent today. In the next six months rates increased from 6.25 per cent to 7.25 per cent.

But dwelling prices kept rising. Indeed, the rate of price growth throughout 2007 and into the first half of 2008 kept accelerating. The more the RBA lifted rates, the faster the rate of price growth. It was only the onset of the global financial crisis that finally slowed the market.

Over the 18 months from the start of 2007 to the middle of 2008 Darwin's median price rose 15 per cent, Canberra's by 18 per cent and Adelaide's by 23 per cent.

The evidence goes back well beyond the past decade. In my research I found a Residex article written in 2000 which began with: "Do rising interest rates mean decreasing property prices? If history is any guide, not at all. In fact, analysis of our data reveals that interest rates have no effect on the capital growth of property at all."

The article presented data on periods of rising interest rates in the 70s and 80s which "were followed by accelerating or steady house price inflation".

My three decades of researching real estate tell me price trends correlate more with the level of public confidence than the level of interest rates. If anything, rising interest rates have a positive impact on confidence, because they are a sign of an improving economy.

Prices stopped rising in late 2008 because confidence fell as we faced a battering of negative news about the GFC, the impending Australian recession (which never arrived) and the prospect of high unemployment (which didn't happen either).

Confidence, and price growth, revived in the latter part of last year as the emphasis switched to news of recovery, falling rates of unemployment and a resurgent resources sector.

Spotlight on London Prime Residential East of City market - April 2010

Savills residential research predicts the prime east of City market to outperform the mainstream markets of Greater London over the next five years, much in the way that it did in the early 1990s.

Please find attached our latest research paper: 'Spotlight on Prime Residential east of City markets'.

Download - Spotlight on east of City markets - April 2010

Key findings:

Values in prime residential markets of the Docklands and Canary Wharf increased by 4.6% in the second half of 2009 and by a further 3.3% in the first quarter of 2010.

Rental demand is increasing with rents up 3.6% in the last six months.

With a significant amount of residential development having already taken place in areas such as Canary Wharf, looking ahead Stratford will form a key part of future housing delivery in east London, much of which forms part of the Olympic legacy.

What is going to happen to South African Interest Rates?

By Cees Bruggemans, Chief Economist FNB
13 April 2010

With interest rates now at historic lows, prime reaching 10%, the lowest since 1981, the main questions are whether the rate cycle has reached its lowest point, how long it could be moving sideways, and when and by how much it could be moving higher.

There is a technical and non-technical side to these questions.

The visible technical focus falls on actual inflation, the inflation forecast and inflation expectations, the risks governing these and the state of the economy and its rate of improvement.

Non-technical considerations are political in nature, mostly deep background, yet also presumable important.

The SARB gives the impression of being forward-looking (taking into account forecasts) but not necessarily always forward-acting (apparently often responding to the present, given the nature of risks it faces).

The SARB inflation forecast projects inflation within the 3%-6% target zone these next two years. As we move forward, the SARB’s two-year horizon also moves forward.

Private inflation forecasts vary regarding cyclical bottom (4%-5%) and subsequent trajectory (5%-7%).

The main upside drivers are public tariffs and oil. Downside drivers include imported global goods prices, food (initially), the Rand (initially) and the local output gap (initially).

Given the balance of risks (at present), the inflation rate could still head lower than consensus forecasts (the reality for much of the past year) and should then at some point cyclically rebound. But when and by how much?

If the downside risks to inflation were to become outsized, with potential disappointment in closing the output gap (for instance through a further sizeable firming of the Rand, but not ignoring things like food price declines and disappointing job recovery), the SARB could still cut rates one more time by 0.5%, prime falling to 9.5%, possibly in May, thereby potentially also still fulfilling any non-technical considerations.

But if inflation risks remain balanced, the SARB may resist further rate cuts preferring to keep rates stable.

At some point in 2010-2011, the focus would shift to the upside risk potential, especially regarding oil and food, but also the Rand and the rate at which the output gap keeps narrowing as growth proceeds.

With actual inflation passing its lowest cyclical point later in 2010, by how much will it lift through 2011-2012 and how will this shape inflation expectation?

Though GDP growth may average 3% through 2012, this won’t be enough to close the output gap. Indeed outside of the public sector, job growth may remain disappointingly low and productivity gains high.

For as long as inflation is not seen as decisively breaking the 6% upper target boundary, this real sector condition may keep the SARB from raising rates early, indeed perhaps preferring to see the Rand weaken as global policy actions in 2011 start to strengthen the Dollar (but not necessarily as yet Euro and Sterling for structural reasons).

Any shock developments (pushing oil and food prices higher, Rand weaker) could push the SARB into pre-emptive mode, starting the tightening cycle. Once activated, inflation could disappoint by up to 2% (from target midpoint), potentially making SARB willing to match this with two to four 0.5% tightening moves during 2011-2012.

Given global policy projections (Fed starting tightening by 2H2011), commodity, Rand, domestic output and formal employment projections, SARB could remain on hold through mid-2011 or longer, but not certainly forever.

Shock developments would presumably prompt early responsiveness, possibly by early 2011.

All these considerations will be up for review every two months. Much is bound to happen between now and mid-2011 making the interest rate forecast a volatile and rapidly moving target.

Cees Bruggemans is Chief Economist of First National Bank. Register for his free e-mail articles on www.fnb.co.za/economics

Tuesday, April 13, 2010

UK House prices in February rose by 1.9%

- House prices in February rose by 1.9% Page 4
The average price of all residential property transactions completed in England & Wales in February 2010 was 1.9% higher than in January. This is the tenth month in succession in which AcadHPI has increased on a monthly basis. This figure is at odds with other indices which show a fall, a point we explore later.

- Annual price increase is 9.7% Page 4
On an annual basis, in February, the average price of all residential property transactions in England & Wales was 9.7% higher than a year ago - a significant market recovery. It is the fourth consecutive month in which the annual rate of change in house prices is positive.

- January housing transactions fall by more than 50% from December levels Page 3

The housing market in England & Wales got off to a very slow start in January 2010 with an estimated 36,000 transactions in total. This is a fall of 52% from the December 2009 level of activity and is the second lowest level of sales in January in the last 16 years.

Dr Peter Williams, Chairman of Acadametrics, said
“The average price of a home rose again in February 2010 and, at £222,008, is back to where it was in April 2007, three years ago. The increase of 1.9% is the tenth in succession and a further step up from the previous month of January at 1.4%. Given that the two lender mortgage approval based indices for February showed falls of -1.0% and -1.5%, we have a clear tension as to what is really happening in the market. The AcadHPI for the latest month is forecast on a mix of data but, as prior months show, when more data becomes available is impressively stable and reliable. In seeking answers to the current divergence we would stress AcadHPI is a completion based measure, it covers England and Wales rather than the UK and it includes all properties sold including cash purchases and homes sold for over £1 million. All of these will be factors in explaining the difference.”

Click below to download the full document...

http://www.ipsinvest.com/News_196_UK_Property_Report_Grew_by_19_in_Feb_10.aspx

Thursday, April 8, 2010

Resurfacing old anxieties

By Cees Bruggemans, Chief Economist FNB
07 April 2010

Despite rising equity markets last month (our JSE now topping 29300) there apparently will be no respite from global anxiety. How this will influence equity markets, commodity prices and emerging currencies is what exercises the mind.

Having supposedly ‘unsatisfactorily’ sorted out Greece (which over the next 18 months has to raise some €55bn to refinance existing debt, nearly half of it probably through IMF-cum-European lifeboats, yet with Greece already this week balking at the likely terms and wanting to ‘renegotiate’), financial markets are maintaining a ‘high’ Greece spread over German bunds (meaning default risk hasn’t gone away, indeed has drastically risen anew overnight).

