Commercial real estate is surging ahead

Australia’s residential markets may be suffering right now but the commercial sector is powering ahead.

What’s behind the surge and will it take the residential sector with it?

Mark Wizel, national director at real estate investment firm CBRE, analysed the commercial real estate market for us on Auction Day, revealing whether its performance is a precursor of things to come for residential real estate.

Despite concern over wages growth and some headwinds in the residential real estate sector, the national and state economies are performing well, Wizel said.

Population growth and infrastructure spending are likely to continue being key economic drivers this year.

This has meant commercial real estate performance over the last 12 months has been quite strong, Wizel said. Investment in retail last year was down on 2017 but still at a very healthy $9.4 billion in 2018.

What drives the commercial real estate market?

Wizel said a combination of factors continue to drive commercial real estate, including strong investor demand and tight supply.

Australia has a reputation as a safe haven for investors, which has attracted foreign investment particularly from Asia, Wizel said.

Overseas investors, unlike local investors, aren’t so driven by sentiment. They look at the fundamentals in the commercial real estate space, which are based on things like population growth, and believe the commercial market is a good place to invest.

“They are seeing an opportunity to get into that space and fill the void of what the big Australian banks have left post royal commission,” Wizel said.

Asian developers, who entered various parts of the Australian market from 2009 to 2014, are now shifting into investment or land banking opportunities as opposed to developments.

“Development sites are not trading anywhere near the ferocity we saw in 2015, 2016 and parts of 2017.

“Unfortunately that’s probably an indicator that we’ve probably got a way to go in that residential market picking up steam again,” Wizel said.

The availability of debt and the attractive pricing of that debt is another factor making Australian commercial real estate a smart investment.

“We are seeing a lot of non-traditional bank lenders enter the market and have a real willingness to work with investors and work with developers in the Australian markets.

“That’s ultimately what’s driving the confidence and the strong activity,” Wizel said.

Wizel rejected the thought that upcoming state and federal elections in Australia would make foreign investors feel jittery.

“Over the past 4 or 5 years, when it comes to Asian investment coming into the country, the election has nothing to do with the ferocity with which they look to attack the property market.

“A lot of the Asian groups, whether they are Malaysian, Singaporean, Hong Kong or Mainland Chinese, they see the Australian political landscape as quite steady,” Wizel said.

 

What does it mean for residential real estate?

Just like the commercial market is driven by general economic factors like population growth and infrastructure spending, so is the residential development and domestic residential markets.

But while the residential sector overall is driven by the same key drivers of the commercial markets, Wizel said there are some factors unique to the residential sector that determine the rate and depth of the current residential market decline and the timing and speed of its recovery.

Wizel said the residential market is “ahead of the game” in terms of market cycles, having peaked at some point across the different geographical markets over the last 12 to 24 months.

The good news?

Multi-billion dollar infrastructure investments by the Victorian and NSW governments into road and rail projects will underpin economic growth in those states for the next few years, Wizel said.

He predicted these developments will counteract, to some degree, the downturn in residential construction. A newly emerging mining revival will also give a boost to WA and Queensland housing markets.

Wizel’s forecast for the residential development market for the rest of the year is it will continue to face challenges, with more stock likely to be sold off and investors focusing on office developments.

Recent commercial real estate sales

There is a new evolving trend of Asian capital away shifting away from immediate development and more into established commercial sites as they sit and watch to see what happens in the market while having some skin in the game.

509 St Kilda Road

The sale of a St Kilda Rd office block in Melbourne smashed the leafy boulevard’s record by almost $20 million after an eye-watering $163 million sale.

It was sold to a mainland Chinese investor and illustrates the trend Wizel identified of Chinese developers shifting over into the investment landscape.

“Here it was effectively a Chinese developer who had done a number of projects in Melbourne and Sydney.

“They said they might just put the brakes on the developing for the time being but we still want to keep the money in the country. And they came out and bought that commercial office building for $160 plus million.”

A Chinese-backed land banker and developer swooped on an Abbotsford industrial site, buying an IKEA-leased warehouse for $17.3 million. It is an example of what Wizel called a “longer-term land-bank play”.

