Grow your wealth in 2016 and beyond

PW looks at opportunities abroad amid local market malaiseRichard Bradstock

Sentiment in the UAE property market hasn’t been too upbeat of late. With crude oil prices dipping below $35 (Dh128) a barrel and with the  value of the US dollar, to which the UAE dirham is pegged, climbing against most other currencies, it’s no surprise that interest in local  real estate assets remains low. Compared to 2014, Phidar’s Dubai  Real Estate International Demand Index (Reidi) dropped 83 per cent by the end of 2015, primarily driven by exchange rate fluctuations. So what are the options abroad for UAE residents looking to invest in bricks and mortar?

American dream

America remains a favoured destination for international investors. Chicago shows great potential with strong yields and prices still 20 per cent below peak. The Chicago property market has now recorded two consecutive years of price growth, and is on track for a third in 2015. Despite all this, it remains a top choice for investors seeking value in the US.

Rental rates, that have in some areas recorded doubledigit annual growth over the last three years, are driving average yields in Chicago as high as 7.9 per cent. In Miami, the city has achieved its second consecutive year of over 20 per cent price appreciation. This has been largely driven by large numbers of international investors. Domestic buyers, put off by 50 per cent deposit requirements, now make up just 15 per cent of the local market. For international investors, Miami provides a opportunity for buy-to-let properties.

Manhattan’s median sale price is on the verge of reaching $1 million for the first time, while the average price has now exceeded $1.7 million. The famous island’s median sales price is up 9.9 per cent this year, while price per square foot has risen 17.9 per cent. Vacancy rates at 1.07 per cent are the lowest in three years.

European haven

London’s growing population and chronic undersupply of housing continues to fuel price growth. This rising demand saw house price inflation hit 8.3 per cent in August, up from 6.6 per cent in May, while the Hometrack Cities HPI has risen 10 per cent in the last 12 months. Such rises are behind forecasts that the average London house price will hit GBP1 million within five years.

Up the road, the UK government’s Northern Powerhouse vision of Manchester continues to build positive market sentiment. The UK’s largest student population — circa 90,000 — is a key driver of property price growth of 2.9 per cent in the three months to November and 6.1 per cent in the past 12 months. Rental rates are rising too, up 4 per cent in the last year to support the highest rental yields in the UK at 7.98 per cent. The local economy continues to thrive, supported by a strong local government that Westminster sees as a template for further regional devolution across the country. Manchester will be the first city outside of London to gain a metro- wide elected mayor in 2017.

With more and more people pouring into Berlin (an estimated 340,000 new residents are expected by 2030) and a booming  economy, the city is fast becoming a key market for property investors. Over a quarter of a million jobs have been created in the last decade, and the workers that have arrived to fill those positions have generated demand for some 55,600 apartments in the city. To meet this and future demand, 19,655 new apartments will need to be delivered every year to 2020. Despite this demand, less than 9,000 were completed in 2014. This imbalance is driving prices higher, with the average apartment price gaining 11.7 per cent in 2014. In prime area Mitte, the equivalent figure was an impressive 24.2 per cent.

Asia-Pacific chances

In Asia-Pacific, there are still plenty of opportunities for international investors, mostly in Japan and Australia. In Japan, the FX advantage is still a strong incentive for overseas investors, whilst the government’s Abenomics programme is showing steady success in improving Japan’s economic fortunes. The country remains very much a stable and secure investment location. While the Yen has strengthened in the past quarter, the ongoing quantitative easing programme will continue to weaken the currency over the longer-term and improve the value of Japanese investments for international buyers. In the Tokyo Metropolitan area, the average sale price of an apartment increased 6.8 per cent in the 12 months to September.

In Australia, a weakening AUD is good news for overseas investors. Brisbane’s rising international status is continuing to benefit the city. More businesses and people are choosing to establish themselves in the city that now boasts an economy worth AU$146 billion (Dh377 billion). House prices across the city were up 5 per cent per annum over the last three years and are expected to continue forward.

Meanwhile, the influx of residents to Melbourne, a city that has been voted top of the Economist Intelligence Unit’s Global Liveability Index for five consecutive years, is driving significant price growth in the city. The Inner Suburbs continue to stand out, particularly Yarraville and Brunswick, but the city as a whole is expected to perform well, with average price growth of up to 8 per cent forecast next year by HSBC.

Back in the UAE, the number of new residential units laying empty due to poor market conditions and construction delays continues to rise — over 6,000 is CBRE’s latest estimate. Alongside this local housing stock glut, falling oil prices and strengthening overseas buying power for USD-pegged currencies is driving more property investors to look further afield. For those who understand their own investment  strategy and undertake the appropriate due diligence, a number of thriving global cities will offer you promising opportunities to steadily grow your wealth in 2016 and beyond. 

Source: Property Weekly

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