Attention will now probably also be increasingly shifting to Portugal, Spain, Ireland, Italy, all of whom could still turn into needy recipients as well. The IMF’s work, like a good mother, apparently is never done, at least in Europe.

These many mainly southern European problem children may yet refocus attention on inner European strains and therefore the viability of the Euro. It may as yet not be out of the woods. Great news for European exporters as Euro strains resurface once again but not its politicians (or foreign exporters into Europe).

But even as Europe is creating another global ripple, global awareness is also very preoccupied with bigger issues governing liquidity, such as the Fed ending special arrangements and bond buying and China tightening more decidedly.

Some people see this as really bad news, reducing global liquidity and stimulus, with downside implications for commodity prices and emerging currencies (and their equities?).

Concern about Fed (and ECB) ending special liquidity arrangements and bond buying may be overdone. Such supports ultimately were financial props and ended up as excess central bank deposits rather than fuelling massive financial and economic credit booms.

The removal of these supports is undertaken as the Fed feels markets have been repaired enough and self-sustaining growth is coming into focus. Time to be less supportive with super liquidity.

Does this necessarily reduce demand? Surely if markets show evidence of being able to carry on independently, the extra support is no longer required to underpin things? Still, liquidity is liquidity and less of it presumably means less price support. It makes people uncertain, at least until they can see how it plays.

China is probably the more interesting question. Like the US, China launched an enormous fiscal stimulus program in response to the financial crisis.

In the US, its growth stimulus should be waning from 2Q2010. It seems China is also pulling in some of such support. In its case, though, the message goes via its local authorities and state banks. Less lending for everything apparently, including land purchases, real estate development and infrastructure.

At the same time, Chinese manufacturing, exports and imports are growing robustly, indicative that China is benefiting hugely from the global recovery but that it is also contributing its bit to its sustainability.

Still, in China’s case it is the excessive credit lending of recent months that is being disciplined from fear of overheating and its inflationary implication.

Thus we hear about bank reserve requirements being tightened, interest rates being raised, banks being ‘told’ to lend less and deposit requirements being forced higher. What waits is a yet bigger issue.

China allowed its currency to appreciate by over 20% against the Dollar in 2007 and 1H2008. But as the global financial crisis deepened it went on hold, happy for its Yuan to shadow the Dollar.

With the global crisis ended, recovery well underway, US insistence growing that China needs to do more to undo the global imbalances (implying a fairer trade deal for the rich West after all its accommodation of China these past three decades) and China itself seeking a greater handle over its internal demand dynamics, a new policy shift could be looming shortly.

Not that China isn’t contributing anything to righting the global imbalances. Its domestic stimulus has been without equal. But the world wants more, especially sustainable moves that are more permanently embedded in trade competition. A revalued Yuan is central to this.

China likes to do things without getting pressurized. Americans are probably not unwilling to threaten trade penalties (import surcharges). A compromise is probably shaping, as much because the global financial crisis has passed and China has its own domestic reasons for wanting to move as Americans insisting on being heard.

Next week Chinese President Hu Jintao will be visiting Washington just ahead of a crucial report to Congress on whether China is a currency manipulator (warranting to be punished). That report is now being delayed. And the Chinese delegation may not arrive empty-handed. More Yuan currency appreciation may be on the cards. But how much?

Financial markets undoubtedly would welcome less confrontation between the US and China and more progress with addressing the world’s imbalances.

But some markets may read falloff in commodity demand and slower industrial growth into all of this.

Some are taking a middle-of-the-road attitude, seeing a marking time in commodity prices for a couple of months, followed by a resumption of robust growth from later this year once stockpiles have thinned somewhat.

Bottomline is that something is cooking. Understanding what it means for financial prices is the difficult part.

Obviously this is a situation in which volatility (price overreaction) is possible. But the Chinese are unlikely to want to slow down their economy too much.

And though US growth may slow somewhat in coming months as inventory repair and fiscal stimulus wane, there is evidence self-sustaining growth is making an appearance.

With global companies strongly insistent on cutting costs (employment) during the crisis and reaping rich productivity gains during its aftermath, corporate earnings repair is well-advanced and still gaining.

This bodes well for global equities, also because big public debts and greater risk discernment about sovereign bonds is pushing down their prices, while cash still wants to leave the sidelines.

This may well favour developed market equities for now, while some of these changes are seen as risk averse for emerging markets. But the overall picture remains pro-growth with short-term interest rates and capital flows (and bond market destinations) favouring still high-yielding emerging markets.

So despite the new bouts of anxieties, the world recovery seems to be supporting good growth gains and financial market support.

South Africa is finding itself a steady beneficiary of global conditions, especially linked to commodities, but the bond (and equity) flows may also still favour us, not only pushing up our asset prices but also the Rand.

The fiscal windfall last week, reducing the estimated budget deficit, has probably improved our market rating (seeing so many other sovereigns under pressure while we apparently improve our numbers effortlessly), but also our small current account deficit may currently need minimal funding.

A current account deficit of 4%-5% of GDP, with unrecorded transactions (probably trade items) amounting to 2%-3% of GDP and Customs Union proceeds owed to neighbouring African countries amounting to another 1%-1.5% of GDP (but transferred in Rand) would suggest we don’t need much foreign capital at present.

So we may well continue to have excess capital inflows coming at us, potentially firming the Rand.

Therefore the Rand still may remain a candidate for testing 7:$ on the downside, even though Fed liquidity and Chinese policy concerns may be feeding some renewed risk averseness globally, potentially keeping the Rand from advancing too far for now, making for 6.80-7.80:$ territory.

Cees Bruggemans is Chief Economist of First National Bank. Register for his free e-mail articles on www.fnb.co.za/economics

Monday, March 29, 2010

IPS Cares about animals

IPS Gives Back!

On Wednesday 17 March, IPS began their drive to give something back with our very first charity afternoon at Kitty and Puppy Haven. This day marked IPS’s sixth birthday and was the perfect day to gather our staff and start helping those who need it.

Kitty and Puppy Haven is one of the only rescue and rehabilitation centres in Gauteng that offer complete veterinary care, vaccinations, and sterilisation of all the animals in their sanctuary. They also find homes for these once injured, traumatised or abused animals, once they are in a fit condition, healthy both physically and mentally. The people who work at Kitty and Puppy Haven have seen the worst of what these pets are put through and have some amazing success stories. They recently relocated their premises to allow for the much needed space for all their special animals.

Upon arrival we were greeted by a contented bunch of cats and dogs, each with their only special character. The staff at Kitty and Puppy Haven are dedicated to what they do and welcome every visitor (whether animal or human) as a part of their family. During our tour of the facility, everyone found their hearts being stolen by more than one of these special animals.

Because Kitty and Puppy Haven are extremely busy doing the wonderful work they are doing, they have not found the time or resources to begin revamping their new location. So, IPS set about, in the sweltering Johannesburg heat, building a plant bed in front of the main wall so the beauty inside would radiate to the outside. After grappling with weeds, stones and broken glass, the plant bed was taking shape. We built it up so it would stand higher than ground level to allow for better drainage during our spectacular Highveld storms. We finished the bed off by planting some seeds and giving them a light sprinkle of water. In a few weeks these seeds will begin sprouting and in time will grow into a gorgeous array of flowers designed to attract butterflies and birds to this cheery place. IPS have laid a foundation which, hopefully, further volunteers can continue to build on. After bidding this sanctuary a happy farewell, IPS can certainly say it was worth closing our doors for an afternoon to give a little bit back.

Watch this space as we update you with more of our volunteer work and possibly a few pictures of our flowers as they grow.