Source: Azal Khan

Five Trends That Will Impact Real Estate Investing This Year

Let’s be honest: Real estate valuations are very high today. But worries of an impending housing crash are premature. There are many trends that could continue to drive real estate values. A millennial middle class hungry for the independence of owning a home and a reasonable economy outweigh housing indicators that might signal a downturn is imminent. That doesn’t mean U.S. real estate markets are not in a pivotal phase. In fact, 2019 is poised to create significant opportunity for those who understand the five significant economic and demographic trends driving the market. Let’s consider the following five trends:

1. Rise in Interest Rates

Predicting Federal Reserve actions on rates is impossible. The Fed has wound down its unprecedented bond-buying program triggered by the 2008 financial crisis. Although mortgage rates have been in decline over the past several months with the 30 year mortgage around 4.5%, many analysts see mortgage rates rising on average to a high of around 5% on a 30-year fixed in 2019 and remaining at that level. As of this writing, the Fed’s next rate decision is a few weeks away and (at its mid-March meeting). It is widely expected that the fed funds rate will remain in the 2.25% to 2.5% and will delay any future rate hikes. However, mortgage rates geared off the 10-year Treasury rate may rise and increase the cost for real estate buyers and investors.

Some real estate price softening will be seen where cost of financing is critical. Given the amount of institutional capital chasing multifamily and industrial real estate investments, I expect investment activity to continue with lower IRR return expectations.

2. Millennial Homebuyers Enter The Market

There are 74 million millennials, a larger demographic than the huge number of baby boomers. So follow the millennial money. Many millennials are at prime home buying age, and they continue to push trends in the real estate industry. Millennial homeownership rates are below the national average of 64%. That represents a deep well of demand that could convert to 10 million home purchases. With the average millennial home buyer having a reasonably high household income at $88,200, millennials have the means, and they want to buy first homes.

The year 2020 marks the pinnacle of millennial home buying. For the next decade, this generation will represent the largest share of the market. The desire for their first home may continue to push single-family home prices higher in select markets. If prices are seen as too high in some markets, then millennials will focus on newer, expensive rental properties.

3. Growth Of Secondary Cities

High prices in first-tier cities are forcing many homebuyers and investors to consider second-tier cities in search of better value. This trend is likely to continue through 2020. The influx of capital to second-tier markets is driving double-digit growth in investment activity and price appreciation. Major employers such as Toyota have pulled out of Southern California and relocated to the Dallas metro area. Apple is opening a billion-dollar campus in Austin, and Amazon is opening HQ2 just outside Washington, D.C. These moves, and others like them, may be signs that economic growth could support continued rising real estate values in second-tier markets.

In a typical late cycle, capital leaves the overvalued first tier such as New York and San Francisco and flows to the less-expensive second tier. Eventually, capitalization rates in the two markets converge. Premium cap rates on secondary market investments range from 75 basis points to 100 basis points higher than major markets and a full 300 basis point higher than top tier cities. Expect to see rising property values in the secondary cities, which will reduce cap rates.

4. Housing Affordability

Currently, renting is more affordable in 59% of U.S. housing markets, and home prices have continued to increase more than wages in 80% of markets, according to an analysis by ATTOM Data Solutions. So, expect continued strong rental housing demand rather than continuing single family home price increases. Evidence of this shows up in strong markets such as Seattle, San Jose, Las Vegas and Portland, where the number of homes for sale rose last year, but the share of affordable homes fell, due to rising home values and increasing mortgage rates. Multifamily investors will be rewarded in markets where housing affordability is strained.

According to ATTOM, it has gotten increasingly difficult to afford a home purchase in virtually every market with a population over 1 million. Currently, it is more affordable to rent than to buy a home in Miami, New York City, Seattle, Las Vegas, San Jose, San Francisco and Boston. It’s my take that this will push rents higher, making multifamily investors happy.

5. Impact of Opportunity Zone Funds

Real estate investors should consider a new tax incentive included in the Tax Cuts and Jobs Act of 2017 for investments in real estate in qualified opportunity zones (QOZs). The provisions include deferment, reduction and complete elimination of capital gains taxes for certain investments. I believe local expertise in these markets is a requirement and fold it into my company’s own QOZ Fund offerings, because local operators will have the best understanding of these opportunities. It is projected that $6 trillion in unrealized capital gains are eligible for QOZ investment, which could result in very strong real estate values in these QOZs. With core property in first-tier markets flooded with capital, the right investment in a QOZ with the right local partner could be a diamond in the rough.

The Bottom Line

There are certain drivers that will push rents and home prices higher. For longer-term real estate gains, the trends of millennial renting and buying upscale homes, the increasing prices in secondary markets, and capital flowing to opportunity zones will provide great opportunities to make outsize returns. A disciplined approach to real estate investing can uncover opportunities that lead to outperformance with less risk.

