Own A House - real estate market news

In 20 largest cities USA prices for houses have fallen to record size. The S&P/Case-Shiller index, which shows the state in the real estate market in the American mega cities, has fallen in January, 2008 to 10,7 % in comparison with the similar period of the last year.
In experts’ opinion, it shows that hypothec crisis has gone deep into the USA.
In December, 2007, S&P/Case-Shiller has fallen to 9 %. The index, which is being monthly calculated, has reached the maximum in the second quarter 2006 and then it has started to decrease.
During the last year the quantity of transactions on sale of houses-new buildings in the USA has reduced on 26 %. It is the record-breaking low parameter since 1963. Concerning the secondary real estate market, in September, 2007, the sale here has fallen on 19 % in comparison with September, 2006 - up to a minimum established in 1999.
In savings and loan associations experts’ opinion, the prices for real estate in both segments will continue to decrease - on 15 % on primary, and on 13 % on secondary the market.

The British - masters of marketing, they always the first come on the new market and promote it. The script is simple. At the initial stage, when the habitation and land is very cheap somewhere far away, the most brave investors buy up actives. Then goes massed promotion in the mass-media with the description of local life, unappreciated real estate and the promise of further growth. Frequently game is built around any important event in a history of the given country: for example, joining the EU. At this stage begin mass purchases of the real estate by Englishmen: they are sent in “cottage-tours,” though the British frequently buy without going to a place of the future purchase, during real estate exhibitions. At the third stage the business involves investors from other countries. The prices really grow even more. The Englishmen, who have bought actives some years prior to it, can easy fix super-profit and start to develop the new country with cheap real estate. Now, for example, everything begins in Vietnam.

The situation when a lot of middle class representatives appear owners of real estate abroad is fundamentally new. On the one hand people have a “wardrobe” of the real estate. English pensioners are closest to realization of this principle: one third of the year they can spend in the apartment in London, a third - in a small house in Southern Africa, and the last third - in Brazil. On the other hand, formation of built-up areas, which high-grade exist only a part of the year, is at early stages of development and viability of this model is not clear.

The main buyers of real estate abroad - Englishmen: more than 5 million people have already got houses or apartments outside the island. The main cause of such transactions is in big difference in the prices for real estate between expensive Britain and other countries. For young Englishmen real estate abroad is the first step in «a staircase of real estate» as on the native land they can buy nothing. Middle-aged and old people frequently sell their houses and move to other countries to get rid of mortgage credits - 37 % of Englishmen are ready to leave Britain for this reason.

Recently the British have started to practice selling the big house, and buying for this money a smaller one. The difference is invested in the second habitation abroad, trips and entertainments.
The British foreign real estate investment Internet-portal Homesgofast.com has studied inquiries of 170 thousand visitors and has found out, that Dubai, Brazil, Egypt, the USA (the western part of New York state and Florida) and Turkey are the most popular among potential buyers.

English pensioners like Spain, Australia or New Zealand (became fashionable due to fantastic landscapes in the movie Lord of the Rings). Developers have at once responded the demand and started to build for pensioners special inhabited complexes «60 +».

One of the most scale, amazing and paradoxical town-planning phenomena on the planet is the project of of Dubai’s site development. ”Persian Gulf is on the front line of impetuous modernization with the most active growth of urbanistic formations. The Gulf, which has started the development owing to the oil, passes a phase hyper-development, preparing for an inevitable exhaustion of oil stocks”, - writes in the research “Gulf” well-known Dutch architect Rem Kolhaas.

In Dubai it is staked on mass construction of outstanding buildings. New wonders of the world grow there in abundance: the only in the world seven-star hotel “Sail”, a huge mountain-skiing slope in a shopping center in the middle of the desert, the highest building of the world, fantastic artificial islands-palm trees, the house as the Arab, Rotating Building, the house from Porshe designers and so forth. Scales of construction amaze. Today over 30 thousand hoisting cranes are concentrated on a small site of a land (a coastal line of only 50 km). Moreover, every fourth high-rise crane of the world works here. Volumes of investments into the real estate are estimated in hundreds billions dollars annually.

An interesting detail - the planet’s largest building sites today are in not liberal countries. They are China with the communist party, in Dubai with sheikh Mohammed Al-Makhmut, who possesses all ground area and the control over the three largest developers of the country - Nakheel, Emaar and Dubai World.

Change of building site geography – is one more tendency of the world real estate market. - New sites of the building boom - Asia and countries of the Persian Gulf. In the urbanized zones of coastal China and Southern Asia, according to the forecasts, in twenty years time will concentrate half of the planet’s population.

Europe, where population does not grow and building supply is high, cannot brag of global projects. Moreover, volumes of house-building in some countries fall. For instance, in Western Germany the volume of house-building has reduced more than twice for ten years, and in East Germany - more than in three times. At that the prime cost is rather high, that also doesn’t encourage mega-projects: according to the research of architectural magazine Wonderland, one square meter in a private house costs in the Western Europe 1430 Euros, in the East Europe - 780 Euros.

The main huge building site of the world is China. In a marvelous way Chinese manage to build 1 sq. m of habitation for a person in one year. In Shanghai a housing stock has practically trebled for ten years. In Chinese People’s Republic in resent years the population of many towns has grown up to one million.
It is interesting, that China not only invests huge money in housing construction (2,1 billion dollars in 2006), but also skillfully controls the market. So, when in 2005 the market in Shanghai became superheated, authorities managed to cut off speculators from the market and prevent growth of the bubble.