Sunday, March 7, 2010

Rand Prospects 2010-2012

By Cees Bruggemans, Chief Economist FNB
22 February 2010


The present US context would appear to warrant another year of Rand firming against the Dollar. Also, the European context warrants Rand firming against the Euro.

Yet not everything may support such outcomes.

The Rand’s advance against the Dollar ended five months ago. It is uncertain how far recent Euro weakness will proceed, boosting the Rand. Also recent domestic policy actions may eventually favour Rand moderation.

So what gives in 2010 and beyond?

Following the Great Crisis (2007-2008), the Great Recession (2008-2009) and resulting policy responses, 2010 could quite easily be a copycat repeat of 2009 for the Rand.

As the Rand firmed steadily in 2009 from near 10:$ to 7.50:$, a copycat repeat could yield further Rand firming towards 6:$ this year.

Asia should remain a growth locomotive, with China leading with 10% GDP growth. Most of the developed West will be a slow coach, starting the year with 10% unemployment and policy determined to keep rates low.

It is a context favouring firm commodity prices and capital flows into emerging equity and bond markets, also firming their currencies.

Yet the Rand reached 7.50$ by September 2009, thereafter coming to a standstill. This probably reflects many forces. US growth recovery was more robust than other Western countries, inviting Dollar revival. During 4Q2009 Europe encountered sovereign fiscal weakness, spilling over into Euro weakness and more Dollar safe haven strength in 1Q2010. Chinese policy tempering also fed global concerns.

All these dynamics guided risk aversion, limiting capital flows, causing emerging market pullbacks.

Throughout the Rand appeared in suspended animation at 7.20-7.80:$. These same forces could continue to prevail in coming months, keeping the Rand near 7.50:$ within a wide trading band.

Meanwhile the Anglo-Saxon banking troubles, having triggered the Great Recession, also uncovered many old fiscal sins in Europe’s monetary union. Late in 2009 and into 2010 this put downward pressure on the Euro, causing Rand firming towards 10:€ and potentially beyond it.

European monetary union wasn’t accompanied by political union. Every country retained fiscal sovereignty. The Financial Stability Pact of 1997 created an artificial straightjacket, requiring every country to limit its fiscal deficits to 3% of GDP. Reality was a lot more flexible and was papered over by the good times, with weak countries getting subsidy support from rich countries as well as their bonds being able to leverage handsomely off Germany’s good name.

When the Great Recession struck, it greatly worsened fiscal finances in Europe’s periphery, even suggesting eventual sovereign default, putting the focus fully on inadequate European coping mechanisms.

With some European countries suffering weakened finances and rich Europeans unwilling to bail them out, the Euro headed lower firming the Rand towards 10:€.

Yet Europe may not be in freefall.

Europe’s periphery (Greece, Portugal, Spain, Ireland) faces painful fiscal adjustment (higher taxes, public spending cuts) with increased unemployment. Even so, such fiscal weakness may ultimately require European support. Though rich taxpayers may balk, letting the monetary union unravel would be more costly.

Besides, resulting Euro weakness is good for exporters and fragile European recovery. This is worth something, warranting some European backing for its weak periphery.

Financial markets appear to be accepting the tough love meted out to the periphery, the superficial willingness to ‘stand’ by weaker countries, the retention of fiscal sovereignty, and the advantage of a weaker Euro.

America’s financial crisis may have weakened the Dollar as its interest rates fell to near zero, favouring US exporters and supporting US growth. It all went at Euro expense to which Europeans had no answer, until Greek fiscal trouble started to force the Euro lower.

Though European fiscal strain could be substantial in coming years, with the European centre unwilling to support its periphery unduly and fiscal sovereignty mostly surviving, markets do recognize the benefits of Euro weakness, thereby probably arresting it.

Thus Rand firming against the Euro could also moderate eventually.

In coming months US growth could keep favouring the Dollar, eventually further bolstered by Fed rate tightening later in 2011-2012 even if US fiscal fundamentals longer term indicate Dollar weakness.

Despite our small balance of payments funding needs and global positioning suggesting rich commodity export prices and large capital inflows, the Rand could yet remain in suspended animation near 7-8:$ and may eventually give way to renewed weakness above 8:$ from 2011-12.

Domestically, flexible inflation targeting (hinting at keeping rates cyclically low in 2010-2011) and exchange control reform (giving banks greater ability to support client activity abroad) also hint at Rand moderation.

Thus the latest Rand firming cycle against the Dollar may surprisingly already have ended in 2009, and its belated firming against the Euro in early 2010 may be contained ere long. Eventually new cyclical easing may materialise.

The high water mark for Rand overvaluation could be near 7:$ and 10:€. Beyond 2010 looms eventual US and European policy normalization and their currency revival, potentially implying less Rand strength towards 8:$ and 11:€, actively abetted by our own policy actions.

Cees Bruggemans is Chief Economist of First National Bank. Register for his free e-mail articles on www.fnb.co.za/economics

Wednesday, March 3, 2010

ABSA Housing Index - First Quarter 2010

• The South African economy emerged from recession in the second half of 2009,
with real GDP rising at an annualised rate of 0,9% in the third quarter. Positive real
economic growth of 2,5% is forecast for 2010.
• Despite a trend of declining interest rates during the course of 2009, the household
sector continued to experience a fair amount of financial pressure on the back of
major job losses over a wide front, declining real disposable income and relatively
high levels of debt. However, the cost of servicing household debt declined
markedly as a result of lower interest rates.
• House price growth in all segments of the market slowed down further during the
course of 2009, with some categories recording a nominal drop in prices. In real
terms, prices declined further in all segments.
• In 2009 the average price of affordable houses increased by 2,8% to R291 700 in
nominal terms, while declining by 4% in real terms. In 2008 prices in the affordable
segment increased a nominal 10,2%, but dropped by a real 0,8%.
• House prices in the middle segment of the market declined by a nominal 0,2% to
R965 700 in 2009, after prices dropped markedly in the first half of the year, but
started to recover in the second half. A nominal price rise of 4,1% was recorded in
2008. In real terms middle-segment house prices declined by 6,8% in 2009, after
dropping by 6,2% in the previous year.
• In the luxury segment of the market house prices were up by almost 1% to about
R4,5 million in 2009, compared with a growth rate of 8,8% in 2008. The average
real price of luxury housing was down by 5,8% last year after declining by 2% in
the preceding year.
• At provincial, metropolitan and coastal level, house prices were marginally up last
year in some regions in nominal terms, but after adjustment for the effect of
inflation, price declines occurred in all areas compared with 2008.
• The affordability of housing improved further during the course of 2009, based on
the ratio of house prices as well as mortgage repayments to disposable income.
This was the net result of trends in nominal house prices, nominal household
disposable income and interest rates.
• The steady recovery evident in the residential property market since late 2009 is
expected to gather further momentum in 2010 as a result of better economic
conditions, the lagged effect of lower interest rates and less tight credit conditions.
Nominal house price growth of around 6% is currently forecast for 2010, but with a
projected average consumer price inflation rate of also 6%, no real price growth is
expected this year.

Click here for full report -
http://www.ipsinvest.com/News_194_ABSA_Housing_Index_First_Quarter_2010.aspx

Nationalisation and South African Property

Julius Malema & your property rights
Jackie Cameron
03 February 2010

‘Have 20 properties, as long as you're a local'- ANC Youth League speaks to Realestateweb

CAPE TOWN: The ANC Youth League, becoming increasingly vocal and more controversial in its views, gives investors in South African residential property its blessing - provided they are not foreigners.

This was the message from Floyd Shivambu, spokesperson for the ANC Youth League, in response to questions from Realestateweb, property news site in the Johannesburg-listed Moneyweb stable.

"They can own more than one house, they can even own 20 houses. There's nothing wrong with that," said Shivambu of property investors with South African assets in a telephonic interview.