Source: Forbes

Housing Ministry surpasses real estate developers in sales of new cities

The Ministry of Housing, through the New Urban Communities Authority (NUCA), has achieved significant sales in the cities of New Mansoura and New Alamein, in contrast to the expectations of real estate developers regarding the deceleration in sales of the real estate market during the current year.

The ministry announced in early March that 536 distinguished housing units were electronically booked in New Alamein in just 26 minutes. This is a great indicator of the popularity of the ministry of housing, which is almost the sole developer in the New Alamein city.

The substantial sales are not merely for the New Alamein city, but the ministry has also achieved sales which exceeded EGP 1.5bn in the Zahya project in New Mansoura in just three days, contrary to what was expected by City Edge Developments, the marketer and the project manager on behalf of the NUCA.

Additionally, in late February, Amr El-Kady, the CEO of City Edge Developments, elaborated that the company has achieved EGP 8.5bn in sales of New Alamein by the end of 2018, and has achieved EGP 500m in sales in the city in the first two months of the current year.

Moreover, the company achieved EGP 1.5bn in sales in New Mansoura in 2018, and EGP 600m in the first two months of 2019, according to El-Kady.

Some developers believe that this represents a significant competition for them, and not in favour of developers, but rather in favour of the ministry, which may affect their sales in the coming period.

Chief Projects Officer at Capital Group Properties, Amgad Hassanein, said that the government’s offers of luxury or distinguished housing projects are not its role, but rather the role of private sector companies.

Hassanein added that the continuation of the state in offering luxury housing may lead to problems in the real estate market, which may lead to the reluctance of some companies to exist in some areas where the ministry strongly competes.

For his part, Alaa Fekri, chairperson of Beta Egypt for Urban Development, said that this competition is unbalanced, especially after increasing the implementation cost by about 80%, in addition, developers incur the payment of the value of land purchased from the state.

Fekri explained that the companies’ advertising expenses are rather extensive and therefore companies are working under financial pressure, and at the same time are required to pay the instalments of the land’s value, so it is strongly seeking to accelerate marketing rates.

He elaborated that real estate companies currently face major challenges because they are competing for the same housing category, as well as facing intense competition from the ministry of housing.

Meanwhile, Ayman Sami, the JLL country head-Egypt, believes that the state had to first start by entering these new markets such as New Mansoura and New Alamein in order to reassure investors wishing to operate in these new cities–expecting that there will be a great presence by developers in those cities in the coming period.

Furthermore, Waleed Abbas, the assistant housing minister of the NUCA, said that there is no competition between the state and developers in new cities, especially New Alamein and New Mansoura, proving that the NUCA has offered four plots of land to investors in these two cities in November.

Abbas denied that the state is the only investor or the winning competitor in those cities.

He explained that competition exists if the ministry is offering the same features in projects provided by the investors, noting that develops must distinguish their products in order to be more attractive to the client than what the ministry offers.

He also pointed out that the ministry’s prices are not competitive but are rather market prices as the ministry calculated the cost and profit margins much like developers, in the case of units offering in any of the new urban communities.

Source: Dailynewsegypt

Building Collapse: Sanwo-Olu Promises Urban Renewal For Lagos

Babajide Sanwo-Olu, governor- elect of Lagos state has vowed to implement urban renewal programmes that would put a stop to collapse of buildings in the state.

While admitting that urban renewal policy has always posed a challenge for successive governments in the state, Sanwo-Olu said he would approach the programme with human face, by earning the trust of the people, rather than clamping down on their properties.

He gave the indication on Monday, after paying a courtesy visit to President Muhammadu Buhari at the State House, Abuja, in company of his deputy-elect, Dr. Femi Hamzat.

While reacting to the recent school building which collapsed in Lagos Island, the governor- elect acknowledged that many of the buildings in the state were now obsolete, especially as most of them were constructed when the state was a colony under the British government.

He hinted that his first approach to tackling the problem would be to do proper enumeration of the building in the state, while entering into agreement with the property owners.

His words, “The recent building collapse is an unfortunate incident, even when I was serving in government, I used to be the Vice – Chairman on issues that had to do with building collapse.

It was about ten years ago, which is what led to us to creating an agency called Lagos State Building Control Agency (LASBCA), it was meant to begin to identify structures well ahead before issues like this begin to happen.

