On the lookout for new pockets of value in new and existing markets, Richard Bradstock is responsible for helping investors in the Middle East fund lucrative opportunities around the world. He shares some of the most attractive international real estate investment destinations.
US: Chicago and Los Angeles
“Chicago is a hidden gem in the real estate market, a market to which investors are beginning to pay attention,” says Bradstock. “The city has the sixth-highest GDP among world cities and is expected to be the key US property investment market through 2017.”
Bradstock points out that Chicago was recently named by UBS as the most undervalued global financial centre in the world. “With property prices still 10 per cent below their 2007 peak and thriving technology, government and education sectors, Chicago is a city that’s in major demand,” says Bradstock.
Furthermore, he explains that a very limited supply of new developments is expected. “We’re currently at a 30-year historical low for the development and delivery of new condominium blocks. Double-digit annual property price growth has been recorded in key neighbourhoods. Since July 2013, average condo prices have risen 21.2 per cent, while prices at IP Global’s most recent Chicago project have risen 5-6 per cent since February 2015. These figures are extremely encouraging for potential real estate investors.”
He recommends one- and two-bedroom flats in the CBD/The Loop, and three- to five-bedroom detached town houses in the inner suburbs, which include a garden and parking.
The average property price in Chicago is around $222,000 (Dh815,486), whereas in Los Angeles prices can start from $626,800.
Bradstock recommends getting a mortgage/financing consultant to provide comprehensive support throughout every stage of the investment process.
“With a population of 4 million in 2016 and a Gross Metropolitan Product of $888 billion in 2015, Los Angeles represents a strong property market for investors; with its resilience illustrated by its relatively fast recovery following the global financial crisis,” Bradstock argues. “In 2015 median sale prices surpassed their pre-recession levels and continued development is expected. There remains room for growth as although condominium prices were up 5 per cent year-on-year to October 2016, they remain 3 per cent below peak values.”
The Trump factor
In a growing global city such as Chicago, Bradstock says local residential property demand is not driven or impacted by national government. “We expect to see a continued influx of international investors and buyers on the lookout for safe haven markets like Chicago. Our usual advice to investors is to consider a hold period of five to ten years anyway — which means that any short-term political shocks can be outlived.”
Bradstock recommends to diversify portfolios by investing in a wide range of assets and classes. “Investors are always at the mercy of events: whether foreseeable or completely out of the blue,” he says. He also advises to bank on a property’s reputation; a unique asset class would not be impacted by short-term shocks, such as stocks and the likes. To survive economic downturns, take a long-term outlook.
Canada: Vancouver and Toronto
“Investors and developers are cautiously optimistic about the Canadian property market,” says Bradstock. “Toronto and Vancouver’s markets continue to experience high demand due to a lack of supply, which has driven up prices and caused affordability concerns.”
He notes that Vancouver is expected to lead all Canadian cities with 3.3 per cent in GDP growth this year, while Toronto’s economy remains healthy and growing, with construction, transportation, warehousing, retail, wholesale and manufacturing all contributing to this growth.
According to IP Global’s annual YouGov survey, when it comes to investing in property abroad, 20 per cent of UAE residents would consider investing in Canada.
“Toronto and Vancouver are the two largest markets in Canada and the most favoured market among UAE residents. However, it is important to note that a foreign purchaser tax of 15 per cent has recently been introduced in both cities.”
Pricing. “Similar to the UK, Chicago and Berlin, it’s quite straightforward to get a mortgage. Pricing is also similar to Chicago and London in key cities,” Bradstock says.
“Currently our focus lies heavily on Outer London, Crossrail route towns and key regional cities like Birmingham, Manchester and Liverpool for the foreseeable future,” says Bradstock. London as usual leads in terms of buoyancy with average house prices double that of the UK average, according the Land Registry, but prices rose by just 3.7 per cent year-on-year in March, compared to a 6 per cent average increase for the rest of the country.
Bradstock advises to pinpoint the areas with the greatest scope for added value. These areas include wherever Crossrail passes through. “Woolwich is an especially notable Crossrail winner; the borough is expected to see value growth of 39 per cent from 2016 to 2020,” he says.