"We don't agree with foreign control of South African land. South Africa must be owned by South Africans," he continued.

The ANC Youth League is headed by Julius Malema, who has become a household name thanks largely to his colourful and often controversial comments. The ANC Youth League seems to have played a key role in ensuring President Jacob Zuma and the ANC's political success during last year's election. It is owed favours by the ANC's ruling politicians. It is also increasingly trying to call the shots at the highest political levels.

Earlier this week, the ANC Youth League lashed out at mineral resources minister Susan Shabangu after she attempted to reassure international investors at a mining conference in Cape Town that nationalisation of mines is not government policy.

The organisation accused her of being "disingenuous and dishonest" and of not understanding the ANC after she reportedly said nationalisation of mines would not happen in her life time. "In our internal discussion with Minister Shabangu, she said that she does not disagree with the ANC Youth League, but because she is now trying to impress imperialists, she changes her tone," said Shivambu.

"The ANC is the centre of power and gives direction to government policy, not vice versa. The reason why the ANC Youth League has developed a concrete programme on the nationalisation of Mines within the ANC, not in government, is because we understand that the ANC gives policy direction to government. The ANC policy objectives are located within the Freedom Charter, which says Mineral wealth beneath the soil shall be transferred to the ownership of the people as a whole," said the ANC Youth League.

Shivambu told Realestateweb that he was "100%" sure nationalisation of mines "is going to happen". "The sooner investors realise that, the better...Investors mustn't be misled," he said.

Talk of nationalisation is worrying for many investors in South Africa and those with the ability to command foreign investment flows. It also raises the possibility that South Africa will ultimately go down the same political and economic road as ailing northern neighbour Zimbabwe.

Another thorny issue that is lurking in the background is land expropriation, a concept supported by ANC leaders. Expropriation sparked Zimbabwe's economic demise, ultimately leading to hyperinflation and severe financial hardship for its people.

The ANC Youth League is fully supportive of land expropriation, but not with "generalised compensation". Although the ANC Youth League leaders have not yet applied their minds fully to land expropriation and "haven't yet entered" that debate, the idea is that it should be guided by "objectives" and "conditions" and with the objective of the "restoration of wealth", Shivambu told Realestateweb.

But on the question of whether individuals who have amassed property portfolios should be worried, Shivambu said: "That's an easy one." As long as you are South African, you are welcome to grow your residential property portfolio, is the current ANCYL thinking. Write to news@realestateweb.co.za

Chinese property market is in trouble!

Beijing Seen Vacant for 50% as Chanos Predicts Crash (Update1)

By Bloomberg News

Feb. 12 (Bloomberg) -- Jack Rodman, who has made a career of selling soured property loans from Los Angeles to Tokyo, sees a crash looming in China. He keeps a slide show on his computer of empty office buildings in Beijing, his home since 2002. The tally: 55, with another dozen candidates.

“I took these pictures to try to impress upon these people the massive amount of oversupply,” said Rodman, 63, president of Global Distressed Solutions LLC, which advises private equity and hedge funds on Chinese property and banking. Rodman figures about half of the city’s commercial space is vacant, more than was leased in Germany’s five biggest office markets in 2009.

Beijing’s office vacancy rate of 22.4 percent in the third quarter of last year was the ninth-highest of 103 markets tracked by CB Richard Ellis Group Inc., a real estate broker. Those figures don’t include many buildings about to open, such as the city’s tallest, the 6.6-billion yuan ($966 million) 74- story China World Tower 3.
Empty buildings are sprouting across China as companies with access to some of the $1.4 trillion in new loans last year build skyscrapers. Former Morgan Stanley chief Asia economist Andy Xie and hedge fund manager James Chanos say the country’s property market is in a bubble.

“There’s a monumental property bubble and fixed-asset investment bubble that China has underway right now,” Chanos said in a Jan. 25 Bloomberg Television interview. “And deflating that gently will be difficult at best.”

Third Costliest
Investor concerns have spread beyond real estate. Among 15 major Asian markets, the benchmark Shanghai Composite Index is valued third-highest relative to estimates for this year’s earnings, after Japan and India, even after falling 8 percent this year.
A glut of factories in China is “wreaking far-reaching damage on the global economy,” stoking trade tensions and raising the risk of bad loans, the European Union Chamber of Commerce in China said in November.

More than 60 percent of investors surveyed by Bloomberg on Jan. 19 said they viewed China as a bubble, and three in 10 said it posed the greatest downside risk. The quarterly poll interviewed a random sample of 873 Bloomberg subscribers and had a margin of error of 3.3 percentage points.

Digesting the debt from a popped property bubble may slash bank lending and drag growth lower for years in an economy that Nomura Holdings Inc., Japan’s biggest brokerage, says will provide more than a third of world growth in 2010.

Japanese Comparison
The risks are so great that a decade of little or no growth, as Japan experienced in the 1990s, can’t be dismissed, said Patrick Chovanec, an associate professor in the School of Economics and Management at Beijing’s Tsinghua University, ranked China’s top university by the Times newspaper in London.

The Nikkei 225 Stock Average surged sixfold and commercial property prices in metropolitan Tokyo rose fourfold before the bubble burst in 1990. The Nikkei trades at about a quarter of its December 1989 peak.

“You have state-owned enterprises using borrowed funds from the stimulus bidding up the price of land -- not even desirable plots of land -- in Beijing to astronomical rates,” Chovanec said. “At the same time you have 30 percent-plus vacancy rates and slumping rents in commercial property so it’s just a case of when you recognize the losses -- or don’t.”

China’s lending surged to 1.39 trillion yuan in January, more than in the previous three months combined. Property prices in 70 cities climbed 9.5 percent from a year earlier, the most in 21 months.

Reasonable Control
Policy makers are starting to rein in the loans that helped fuel the property boom. Banks should “strictly” follow real estate lending policies, the China Banking Regulatory Commission said on its Web site on Jan. 27. It called for banks to “reasonably control” lending growth.

The People’s Bank of China today ordered banks to set aside more deposits as reserves for the second time in a month to help cool expansion in lending. The requirement will increase 50 basis points effective Feb. 25, the central bank said on its Web site. The current level is 16 percent for big banks and 14 percent for smaller ones.

“The liquidity bubble last year went to the property market,” said Taizo Ishida, San Francisco-based lead manager for the $212-million Matthews Asia Pacific Fund, in a phone interview. “I was in Shanghai and Shenzhen three weeks ago and the prices were just eye-popping, just really amazing. Generally I’m not buying Chinese stocks.”
‘Dubai Times 1,000’

Chanos, founder of New York-based Kynikos Associates Ltd., predicted that China could be “Dubai times 100 or 1,000.” Real estate prices there have fallen almost 50 percent from their 2008 peak as the emirate struggles under at least $80 billion of debt. The economy may shrink 0.4 percent this year, Shuaa Capital, the biggest U.A.E. investment bank, says.

The commercial property space under construction in China at the end of November was the equivalent of 6,800 Burj Khalifas -- the 160-story Dubai skyscraper that’s the world’s tallest.

It’s difficult to determine how exposed Chinese banks are to real estate debt because loans booked to some state-owned companies as industrial lending may have been used to invest in property, say Xie and Charlene Chu, who analyzes Chinese banks for London-based Fitch Ratings Ltd. in Beijing.

A drop in the property market may be accompanied by a surge in nonperforming loans. The Shanghai office of the banking regulatory commission said on Feb. 4 that a 10 percent fall in property values would triple the ratio of delinquent mortgages there.