“But it’s an unfortunate thing, extremely very unfortunate and it also means that we expect it would happen again. So imagine the current government had started very quickly the integrity testing of the properties in the state.

You know Lagos is a part of the old colony of Lagos, so you will expect to see houses that are over a century old and in those numbers, we need to be sincere to ourselves and we need to be real.

“Lagos truly really needs regeneration, especially Lagos Island and that was part of the things we promised on the campaign train. So, it’s to have a conversation right round all these with families and we’ll see the kind of redevelopment that is important as it’s built on in a lot of other big cities like Lagos.

“The issue of urban renewal has been a big challenge to Lagos, over the years, it’s been a challenge to successive governments. We are bringing things that will be different from what others have done that will make Lagos what it’s supposed to be.

“It’s really not that it’s been a challenge, but because we have not been able to see it through to the end. When you want to take people’s properties and you want to regenerate, they must first see a sincerity of purpose – what are the additional plans that you have for them? Before you could regenerate, there must be a stop gap – in the next two to three years what are the plans you have for them? And you need to do what we call proper enumeration.

“Once you can enumerate properly and determine who are the original owners? And you sit and have an agreement, then the regeneration will start. You can do it in two ways: It could be in form of which when you come back, you have part of it; or you turn it into equity. So it depends on whatever model you are working round to ensure that it works”. Sanwo-Olu narrated.

Source: Innocent Oweh

German Home Buyers Look East to Dresden, Leipzig and Beyond

DRESDEN, Germany — After an evening drink at the old-fashioned wine garden overlooking the Elbe River in Dresden last summer, Stefan and Katharina Kluge decided to hop a nearby construction fence and check out a 19th-century building being converted into luxury condos.

Once inside the gutted old walls, they sat down, drank another glass of wine and stared out at the water.

“That’s the moment we fell in love with the place,” Mr. Kluge said. “That’s when we decided to buy.”

When their 1,270-square-foot, four-bedroom condo is finished this summer, the Kluge family will do what many East Germans are doing today — return to their roots.

Having earned enough money elsewhere, they are settling in to raise their children where they grew up. And they are not the only ones drawn to a part of the country that has been underpopulated for decades.

Housing prices in Germany have been on the rise for years, powered by a strong economy, low interest rates and a growing desire for homeownership. The highest prices are in western Germany, in cities like Hamburg and Munich. But these days, cities in the former East Germany like Dresden and Leipzig — which have gone through complete transformations since the country reunited nearly three decades ago — are attracting buyers, too, and prices there are soaring.

Across Germany, a standard condo, defined in Germany as a 2-bedroom, 861-square-foot apartment, has risen in price nearly 65 percent since the beginning of the decade, almost entirely driven by price increases in cities, according to IVD, a real estate association that keeps track of property prices. (Nationwide top-of-the-line single-family houses with roughly 1,600 square feet have gone up 44 percent in the same span).

Compared with prices in Munich — the country’s most expensive city — Dresden’s standard condos still cost a little over a third as much, but things are changing quickly: From 2017 to 2018, the year the Kluges bought their new apartment, the value of an apartment in the city has risen 46 percent, on average.

In the 1990s, East Germany emptied out. In the decade after reunification, the area that made up eastern Germany, including East Berlin, lost close to a million inhabitants, almost all of whom went west.

The migration was so extensive that many small villages were dotted with abandoned houses and empty apartment buildings, and local officials set about knocking them down, rather than living with the blight. In 2004, roughly 60,000 apartments — one quarter of all apartments in the city — stood empty in Leipzig, according to one study.

Since then, much has changed. Cities like Dresden and Leipzig have things to attract both wayward natives, like the Kluges, and outsiders looking for nice places to live: excellent infrastructure, meticulously refurbished downtowns, shorter commutes, a less hurried pace — in short, a better quality of life.

Dresden, which grew from its lowest point of 484,646 inhabitants in 1998 to 566,484 now, attracts residents with its historic downtown, cultural scene and the Technical University of Dresden, one of the best universities in the country. At first, the city had a shortage of living space. But thousands of new units have been created, a mixture of new apartments and refurbished old ones.

Most of the foreigners who invest in Dresden buy property in the area around the Frauenkirche, a painstakingly restored Protestant church with the largest stone dome north of the Alps, according to Henry Brömme-Herrmann, a native who has been dealing in real estate for more than a decade.