These figures do not look fatal, but it is necessary to recall, that real estate market is rather conservative and can react to a crisis situation rather slowly.
Therefore other parameters can be more evident: sales volumes, amount of building permits, amount of loaned credits, and amount of bankruptcies of house owners. So, according to the Bank of Spain, last July the amount of building permits has decreased by 38 % for the 12-month’s period that can be interpreted as reaction of he builders to big overstocking of the market with ready houses.

What will be with real estate markets of Europe and America? If it had happened twenty years ago, it would be possible to say like «overheated - cool down». The market would have run for some time into recession, the prices would have been a little lowered, and then the market would have recovered. However in conditions of strong connectivity of the markets and increased dependence on financial sector, it is very difficult to make the forecast.
Besides, simultaneously bubbles have swelled in other markets - energy carriers, metals, foodstuffs. It can speak about the similar reasons for rise in prices, and consequently, that question of the future of real estate market depend substantially now not on behavior of local players, but on the policy of financial authorities in leading countries (Federal Reserve System and Central Banks).

The question about the future of European markets can be formulated as: whether they will follow America?
Before the crisis, according to the data of Deutsche Bank Research, European markets had developed synchronously with American one. Especially high correlation was in Britain, Holland, Denmark, Ireland, Spain, France and Sweden. At that, consider German analytics, prices for real estate in some countries of the Europe have obviously left the limits of common sense. «Investments into residential real estate differ from investments in shares and bonds by that it not only the object of gamble, but also consumer goods. Therefore, considering results of overpricing in this segment, experts can’t be limited only to simple calculations of cost and rent rates. They should take into account the factor of moderateness. And at a present price level residential real estate becomes inaccessible to consumers», - is marked in the report of Deutsche Bank Research.

The American crisis has already doubly struck the European real estate market: through the crisis of liquidity in the financial markets (in particular, in Europe mortgage credit rates have grown) and through expectations of recession in American and world economies.

It looks like Europe has already started to react to the American history. The prices for dwelling in second half of 2007 in Great Britain, Ireland, Spain and France have insignificantly eased. The French national federation of real estate agents has informed about falling of prices for residential real estate by 1 % in the third quarter of 2007 in comparison with the second quarter - for the first time since 1998. The Irish Research Institute of Economy and Sociology and mortgage bank Permanent have informed, that cost of apartment houses in Ireland has lowered by 1,9 % in August in comparison with similar month of the last year.

In the USA, when in 2000-2001 the Internet-bubble has burst, speculative capitals have poured from stock exchanges to the real estate market. For the five years prices have doubled. And for 25 years real estate in the USA has risen in price more than three times: if at the beginning of 80s average household cost approximately 60 thousand dollars, in 2005 the figure was already 200 thousand.

In a counterbalance to Europe and America, cost of houses and apartments in Japan for more than ten years only fell: real estate market could not recover from grandiose crisis at the beginning of 90s, and stabilized only in the last couple years.

It looks like the ten years’ trend «for increase» is finished. In the USA from the beginning of 2007 the prices gradually come down. Half-yearly coming down with significant sales slowdown has developed in August into severe mortgage crisis, which has spread worldwide as the crisis of liquidity.
Significant reduction in price for real estate has experienced Tampa and Miami (10-11 % for a year), San Diego, Las Vegas and Detroit (8-10 %). The price index for houses of Standard&Poor’s/Case-Shiller has fallen insignificantly for a year - all by 6,7 % (information for the third quarter of 2007). However the majority of analysts are sure, that the crisis only begins. The number of suits for bankruptcy of house owners increases: in 2007 more than 2 million families have lost their real estate, as they could not pay mortgage credits. The current year won’t differ from the previous one.

The world real estate market begins new stage of development. National governments more and more often refuse liberal market dogmas and start to carry out socially responsible housing policy.

«Even people with respectable salaries can’t buy an apartment. The prices are unreal!» - say Muscovites about the housing problem. At that it is meant, that situation in Moscow is unique and abroad everything is different.

However the current situation with dwelling in Paris and Madrid, Detroit and Dubai is the same. In 2000-2006 the price for real estate continuously grew almost worldwide, therefore it became inaccessible for middle class in the USA and Europe.

One of the main trends of the last decade is significant real estate cost increase in Europe and America. Price enhancement began in 1995-1997 (depending on the country) and has sharply sped up after 2000. For example, in Ireland for the last ten years (1996-2006) real estate prices have increased by 300 %. For the same period in Holland, Sweden, Great Britain, France and a number of other countries prices have doubled on the average. And only Germany pleases Europeans. Houses and apartment almost have not risen in price here, because the country has high supply, the big stock of social habitation and the market is not inclined to speculations.

The number of new buildings in the Great Britain in 2007 has reduced to a minimum for the last four years. It is connected to the fear of developers to offer a lot of houses, because of landslide of prices and sales impairment, writes The Financial Times.
In the last decade of 2007 37900 projects have been launched, that is 10% lower, than at the similar period of 2006. Besides, it is the lowest figure since 2003, says the official statistics.

In total for the last year, according to The Department for Communities and Local Government, in the Great Britain were launched construction of 166900 houses, that is 6% lower, than in 2006.

Royal Institution of Chartered Surveyors (RICS) considers that developers’ anxiety can complicate performance of the state program on increase in construction of houses. According to it by 2020 in the country should be constructed 3 million new houses.