Bank Shares
Hong Kong-listed Industrial & Commercial Bank of China Ltd., the world’s largest bank by market capitalization, has dropped 13 percent this year. China Construction Bank Corp., the second-largest, has fallen 11 percent. Both are based in Beijing. Hong Kong’s benchmark Hang Seng Index has declined 7.3 percent over the same period.
Fund manager Joseph Zeng says he has a contrarian view on China’s banks, on the grounds that rising interest rates this year will benefit their net interest margins.
“For us, non-performing loans are not expected to be a big issue until 2013, the peak of the current economic cycle,” said Zeng, head of Greenwoods Asset Management Ltd.’s Hong Kong office, in a phone interview. He declined to say what he is buying. Greenwoods has more than $500 million under management.

China has firepower to deal with a crisis. The nation has the world’s largest foreign exchange reserves, at $2.4 trillion, and government debt of only about 20 percent of GDP last year, according to the International Monetary Fund. That compares with 85 percent in India and the U.S. and 219 percent in Japan.

Own-Use Excluded
CB Richard Ellis doesn’t count empty office buildings bought by banks and insurance companies when calculating vacancy rates, since some of the space is for the owners’ use. The Los Angeles-based company said in a report that vacancy rates are starting to fall and rents to rise for the best office buildings as China’s fast economic growth buoys demand.

Gross domestic product expanded 10.7 percent in the fourth quarter from a year before, a two-year-high, after the government introduced a $586-billion stimulus package.

“In many cases when you look at these buildings and say, that’s never going to be fully occupied, somehow 12 to 18 months later the building is full,” said Chris Brooke, CB Richard Ellis’s Beijing-based president and chief executive officer for Asia.

Overcapacity may be looming in manufacturing as well. China’s investments in new factories and properties surged 67 percent last year to 15.2 trillion yuan, more than Russia’s gross domestic product. Excess steel capacity may have reached about 132 million tons in 2009, more than the 87.5 million tons from Japan, the world’s second-biggest producer. The Beijing- based EU Chamber of Commerce report said a “looming deluge” of extra cement capacity is being built.

Balance Sheet Deterioration
While neither Xie nor Chu see nonperforming loan ratios reaching the level of a decade ago, when they made up 40 percent of total lending, they say banks will see deterioration in their balance sheets.

“A lot of people will lose a lot of money, but the banks will probably not go down like in the 1990s,” Xie said in a phone interview. “Of course there will be a lot of bad debts. There will be a lot of mortgages gone bad I think.”

Rodman displays the slide show to private equity and hedge fund clients brought in by banks such as Goldman Sachs Group Inc. at his office in eastern Beijing.
“China is the only place in the world that despite having more empty buildings than the rest of the world has yet to reflect those valuations on their balance sheet,”
Rodman said.

Empty Buildings
Gazing south from the building that houses the Beijing headquarters of Goldman Sachs, UBS AG and JPMorgan Chase & Co., one of the first structures in the field of vision is a 17-story office tower at No. 9 Financial Street. Empty.

Farther along are the two 18-story towers of the Bank of Communications Co. complex. Dirt is gathering at the doors and the lobby is now a bicycle parking lot. A spokeswoman for the Shanghai-based lender didn’t return phone calls and e-mails.
The supply of office buildings will continue to grow. Jones Lang LaSalle Inc., a Chicago-based real-estate company, estimates that about 1.2 million square meters (12.9 million square feet) of office space in Beijing will come on line this year, adding to the total stock of 9.2 million square meters.

The city government is driving growth regardless of the market. Financial Street Holding Co., whose biggest shareholder is the local municipal district, plans to build 1 million square meters of additional office space starting this year, and is talking to potential clients such as JPMorgan, said Lydia Wang, the company’s head of investor relations.

Doubling the CBD

Across town, the district government is seeking to double the size of the city’s Central Business District, which already has the highest vacancy rate ever recorded in Beijing. It was 35 percent at the end of 2009, according to Jones Lang LaSalle.
For its part, Beijing-based Financial Street Holdings has “100 percent” of its properties, which include the Ritz Carlton hotel and a shopping mall, rented out, Wang said. The empty buildings along Finance Street don’t belong to the company, which is 26.6 percent owned by the district government.

Zhong Rongming, deputy general manager of the Beijing- based China World Trade Center Co., which built China World Tower 3, said the company is “optimistic about 2010 prospects” given China’s accelerating economic growth. He said the new tower will include tenants such as Mitsui & Co. and the Asian Development Bank.

One new addition to Finance Street may give real estate boosters cause for concern. No. 8 Finance Street will be the headquarters for China Huarong Asset Management Corp.
The company’s mission: selling bad debt from banks.

http://www.bloomberg.com/apps/news?p...SZD.Jr4&pos=11

UK Commercial property experts fear fickle real estate rebound

Mon Jan 25, 2010 5:38am EST

* 'Two-tone' recovery could arrest market growth

LONDON, Jan 25 (Reuters)- Less than one in 20 UK commercial property experts believe a fast-paced recovery in asset values will continue in 2010, while tenant demand and rental growth remain under pressure, a survey out on Monday showed.

Benchmark data in the latest Expert Panel survey, by online real estate portal Reita, shows average commercial property values have gained about 9 percent since July, although this has been driven by prime quality, well-located buildings.

Some investors fear values of secondary property in less popular areas may take up to 18 months to catch up with soaring prices in locations such as Mayfair and the City financial district, both in London, the survey showed.

Experts also worry measures taken by government to curb Britain's rising national debt could exacerbate this 'two-tone' rebound by compressing tenant demand and rental growth.

"The only economic certainty is that public spending will be severely cut by the next government and that people will have a lot less money to spend as a result," Peter Cosmetatos, director of Reita, said.

"This will undoubtedly have an impact on business and on the take-up of commercial space. With that in mind we should tread very carefully when making any predictions over long term market recovery this year," he said.

Reflecting this pessimism, fifty-seven percent of the Expert Panel said they did not expect to see a fall in secondary property yields before 2011, up from 29 percent in the last survey.

Forty-eight percent of the respondents expect returns for listed property firms to be slightly worse than direct property over the next 12 months, up from 21 percent last September.

Last week, the UK real estate sector was the worst performing equity sector at minus 4 percent, with UK REITs showing returns of minus 6.5 percent in the year to date compared to minus 1.7 percent for the FTSE All Share index, analysts at Nomura said.

"Rental values outside the prime areas will continue to slide and banks will carry on being highly selective in their lending activities as they work to shore up their balance sheets," said Patrick Sumner, chair of Reita and head of property equities at Henderson Global Investors.

Reita's Expert Panel consists of leading industry experts from more than 30 different organisations and firms, including Blackrock, Credit Suisse, Deloitte, Land Securities (LAND.L), Liberty International (LII.L), Nabarro and Segro (SGRO.L). (Reporting by Sinead Cruise; Editing by Andrew Macdonald) (See www.reutersrealestate.com for the global service for real estate professionals from Reuters)

Saturday, February 27, 2010

USA Property Report - Feb 2010

There are significant concerns about the USA economy and also the USA property market, but in amongst all this turmoil are also some fantastic opportunities. As with any overseas investment, an investor two most vital things are Information and Partners. What Scott Picken, IPS CEO, has tried to do here, is give you an overview of everything he found on his extensive trip around USA. This is the information so that you can make educated and intelligent decisions. Obviously it is a massive country and a massive market, but this was his opinion of everything he learnt. Scott says, “I believe there is significant opportunity in USA, but one has to be very careful or people could make financially disastrous decisions. I believe it is all about having the right partners on the ground to maximise on the opportunities available!”

Click here to download the rest - http://www.ipsinvest.com/News_193_IPS_USA_Property_Report_Feb_2010.aspx

Watch our USA Report – Movie - http://www.youtube.com/watch?v=TA3Kch6f2xQ
• Scott Picken sitting in Time Square and explaining everything he found in USA (5 minutes)

Go to www.ipsinvest.com for more information.