“Dresden’s growth is sound,” he said. “But you do have to know where to invest.”

In much of the city, a standard two-bedroom apartment sells for slightly more than $200 a square foot, making Dresden the most expensive market in the east, apart from Berlin, where a comparable apartment would cost closer to $250 a square foot. But luxury apartments in some parts of Dresden, can exceed $600 a square foot.

Stefan Kluge grew up in Leipzig; Katharina, in Dresden. After completing their degrees in Leipzig, where they met, she moved to Myrtle Beach, S.C., to intern in an animal emergency hospital and Mr. Kluge focused on making films. In 2007, they moved to Switzerland, where Ms. Kluge earned her doctorate and where their two children were born. The family then moved to St. George, Grenada, where Ms. Kluge works as a veterinary professor and Mr. Kluge as a data scientist while they live on a 35-foot sailboat, which Mr. Kluge plans to sail across the Atlantic when they move.

They want to return because their children are at the perfect age to transfer from Grenadian to German schools.

“What I love about the East — especially Dresden — that it is still a little wild,” said Mr. Kluge, in a telephone interview. “You meet many people who live a different kind of life.”

Just 70 miles west is Dresden’s fiercest rival, Leipzig. Its real estate market is even hotter — for the first time since reunification.

After the fall of the Berlin Wall, Leipzig faced more obstacles than Dresden. The city was considered more utilitarian, and though there was more than enough living space, much of it was not up to modern standards.

When Leipzig was at its lowest in 1998, it counted 437,101 residents.

Not only are universities and colleges attracting researchers and faculties, but Porsche and BMW have opened huge factories on the outskirts. Both Amazon and DHL have overnight hubs in Leipzig.

According to a study by the city, more than three quarters of the people in Leipzig are satisfied with their quality of life — a rating many cities in other parts of the country could only dream of.

Last year, after growing by nearly 6,000 people, Leipzig counted almost 596,000 inhabitants.

“I remember this city when everything was gray. The houses were gray, the streets gray, there seemed to be a layer of soot on everything,” said Andreas Köngeter, a West German who has lived in Leipzig and been active in the real estate market since 1991.

The change, he says, came in 2003, when Leipzig won the domestic bid for the 2012 Olympic Games, which the city would ultimately lose to London. Although the campaign was unsuccessful, the media attention reintroduced the city to German audiences.

Before World War II, Leipzig was one of the most important trading cities in Germany and on track to becoming a city of one million, said Matthias Hasberg, the city’s spokesman.

“It’s why the streets are so wide, and it’s why the train station is so big,” he said.

The British Academy of Urbanism awarded Leipzig the European City of the Year award for 2018, bolstering its reputation as the new pearl of the country’s east.

Although the average price for a middle-of-the line apartment is closer to $150 a square foot, many are betting on a strong upward trend.

A carefully refurbished 1,520-square-foot, five-room apartment in a house built in 1909 in Connewitz, a left-leaning neighborhood with a history of squatters occupying houses, may fetch over $500,000, a sum that would have been unthinkable just five years ago. The unit is not the only one for sale on the block. Dozens of new condos across the street reflect the changing neighborhood.

But because of the often eclectic mix of beautiful prewar buildings (Leipzig has several examples of Bauhaus), more functional German Democratic Republic blocks and newly built post-reunification buildings, neighborhoods mostly stay mixed. Large-scale gentrification, which occurred in the Prenzlauer Berg district in what was East Berlin, is still a ways off.

Mr. Köngeter says that the boom is best documented by the cost of empty lots — the result of bombs during the war, or Communist-era houses in such poor repair that they had to be torn down after reunification. For a while, such lots had virtually no value. But recently, they have been sold for millions to investors planning to build condominiums. According to market research provided by IVD, the price for such lots has gone up 212 percent in the last five years.

“Many who say Berlin is just too expensive now come to us,” Mr. Köngeter said.

Markkleeberg and other villages south of Leipzig are also getting attention. The towns were at the edge of some of the largest open-pit coal mines in the region. When the destruction of the landscape stopped with the fall of East Germany, those living closest to the pits had won the lottery: After billions of euros of cleanup, the pits were converted into large lakes, and the lakefront land became some of the most expensive real estate in the region.

Private real estate in East Germany didn’t exist as such before 1990. Property was state-owned and virtually everyone rented or received housing from their employer.

A problem for young families who were raised in eastern Germany, is that their parents can’t help them with down payment or financing, the way many do in the west, Mr. Kluge said in a telephone conversation, because their parents were never able to buy property or otherwise amass wealth.

