Investing in real estate, whether directly or through REITs, can offer opportunities other investments don’t—particularly since, as the old saw goes, they aren’t making any more of it. It carries unique problems as well. Here’s a look at the top five trends in global real estate investing.
1. Australia’s slowing down. Real estate has been a hot topic in Australia for the past year, with housing prices booming and tighter availabilities boosting rents as well. However, May budget actions by the Australian government to boost taxes and cut spending have taken a toll on both homebuyers and renters, causing home prices to drop for the first time in a year. The market had been so hot that the price trend for the 12 months up to May had been up in the largest cities, which gained 10.7% for the period.
But that’s changing. In fact, all major Australian cities with the exception of Darwin and Canberra lost ground. Average home prices for the month of May for the eight largest Aussie cities lost 1.9%, the largest one-month drop since December of 2008. Melbourne suffered the most, falling 3.6%.
Approvals for new construction or renovation, according to the country’s statistics bureau, had already slackened. They dropped in April by 5.6%; it was the third straight month of decline.
But the new downward trend isn’t uniform. While high-end spenders’ interest in the purchase of property has waned a bit—with homes in the top 25% showing the biggest decline in value—0.5%—for the three months ending in May, on the other end of the spectrum, the cheapest housing actually gained 2.8%.
2. Spain’s heating up. Long regarded as a money pit for real estate investments during the financial crisis, Spanish properties are suddenly in demand.
It could have something to do with the fact that prices have fallen—sometimes as much as 50% from where they were at the height of the housing bubble—and suddenly everyone, even fund managers John Paulson and George Soros, seems interested in everything from homes to commercial properties. Paulson and Soros have put a sizeable amount of money into Spanish property investment vehicle Hispania, managed by Spanish investment firm Azora.
Even the whimsical is attracting attention, with KKR having purchased 49% of the Port Aventura theme park in Tarragona. The company also plans investment in hotels, offices and commercial properties.
And Germany’s Commerzbank put together a $5 billion sale of Spanish property loans with JPMorgan and private equity firm Lone Star; the deal was codenamed “Project Octopus.”
3. Singapore is sprawling. Workers in the thriving city are looking for cheaper, better places to live outside the city, and have overflowed the boundaries of the island state to seek homes in Johor in Malaysia and the Riau Islands of Indonesia. The trend, which has become so popular that it has given rise to its own acronym—Sijori—means that Singaporean workers can afford to own their own homes and have money for amenities that they could not otherwise afford.
Trading a short commute for a trip that can instead take a couple of hours, what with border checks and traffic congestion, may seem counterintuitive. But to its participants it makes sense. From a global perspective, the trend is knocking down the boundaries among the three nations involved for an economic expansion trend that encompasses all three.