Tuesday, February 16, 2010

5 things you have to know and ask before you invest offshore?

Dear Potential Offshore Investor

Napoleon said, “Information was nine tenths of any battle.” The challenge is do you have the right information, are you choosing the right partners, making the right investments and most importantly asking the right questions?

1. Information – like water, the right information makes you finically healthier, but the wrong information is like poison.

a. 80% of people who invest offshore lose money and the investment becomes a tremendous headache in a short space of time! According to Real Estate Web -http://www.realestateweb.co.za/realestateweb/view/realestateweb/en/page206?oid=54920&sn=Detail – you could also make far better returns in South Africa.
b. The reason for this is that people make decisions without the right information. Sure the sales person gives them allot of information, but invariably they will give people what they want to hear?
c. An example of this is in the last few months South Africans have bought $184 million on the Gold Coast in Australia. They think they are getting a real bargain, but when you talk to Richard Dunn, OzInvest Acquisition Manager, a company who spends millions on research, says, “We get offered opportunities on the Gold Coast every day! At the moment we would never offer these to our investors as there are huge vacancies and the property values are in real trouble.” Similar examples are Manchester or Leeds, where South African investors believed they were buying real value (perceived huge discounts) and yet there is huge oversupply, banks are not lending and there are huge rental problems. Do we need to talk about the information presented on Dubai and how that has changed?

d. The questions you need to be asking:
i. “How much do you spend on your research monthly?”
ii. “Can you show me how you have communicated this research over the last couple of years, so that I can see you really understand your market?”
iii. “Can I see the research from an entity that doesn’t have a vested interest in selling something to me and who substantiates this information?”
iv. If someone is based in South Africa – “How often do you travel over to the investment country to understand the market and make sure you are keeping up to speed with current trends?”

2. Partners – the key to the vault of success!


a. In life there is a saying, a chain is only as strong as its weakest link.
b. Investors often underestimate how important the choice in your partner is to your long term success. Dr Dolf DeRoos, the World Famous International Property Investors says, “You are only as strong as your team.”
c. Many investors invest because they like the salesmen, they have been referred by a friend or they associate with a brand. This can be catastrophic to your success!
d. The questions you need to be asking:
i. “How long have you been helping people invest internationally?”
ii. “How many people have you assisted to invest in this specific country?”
iii. “Is this your core business, or something which is supplementary to your estate agency business where you help people buy homes?
iv. “Are you a property investor yourself and have you bought international property?”

3. Rentals – the life blood of property investment!

a. Property Investment fundamentals live and die on cashflow. Experienced property investors understand this and it is why they succeed in all property cycles. Inexperienced investors are always chasing the bargain, and yet often they find a great bargain or focus on capital growth, only to realise there is no rental market. This often destroys the investment and in many instances them financially.
b. Examples of this are Manchester where you can get 60% discounts but there are 2000 units oversupplied on the market. Dubai which is also at a 60% discount, but has massive oversupply problems (The numerous developers who offered rental guarantees who have gone bust are testament to this). And then Las Vegas which is 70% down, but there are 5000 families leaving a month as tourism is down by 60% and there are 32 000 homes on the market.
c. If there is one thing you have to be certain on is the rental market and where this demand is going to come from. You need to ask:
i. “How can you ensure me of the demand for my property when it is ready to rent?”
• I am not talking about a 1 or 2 year rental guarantee from the developer, which has often been included in the price. I am talking about me receiving long term sustainable rental income at market related rates from the demand which exists.
ii. “Are you prepared to put your money where your mouth is based on this guarantee or assurance?”
• How would you sustain this long term if you were wrong?

4. Local & International Offices – geography is so NB!

a. Many salesmen will travel to South Africa with a suitcase, put on a classy presentation, meet you in a hotel, sign you up, take your money and then leave in a couple of days. This is where all the problems start and you can’t get hold of them or find out what is happening, etc. and this is how a “great investment” (supposedly) turns into a lemon.
b. To be successful you need to ensure the partner you choose to invest with, not only has offices in the foreign country, but also offices and a physical presence in South Africa. It makes such a difference when you can speak to a local South African on the phone, on the same time scales and if needs be come and see them in their office whenever it suits you.
c. Questions you need to be asking:
i. “Where are you offices in South Africa and in the country I am investing in?”
ii. “If you don’t have offices in South Africa, how can I ensure that you will still be here in a couple of months or years when I need help with the investment I have bought?”
iii. “I would like to visit the property. Who is going to show me around overseas?”
iv. “How do you understand the market unless you have someone who is permanently looking for opportunities and living in the property market?”

5. After Sales Support – the helping hand you need! Trust me!


a. Most investors only focus on the purchase of the property and they forget how important it is to manage the sale. Salesmen are also only interested in closing the sale, but most importantly not to help you right through the process, when you are investing from afar. Many companies claim to provide the full service to you, but where are they based and how are they going to do it?
b. Questions which you need to ask:
i. “How big is your aftersales team and who will be assisting me personally making sure the property transfers timeously into my name?”
• Sorry I am not talking about the salesmen, I want an Aftersales Professional who has been dealing in this for many years and understands the nuances between South African property and overseas property.
ii. “What happens when the property is ready? Who will be assisting me with transfer of the property, inspections, etc?”
iii. “Can I see referrals from people who were happy with your service?”

With these simple questions you can ensure you don’t buy lemons and you can take advantage of the significant opportunities. It is not only wise it is prudent to invest some of your wealth in foreign markets. In the Real Estate article above it talks of the tremendous opportunities locally. We completely agree with this and continue to make great money in South Africa, through the use of strategic partners as they suggest. However once you have made this money, it is essential, if not irresponsible not to, to take some of this wealth and invest overseas. To achieve your goals of Asset Preservation, Capital Growth, a Rand Hedge, Diversification and Positive Cashflow in first world currencies – you need the right information and partners and most importantly to be asking the right questions!

Good luck!

Scott Picken
IPS CEO
www.ipsinvest.com

Sunday, February 14, 2010

Australian home values deliver double digit growth in 2009

RP Data – Rismark Home Value Index Release

Australian home prices rise by +1.1% in November with 11.3% cumulative growth in first 11 months of 2009; results driven by robust gains in Sydney (+11.6% for year) and Melbourne (+17.0% for year).

Based on the rpdata.com residential property database, which is the nation’s largest with over 250,000 sales in the first eleven months of 2009 alone, Australia’s housing market continued to grind out strong gains in the month of November with cumulative double-digit growth recorded in the year-to-date.

According to the RP Data (rpdata.com)-Rismark National Home Value Index, which is published by the RBA in the Statement on Monetary Policy, Australian home values rose by an indicative 1.1 per cent in the month of November after 1.3 per cent growth in October (October’s initial indicative estimate was 1.4 per cent).*

Over the first 11 months of 2009, Australian home values rose by 11.3 per cent following on from their modest 3.8 per cent peak-to-trough falls in 2008.

The most important story of 2009 has been the extraordinary recovery in the Melbourne and Sydney housing markets. In the three months to end November, home values in Melbourne and Sydney have outperformed most other capitals rising by 4.5 per cent and 3.2 per cent, respectively (see summary tables for more).

Over the year-to-date, Melbourne has been Australia’s best performing capital city outside of Darwin, generating exceptional capital gains of +17.0 per cent. Sydney home values have increased by more than 1 per cent per month with cumulative growth of 11.6 per cent.

In the first 11 months of 2009, most of the other capital cities have performed strongly with Darwin (+17.9 per cent) leading the way, followed by Canberra (+10.9 per cent), Brisbane (+6.9 per cent), Perth (+6.5 per cent) and Adelaide (+5.7 per cent).