So the couple had to finance the nearly $700,000 price themselves.

Although their unit is not yet finished, the family has spent a lot of time thinking about how to style their apartment, how to make best use of the light and of the two windows facing the Elbe, where Mr. Kluge hopes to be able to sail a dinghy. (He plans to keep his big sailboat on the Baltic Sea, roughly four and a half hours by road from Leipzig.)

“In all the places we’ve lived we realize, what really counts is not so much the house itself, but where it is,” Mr. Kluge said.

Source: Nytimes

Affordable Housing Segment: These two regions are topping the chart – What homebuyers, real estate investors should know

The National Capital Region (NCR) and the Mumbai Metropolitan Regions (MMR) lead the affordable housing segment in terms of launches and sales across seven cities in the country, a CII-Anarock report said on Sunday. NCR and MMR account for 55 per cent share of total six lakh affordable housing units launched across the top seven cities in the country and NCR saw the maximum supply, said the report.

Of the total 3.98 lakh units sold in the price category of under Rs 40 lakh, NCR and MMR contributed 57 per cent of the total sales. The other cities where the survey was conducted were Bengaluru, Chennai, Hyderabad, Kolkata and Pune.Commenting on the report, Anuj Puri, Chairman, Anarock Property Consultants said: “The anticipated 8-10 per cent annual growth of this segment is luring investors.”

“Data further suggests that out of the total 15.3 lakh units launched across the top 7 cities between 2014 to 2018, affordable housing contributed about 6 lakh units – 39 per cent of the overall supply,” he said. Homes have already been sanctioned under the Pradhan Mantri Awas Yojana (PMAY), but the pace of development needs to pick up, said the report.

According to the survey, some of the key deterrents for speedier affordable housing development are scarcity of land, illegal settlements and slums and limited private sector participation despite several fiscal and statutory benefits to attract private players.

Source: Zeebiz

Cosgrove boosts housing market with Abuja estate project

Poised to expand the frontier of real estate and bridge the housing gap, Cosgrove Investment Limited has begun Cosgrove’s Smart Estate Wuye in the Federal Capital Territory, Abuja.

The exclusive ‘future-ready’ gated estate offers a mix of three to five bedroom flats, terraces and fully-detached buildings, each providing a perfect balance of safety, accessibility, privacy and functionality.

According to the developers, the estate represents a future driven by innovation and offers ground-breaking solutions that would change the course of industries, communities and societies.

Located at the Wuye, a phase II development plan of Abuja city, close to Wuse and Utako districts, the firm said, the estate is making a new statement through a product or service, as the world expects something innovative and unprecedented.

According to the Chairman of Cosgrove, Mr. Umar Hadeija, the premiere project in Wuye, Abuja and most recently Katampe, Abuja site, “ is evident that Cosgrove is developing estates that tell the world the future is here indeed.”

He said: “From the time, construction on the project began in April 2018, it was clear that Cosgrove had been able to move at such a fast pace without sacrificing their goal of building world-class smart bespoke homes for their clients.

“ All these are possible because Cosgrove pays close attention to the details of the planning, design, and finishing of each building”, he added.

Hadeija also stressed that at the heart of every Cosgrove project is a commitment to use only world-class infrastructure required for home automation and smart living. That’s why all their projects are ‘future ready’and meets global standards of smart homes.

He noted that the impact of Cosgrove’s vision to change the way people live and at the same time bring long-term returns is already being felt by their investors who are seeing a minimum of a 40 per cent return on their investment.

Speaking on the project, trainer for Bosch power tools and accessories, Mr. Dieter Schulze, said Cosgrove pays close attention to the details of the planning, design, and finishing of each building.

Schulze was among the team from Bosch Power Tools and Accessories in Germany, who visited the Cosgrove’s Wuye, Abuja site, to assess the quality of work on the estate with 150 housing units of various types.

The team expressed delight with the quality of the construction and resources that went into each building on the site.

Source: Bertram Nwannekanma

Estate agents call for Real Estate Investment Trusts review

The Association of Estate Agents of Nigeria (AEAN) has called for a review of the Real Estate Investment Trusts (REITs) laws to allow direct investment of pension fund in real estate development.

Mr. Adeolu Ogunbanjo, AEAN Chairman, made the call in an interview with the News Agency of Nigeria (NAN) in Lagos on Friday.