He also cites outlying areas delivering desirable yet accessible accommodation in tune with the aspirations of a largely young, professional occupant base. “Increasingly, these are go-to destinations where urban regeneration features heavily — as does making the most of the waterfront. Croydon is a case in point: £23 million [Dh110 million] has recently been spent on rejuvenation of the town centre. It’s much more than a commuter town; 100,000 people are employed across 12,500 workspaces.”
Bradstock points to research from Savills that although the number of homes built in London was expected to hit a record in 2017, these numbers would fall sharply from next year. The currently supply of homes also does not match the demand for homes costing less than £450 per square foot, but rather targeted above that and up to the £1,000 price point.
Manchester, Liverpool and Birmingham
Bradstock says there has been much investment on infrastructure in the north, including high-speed rail links and upgrades to Manchester Airport. This and the lower cost of living have attracted many working professionals and in turn businesses.
In a recent project in Woolwich, London, the costs include property price (£392,000), legal fees (£700), land registry fees (£270), stamp duty (£21,360), mortgage broker fee (£3,822) and valuation, furniture, tenant and handover fee (£7,700)
Average property prices in Manchester are around £150,000 for a one-bedder and £230,000 for a two-bedder. In prime locations, it is £190,000 for a one-bedder and £325,000 for a two-bedder, according to JLL. Land registration would cost £158,403.
In Liverpool, the average prices are £120,000 for a one-bedder and £195,000 for a two-bedder. In a prime location, prices are £145,000 for a one-bedder and £235,000 for a two-bedder. Land registration cost is £122,283. In Birmingham, the average prices are £140,000 for a one-bedder and £173,000 for a two-bedder. In a prime location, the prices are £173,000 for a one-bedder and £250,000 for a two-bedder. The cost of land registration is £165,182.
“In terms of mortgage finance for overseas nationals, the UK is one of the most robust and straightforward mortgage finance industries. In the last five years, our sister company Liquid Expat have seen their available number of lenders willing to accept a UK mortgage application rise from 20 to up to 35 lenders on their approved panel,” says Bradstock.
Expats purchasing a buy-to-let unit using a UK property as collateral can get up to 75 per cent loan to value. It can go up to 90 per cent depending on the purpose of the purchase.
Australia: look East
According to IP Global’s annual YouGov study, 11 per cent of UAE residents would consider investing in property in Australia.
“A considerable number of our UAE clients do plan to buy in their home country, as the majority of employment contracts here are on a fixed-term basis,” says Bradstock. “Therefore, often our clients have a set goal and timeline for when they return.”
Home or investment?
“We continue to have a high degree of confidence in the overall direction of Australia’s Eastern cities, based on the fact that the most recently available public data shows prices continuing to rise,” says Bradstock. However, he notes significant increases in foreign-buyer stamp duty in New South Wales, Victoria and Queensland and significantly reduced mortgage availability for foreign borrowers. “[This] make Australia a less attractive investment destination for foreign nationals than other tier one property markets globally at this time,” he cautions.
This year Berlin was named the top market for real estate investment and development in a report carried out by PWC and the Urban Land Institute, scoring highest on investment, development, prospects for rental growth and prospects for capital growth.
In 2016, apartment prices increased 9.6 per cent, with the top market segment (new builds) experiencing 10.5 per cent capital growth. Rental growth was also strong for the same market segment, at 4.6 per cent, according to CBRE. Bradstock says waves of regeneration are moving outwards from the city’s central locations of Mitte, Charlottenburg and Friedrichshain, with investors and start-ups moving into new districts on the fringe of the city centre.
Pricing and outlay
For a €315,000 (Dh1.36 million) property, investors can expect to pay a one-off 6 per cent transfer tax of €18,900, 0.5 per cent land registry tax of €1,575, 1.5 per cent notary fee of €4,725 and the optional 1 per cent mortgage broker fee of €1,701.
Prices can range from €180,000 to €1 million.
For investors expecting to fund their acquisition through mortgage finance, Berlin is a foreigner-friendly market. As any other mature realty market, due diligence is thorough, which is a strong indicator of a stable market.