According to Christopher Joye, managing director of Rismark International, “At the end of 2008 most forecasters were predicting substantial house price falls in the following 12 months. Almost all of them were proven wrong. Australia’s housing market has surprised on the upside with impressive double-digit capital gains in the year-to-date. The inability of most analysts to get close to divining Australia’s housing market trajectory during the GFC and in the recovery since, combined with the many misconceptions one typically hears about housing, illustrates just how poorly understood the sector is.”

Rpdata.com Research Director Tim Lawless suggests that the November results highlight that the Australian market may be less sensitive to interest rate rises and the removal of Government stimulus than many would have thought.

“The strong November results were achieved despite the 25 basis point lifts in the official cash rate in October and November as well as the wind back of the boost to the First Home Owners Grant which was halved on the first of October. First home buyers have been trending down since peaking in May ’09 and the gap is being filled by upgraders and investors who are much less sensitive to rate rises and the level of stimulus.”

Christopher Joye said, “first time buyers have been fading from the market and the withdrawal of the boost has yet to have any discernible impact on price growth. The key driver of Australian housing demand in the latter half of the year appears to have been upgraders and investors. We expect this trend to continue in 2010.”

He said that as mortgage rates normalise to around 7-8 per cent, house price growth will taper back to more modest single-digit levels in 2010. Since many borrowers did not reduce their mortgage repayments in 2008-09 when the RBA cut rates by circa 40 per cent, household balance-sheets should be well positioned to absorb higher costs.”

Rpdata.com’s Tim Lawless agreed stating that value growth in Australia’s residential sector is likely to be more subdued than what was recorded in 2009.

“2009 has been both an exceptional and surprising year for Australia’s property market.”

“Looking forward we would expect market conditions to moderate into 2010 as interest rates continue move back to a neutral setting and the remainder of the Government stimulus is rolled back. The primary driver of growth will continue to be an under supply of housing coupled with extraordinary housing demand fuelled by population growth,” he said.


Market dynamics

The median Australian home price in all capital cities over the three months to end November was $439,800 (including houses and units). If we include all regions across Australia (i.e. not just the circa 40 per cent of homes located in capital cities), the national median dwelling price is $395,000. (Note: that these are the ‘middle value’ or 50th percentile median prices based on the pooled sales over the last three months.)

The median Australian house price in capital cities is $470,000 while the median unit price is $390,000.

The most expensive houses, based on median price, are in Sydney ($550,000), followed by Canberra ($535,000), Darwin ($501,000), Melbourne ($486,400), Perth ($485,000), Brisbane ($449,850), Adelaide ($372,000) and Hobart ($330,000).

Sydney has the most expensive unit market with a median price of ($417,000). This is followed by Melbourne ($402,500), Canberra ($390,000), Perth ($385,000), Brisbane ($375,000), Darwin ($357,000), Adelaide ($310,000) and Hobart ($270,750).

In the month of November, detached houses (+1.0 per cent) have underperformed units (+1.3 per cent).

Over the three months to end November, unit values (+3.1 per cent) have also shaded houses (+2.9 per cent).

And in the year-to-date, units (+12.5 per cent) have materially outperformed houses (+10.9 per cent) presumably due to the influence of the first time buyers’ boost.

National rental yields tapered slightly in November with the gross annualised rental yield for units being 4.9 per cent while house yields are lower at 4.1 per cent.

Notes
* This data is indicative and subject to revision. It is typically based on approximately 30-40 per cent of the total population of expected home sales. RP Data ultimately collects roughly 100 per cent of all property sales via its license agreements with every State and Territory Government Valuer General and Land Titles Office. This is reflected in subsequently reported index results (ie, in the months preceding the current indicative period).

**The median price is the 50th percentile observation based on all pooled home sales over the three months to end November 2009. This is different to the medians reported by other parties for several reasons. First, where appropriate it includes all property types (ie, not just detached houses, like the ABS). Second, the median value reported by the likes of APM is calculated using a ‘stratification technique’, which is different to the simple 50th percentile observation used here. RP Data-Rismark’s previously reported ‘median values’ must also be interpreted differently. These are the index values attributable to the RP Data-Rismark ‘hedonic index’, which was originally based at inception on median automated property valuation estimates (ie, the median of a statistical valuation of all capital city homes). The change in the index value over time reflects the underlying capital growth rates generated by residential property in the relevant region. These growth rates are not influenced by capital expenditure on homes, compositional changes in the types of properties being transacted, or variations in the type and quality of new homes manufactured over time. The RP Data-Rismark ‘median values’ are not, therefore, the same as the ‘simple median price’ associated with all homes sold during a given period. In future, we will report simple median prices to avoid any further confusion.

Ends. Additional information – please contact Mitch Koper at RP Data on 0417 771 778 or Christopher Joye on 0414 980 264.

Key statistics, tables and graphs available in the PDF (289kb). - http://www.ipsinvest.com/News_188_Australian_home_values_deliver_double_digit_growth_in_2009_14_February_2010.aspx

UK Property is up 0.7% in Jan 2010 - 9th consecutive month of growth!

 House prices in January rose by 0.7% Page 4

The average price of all residential property transactions completed in England & Wales in January 2010 was 0.7% higher than in December. This is the ninth month in succession in which AcadHPI has increased on a monthly basis.

 Annual price increase is 5.4% Page 4

On an annual basis, in January, the average price of all residential property transactions in England & Wales was 5.4% higher than a year ago - a significant market recovery. It is the third consecutive month in which the annual rate of change in house prices is positive.

 December transactions are the highest for two years, helped by the stamp duty holiday
Page 3

This was a strong end to 2009 which had seen the lowest number of annual housing transactions in England and Wales since the Land Registry began computerising its records in 1995. The market in December was assisted by an increase in the sale of properties valued below £175,000, with purchasers seeking to take advantage of the stamp duty holiday which ended on 31 December 2009.

Dr Peter Williams, Chairman of Acadametrics, said
“The average price of a home rose again in January 2010 and, at £215,016, is almost back to where it was in January 2007, three years ago. The increase of 0.7% is the ninth in succession, suggesting a recovery that is now well entrenched. However, the rise from 0.4% in December to 0.7% in January is modest, and it is hard to draw firm conclusions, given that the monthly increase had been slowing since September and there are strong regional variations in the recovery story. Without doubt, year end activity was heightened by the anticipated end of year closure of the stamp duty holiday for properties up to £175,000 which had been in place since September 2008 as we discuss later. This factor, along with historically low interest rates for some borrowers and much else, adds layers of complexity in trying to anticipate what the market might do next.”

“The average price of a home in England & Wales is now £215,016. At this level, it is still down £16,812 or 7% from its peak in February 2008 of £231,828, but prices have recovered significantly and the index is showing a 5.4% increase over the last twelve months. The fact that there remain strong regional variations in this reported trend does mean that household experience will vary considerably, although prices in all regions are currently moving in the same direction - upwards.

“It is clear that, with average monthly increases of 0.6% over the last three months compared to double that (1.2%) over the previous three months, price increases have been moderating, and it is too early to say with any confidence as to whether this trend will continue. Published house price forecasts for the year vary from plus 10% to minus 10%, which gives a clear sense of the current uncertainty. Total mortgage lending for 2009 was £143.5 billion gross and £11.5 billion net, down from £254 billion gross and £41 billion net in 2008. The latest Trends in Lending report published by the Bank of England in late January noted some improvement in credit availability and for higher loan to value ratios. The evidence supports the view that the thaw continues, but there is little to suggest there will be a sharp recovery in mortgage volumes. Furthermore, the recent statement by the Council of Mortgage Lenders concerning the need for continued governmental assistance for lender funding sends a clear warning of possible consequential future mortgage constraint, raised interest rates and falling house prices. Uncertainty alone will restrain the market.”