According to him, REITs laws and the National Pension Commission (PenCom) guidelines prohibit pension funds from being directly invested into real estate.

He said that REITs regulations directed that pension funds could only be invested in mortgage-backed securities.

Ogunbanjo said contributions to PenCom under the national contributory pension fund had accumulated to more thn N6.3 trillion.

“These are idle funds that can be unleashed into the real estate sector to stimulate business activities and create room for people to invest in the sector.

“The fund is enough to grow the building construction industry and the economy as a whole if properly harnessed and managed,’’ he said.

Source: DailyTrust

CHINA HOME SALES SLOW, BUT REAL ESTATE INVESTMENT REBOUNDS IN 2019

Growth in sales of real estate in China fell to 2.8 percent during January and February 2019 compared to the same period a year ago, with the value of new property sales during the two months totalling RMB 1.28 billion, according to data released on Thursday by the National Bureau of Statistics.

The slowdown in the value of real estate being sold was a drop of 9.4 percentage points from the 12.2 percent annual growth pace recorded in December 2018, and may help to explain recent government moves to open up China’s monetary taps while local authorities begin to loosen sales policies and allow cheaper mortgages.

The change in government direction seems to already be understood by developers, who increased the amount invested in the real estate sector by 11.6 percent in January and February compared to the first two months of last year — the biggest surge in commitments to the sector in five years.

Sales Growth Slides

The NBS’ latest data indicated that, in addition to the declining growth in the value of homes sold, property sales by floor area fell 3.6 percent year-on-year in the first two months of 2019, declining to 1.41 million square metres. That slide in the amount of space transacted came after the volume of square metres sold had grown by 0.9 percent in December.

China real estate sales

China’s real estate sales growth by value (in blue) slowed by 9.4 ppt in Jan-Feb. Source: NBS

The volume numbers included a dip of 3.2 percent in the residential sector, excluding subsidised housing, while sales of office and retail properties declined 15.7 percent and 13.6 percent by volume respectively.

Overall sales of real estate during the period reached RMB 1.28 trillion, with residential sales posting 4.5 percent growth, office sales dropping by 6.2 percent and retail property sales falling by 9.4 percent, according to the government statistics.

Local Governments Loosen Policies

The slowing sales of homes, and the dependency of Chinese local governments on land sales for the majority of their revenues, appears to already have led to changes in how real estate rules are implemented in many cities.

“Local authorities, feeling that price growth has now come under control and wanting to encourage transaction volumes in support of local market and cash-strapped developers, are selectively loosening some of the more stringent restrictions while banks are starting to reduce the cost of financing in selective cities,” analysts from property consultancy Savills said in a research note issued in response to the latest government real estate statistics.

Some southern cities, such as Guangzhou, along with Heze in Shandong province, have been loosening curbs on the property market since late last year amid slowing sales and bearish sentiment.

Despite the changes happening at the local level, China’s Minister of Housing and Urban Rural Development, Wang Menghui, vowed this week to avoid a “big rise and big fall” in property prices.

Investment Surge Follows Liquidity Boost

The slowdown in China’s real estate sector, which is responsible for 20 percent or more of the country’s economy according analyst estimates, may have already been recognised by top decision-makers who have pumped liquidity into markets this year.

China property investment

New property investment jumped by the biggest margin since 2014. Source: NBS

The NBS data showed that property investment in China rose 11.6 percent in the first two months of the year, compared to the same period a year earlier, up from the 9.5 percent growth reported for the 2018 full year.

Total investment in the sector reached RMB 1.21 trillion during January and February, after China’s central bank lowered the reserve ratio requirements at the nation’s banks by an average of 100 basis points during the first week of January.

That RRR cut, the fifth such reduction in the amount of cash that banks must hold in reserve in a one-year period, had the effect of freeing up around RMB 779 billion for new lending.

In the nation’s subsequent real estate investment surge, commitments to the the residential sector accounted for 72.1 percent of the total and represented an 18 percent increase in investment compared to the same period the previous year. The trend marked the strongest growth for the January-February period since 2014, when it rose 19.3 percent, according to Reuters.

The NBS said that robust investment in the property sector was due to steady housing prices and an increase in new construction starts.

Source: JAN KOT

Rent controls won’t solve London’s shortage of affordable housing stock

The topic of introducing rent controls in London crops up time and time again in our industry. But it’s been hitting the headlines again lately, as Sadiq Khan has pledged to cap rent in the capital as part of his 2020 re-election campaign.

The Mayor hasn’t explained precisely what he means by rent control yet. There are two main forms he could opt for: introduce rent stabilization to prevent sudden rent increases, or impose a blanket rent cap that limits how much a landlord can charge overall.

Various forms of rent controls already exist in many cities around the world. Berlin, Munich and Dusseldorf have all banned rent increases in property potshots, while roughly one million homes in New York have their rent stabilized to prevent sudden spikes. Oregon is also poised to be the first state in the USA to impose statewide rent controls.

In fact, if Khan is successful in his bid it wouldn’t be the first time that rent controls have been imposed in the United Kingdom.

A shortage of housing during WWI saw the introduction of rent controls in the UK and subsequent legislation retained rent controls in some form or the other until deregulation under Thatcher.

More recently, Scotland and Northern Ireland have been using their devolved powers to introduce rent caps in some areas and types of tenancies.

Making life more affordable for Generation Rent

London’s private rented sector has been growing rapidly in recent years and now accounts for 30% of all London households. Some predict that by 2030 that number will climb to 40%.

But rent prices have also risen far quicker than wages and for the typical Londoner the majority of their income goes on rent.

In the areas of East London we work in, we’ve seen the average 2-bed skyrocket to over £1700 a month in rent. To buy a 2-bed will also easily set you back around £500,000 – with the deposit amounting to the cost of a whole property elsewhere in the UK.

The likelihood is that many Londoners – especially the young and lower income earners – will rent for way into their 40s and beyond. This is a totally new phenomenon, so it makes sense to adapt and to take steps to protect tenants’ rights.

Ideally, some form of rent control would make London more affordable for those who live and work in the city and give tenants greater security.

But will it actually work in practice?

The cultural component of housing in the UK and London

If rent controls already work in other cities and countries they could work in London too, right?

Unfortunately, it’s more nuanced than that. Drawing simple parallels between countries ignores the fundamental and historical differences between national property markets.

Take Berlin, for example. Arguably, rent control works quite well in Berlin. However, that’s largely down to one key cultural difference: Germans don’t rent in order to buy down the line, they choose to rent as a way of life. As a result, Germany’s home ownership rates are among the lowest in the developed world.

This in turn means that the property market is far more stable than in the UK, where home-ownership is considered a long-term goal for many.

It also means that tenants make up a large proportion of the electorate and so there’s a greater level of pressure on the government to impose strong tenancy protection laws throughout the whole housing system. For instance, it’s common to find fixed tenancies for five or 10 years in Germany.

So applying rent caps in London won’t be enough to solve the city’s housing issues. If the Mayor wants the Berlin-model, rent controls would need to be rolled out alongside improved tenant rights across the board.

Existing and would-be landlords will be put off the sector

The National Landlord Association has been understandably critical of the Mayor’s proposals. It points out that capping how much landlords are able to let their properties for will reduce rental yields and potentially drive many ‘good’ landlords out of the sector.

We’ve seen this play out for our landlords over the last two decades. In the early to mid-2000s, a third of our sales in East London were for buy-to-let properties; now that number sits closer to 10%. Back then, landlords could expect a rental yield of 10%, whereas now they can expect 3-4% on average.

The impact of rent control is basic supply-and-demand economics.

As investing in buy-to-let becomes less lucrative, more and more landlords will leave the private rented sector and move their money into other income-generating projects, like stocks and shares. With fewer landlords in the sector, the supply of rented properties will dwindle.

Middle income earners who are currently renting may well be able to leave the private rented sector too, since more rental properties flood the housing market and drive prices down. But even so, the demand for private rental properties will still outstrip supply.

What’s more, with social housing in short supply, the risk of homelessness among low income earners may rise. This means that the very government intervention intended to give greater housing security might have the exact opposite effect.

Lack of affordable housing stock

The crux of the housing issue in London is not that there’s a lack of stock – there are a million properties being advertised on Right move right now. The issue is that there is a shortage of affordable housing stock.

Artificially suppressing rents in the private rented sector won’t fix the root of the problem – it may even exacerbate it.

London needs more investment in affordable social housing, alongside stronger protection for tenants in the private rented sector and incentives to keep ‘good’ landlords in business.

Regardless of any individual’s political leanings, as an industry we’d love to see a housing policy work in the long term for the many, not the few.

The Mayor of London’s well-intended proposals, however, may have far-reaching and unintended consequences.

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