HOUSING TRANSACTIONS

“Overall, the number of housing transactions in England and Wales has increased by 51% during Q4 2009 (October–December 2009) compared with the same three months in 2008. The year began on an all time low of 27,637 monthly transactions, representing a 60% reduction on the 15-year average for January of 67,378 monthly transactions. However, during the year the monthly transaction count rose, with December sales reaching an estimated 76,000, the highest level since December 2007 – a figure which will have been influenced by the year end cessation of the stamp duty holiday for homes costing up to £175,000. Some might say of the year – in like a lamb and out like a lion!

“The 51% increase in annual transactions has two distinct underlying trends. The first trend is of a North/Midlands/South gradation in the increase in the number of homes sold. In the Northern regions and Wales, the average increase in housing transactions has been 34% or less; in the Midlands the increase has been between 42% and 56% whilst, in the Southern regions including London, there has been an annual increase of 66% to 68% in the number of properties sold.

“The second trend is one of different activity levels by property type. Over the three months October–December 2009, compared with the same three months in 2008, increases in the numbers of properties sold have been as follows: detached 69%, semi-detached 61%, terraces 46% and flats 26%.

“Comparing Q4 2009 with Q3 2009 these trends appear to be changing. The increase in the number of housing transactions in London over the period is 0.2%, whilst in the rest of the country the increase has been an average of 6%. The volume of flats, terraced and semi-detached homes sold has similarly increased by 6% over this period, whilst sales of detached properties have increased by a more modest 1%. The mini-boom in the purchase of detached properties in the southern counties would thus appear to be over, at least for the time-being.”

Download the full document here - http://www.ipsinvest.com/News_187_UK_Property_is_up_07_in_Jan_2010_9th_consecutive_month_of_growth.aspx

Wednesday, February 10, 2010

South African property is waking up, but what is happening in London?

By Scott Picken, 10th Feb 2010

As South African’s moved into 2010, with allot of hope about the year and of course our awesome World Cup, there was definitely a sense of optimism which is prevailing. Scott Picken, IPS CEO says, “We have definitely noticed this trend with a large increase in interest for South African property. The great thing is this is locally and also from the expats in London and other countries!”

So the South African market is starting to recover but what is happening elsewhere. Australia continues to boom, but another market which is recovering strongly is the London market. Although the economic picture is far from certain with the UK being the last country in the G20 to come out of recession and with a poultry growth of 0.1%, the property market is into a full swing recovery. According to all the property indicators the property market reached the trough in March / April of 2009. Since then there has been growth consecutively every month. Click here for the latest reports. It is still roughly down 7% from the peak of February 2008, but it grew 4.2% for the last 12 calendar months.

The market recovery has also been spurred on with investment from areas like Hong Kong, Singapore, Malaysia, etc. On a recent trip to London, Scott met with all the top property companies and developers. An example of this was King Sturge who went to Hong Kong in April 2009 and sold 130 units on a weekend. From there, there was significant demand and there were many launches. King Sturge went to the East and had exhibitions on 23 weekends last year and averaged 60 – 80 sales a weekend. The question you would ask is where is the appetite from the East coming? It comes down to 3 major factors. The sterling has weekend 30% in the last 2 years, property is down 30% and banks are more willing to lend to foreigners at the moment as they are willing put down 30% deposits. People in these countries, understand the opportunity when they see it, are long term investors and see London as a great long term investment!

This demand has now transpired into the local markets. Galliard Homes, one of the prime developers in London who IPS strategically partnered with had a exhibition for locals in London this weekend and they sold 130 apartments.

IPS believes South Africans are in a very similar position to those people in the East. Although the South African economy has taken longer to recover, the Rand is strong against the pound and there are great asset value opportunities in London. Outside of London the market is still in trouble, but in London now is certainly the time to be investigating. IPS is proud to announce it has a number of various opportunities from New Developments with great discounts, existing distressed properties and the opportunity to invest in Central London property from as little as £10 000.

We will be holding information sessions around South Africa to explain what is happening in the London market and where the opportunities lie!

If you are considering Offshore Property then this is something you need to understand. We will cover –

• 5 essential things you need to know before you invest offshore.
• 7 fundamental items of London property.

Go to www.ipsinvest.com to book for the events.

Tuesday, February 9, 2010

Why Adelaide ?
• During the next 30 years, the government is planning for steady population
growth of 560,000 people in Greater Adelaide.
• South Australia’s population is expected to reach two million by 2027.
• 258,000 additional homes needed in the next 30 years for Greater Adelaide.
• 9,000 additional homes needed in the next 30 years for the Adelaide Hills
alone.
• Government planning for economic growth of $127.7 Billion over 30 years.
• 282,000 jobs expected to be created over 30 years.
• There is an estimated shortfall of over 200,000 properties being demanded by
renters and owner occupiers.
• South Australia set to benefit from $100 billion worth of future defence
projects, creating 5,000 jobs.
• SA’s GDP grew by 5.2 last year.
• In November 2009 South Australia’s property market has recorded its best
results since the global financial crisis.
• Adelaide Hills / Mount Barker
• A population increase of 29,000 has been earmarked for the Adelaide Hills &
Murray Bridge.
• Mount Barker set to grow from 10,500 to almost 29,000 within 15 years.
• Over the last two years, Mount Barker’s population has increased by about 17%
to 12,500.
• Mount Barker’s population increased by 3% last year, 3 times the national
average.
• Recent mining activity at several locations has drawn many workers to the
Adelaide Hills.
• Real Estate Industry leaders believes the Adelaide Hills to be one of the
top 5 performing suburbs in 2010 with some suburbs predicted to rise by 10%.
• Due to a large percentage of tradespeople, the Adelaide Hills will be one of
the areas least affected by unemployment.
• Mount Barker is the second fastest growing council in all of South Australia.

Homes to hit $1m in decade

Herald Sun, Wednesday, January 20, 2010 11 Greg Thorn
THE average Melbourne home may cost more than $1 million by 2020.

Real estate analysts predict the median price of a house will be $1,166,344. According to property expert and wealth creation author Michael Yardney, the trend will be repeated
in every Australian capital. "They (house prices) are likely to be closer to $1.5 million," he said.


The prediction comes after a record year in Melbourne's overheated property market, which
boomed despite the global economic crisis. Statistics compiled by Mr Yardney from a variety
of sources including the Real Estate Institute of Australia, show house prices in Melbourne grew from an average $230,500 in October 1999 to $518,500, an increase of more than 124 per cent.
"A lot can happen in 10 years," he said. "Median house prices have more than doubled
in every capital city and in some cities property values have gone up more than 200 per cent.

"These increases have occurred despite a recession in 2001, a change Millionaires: average house prices will rocket. of government, periods of high interest rates and the global financial
crisis," he said. Despite the booming local market, Mr Yardney's figures show Melbourne will be overtaken by every other capital except Adelaide by 2019.

The west is destined to take the property mantle, with Perth tipped to snare the top median house price of more than $1.6 million by the end of the decade, followed by Brisbane and Canberra ($1.4 million) and Sydney ($1.2 million).

"Our major cities of Melbourne, Sydney and Brisbane are growing at an enormous pace and are
bursting at the seams," Mr Yardney said. He said some forecasts suggested the population
of all three cities, including southeast Queensland, could each grow by 700,000 people over the next 10 years.


This should create a building boom and the economic prosperity that gives home owners and
investors confidence. "We are moving into a new economic cycle with record population growth
fuelled by rising immigration and a baby boom," Mr Yardney said.
"If you help enough other people get what they want, you can have anything you want!"

Zig Ziglars