Wednesday 16 May 2012

Is now the time to buy a House in London or is Oslo property the new gold?

Table 1 – Global real house price % performance, 2001 Q3 – 2011 Q3 Country
Real house price changes % 1 yr
Real house price changes % 10 yr
Real house price changes % 10 yr pa
South Africa
Hong Kong
New Zealand
Euro area average
United States
Continuing a conversation from the comments of a previous post and indeed, to continue a conversation I was having with a very wealthy investor last week, I post above courtesy of Lloyds, a summary to the end of last year of key housing market trends.
Firstly there is the 10 year trend, and then there is the movements over the past year. Best of all, this is adjusted for inflation - however not for currency and so I will come to that later.
Clearly, from the chart above we can forget about some major countries, Germany, Japan, Ireland. In fact let's look at beating the UK.  Given London is a much better performing place than the UK and we don't want Eurozone because of um..political risk, I am only going to focus on those Countries that are better than the UK performance, preferably double with FX performance tied in.
Of these though, you can't as a foreigner buy a place in India. In South Africa you need a 50% deposit as a foreigner so I don't fancy either of these two. Russia's house prices are collapsing so perhaps the volatility there won't be for everyone and having been to Moscow in winter I can think of better places.
This leaves Hong Kong, Lithuania, Norway, New Zealand and Australia.
Lithuania -  interesting; prices are cheap, it's close to the UK, the currency is though depreciating versus the pound, but the Lithuanian economy has recovered well since 2008 - better than the UK. Long-term, this could be OK. Property prices are still falling, but this is tailing off.
Norway - here the deal is on the currency, with the NOK being  safe haven and in a 4 year uptrend against the Pound where it has gained 25%, together with strong house price growth this has to be a leading contender. Taxes are not too bad, although rental tax is 28%.
Hong Kong - HK prices rebounded quickly from the low of  2009 and the HKD is stable versus the Pound.  With many similarities to London this could be good. However, its a long way for an investment and if the China property bubble bursts, will their be spill over?
Australia - Prices are falling in Aus nearly as fast as the UK, certainly not slightly rising as in London. However, the Aussie dollar is 40% up on the pound in 10 years and the trend continues, wiping out any worries about making a loss. A good place for a currency/property hedge if you can hack the distance?
New Zealand - See Australia above!
London - As the global property safe haven, what could go wrong? Well the currency risk is the main issue, along with increasing property taxes and a weak London economy. Prices will seemingly always hold up and rise, perhaps more in a crisis - but that currency risk with the UK prone to quantitative easing does stop London from being an easy winner.
My overall assessment would be:
On a budget and - Look to Lithuania
For real safety close to home - look to Oslo - perhaps Oslo property is the new gold?
Long term - Aus/NZ is the better bet than London
Medium term - London


andrew said...
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andrew said...

Steve Keen is not so confident about Australian house prices.

Anonymous said...

Those figures for Ireland look very odd. Ask T10T or Lorcan what they think - has there really been a 20% real-terms drop in the last 10 years? Has all the increase been zapped since the Irish bank bailout?

Seems very very unlikely - but if it's true that would imply Spain has way to go before the bottom.

Australia seems to be at the top of the market, if Mr Hempton's commenters are any guide.

What about Germany? Civilised place (mileage may vary) - and if Euros get printed by the bucketload, prices will rise. Nice flat in Munich? Good beer, full employment, skiing down the road at Garmisch?


PS - can EMED go lower ?

Anonymous said...

Lithuania - where the lap dancers come from.

OK, I'm in.

Not in the market now said...

Did these figures take into effect the effective 25+% devaluation of the pound thanks to brownonomics?

New build prices in Oz are galloping upwards by the way. Another bubble in the making?

Not in the market now said...

*account, not effect. Sorry.

CityUnslicker said...

German property is a disaster zone, the country has yet to experience its bubble opporing, ut it is here - there isno shortage of land in Germany with all the ossie space - so its more like the US than the UK as a market. Plus all the cities are nicely spread out so there is not a London equivalent bias.

Ireland - Yuip, the bubble is burst, not too far to go. Unlike Spain, where there is a good 30-505 to go before you go villa shopping.

(EMED - all share can go lower with this eurozone crisis. however, fundamentals still good, so add on the lows - actually I think its been quite stable considering....)

OZ - Yes, bubble in oz that is for sure, but less so in key cities like Sydney and the remoreseless FX decline of the Pound will offer a lot of cover.

redrut said...

London property is going one way.... up

I could go on for ages on this topic and in fact I already have done

hatfield girl said...

Last week in London I viewed a 'house' of 150 square metres, not even on one floor, without a garden, attached to another house, the whole set down in a graveyard, overlooking the chapel of rest.

£2.5 million.

I'll find something better to do with the euros.

CityUnslicker said...

Mr 1% - that is not really my argument - mine is more to do with the currency risk of being quantitively erased (TM).

Bill Quango MP said...

HG: I remember brother Quango looking at a house in Richmond.

He said he hadn't realised that the estate agents viewing sheet was 1:1.
This is actual size? the property footprint is actually A4 size? Including the garden?

Anonymous said...

As politicians always fall foul of the law of unindented consequences, could their Euro dream actually trigger the war they thought could never happen again?

Anonymous said...

CU - I guess it all depends on whether you're looking to preserve value (in which case surely Germany) or turn a profit. But

a) Australia seems bubble-ish
b) if Euro-printing, German property could rise, making it a safe haven. But the Eurozone will have to get worse before they print - so it might get cheaper still.
c) looking on Irish prices are low, but not that low. Or is the selling price usually much less than the asking price?


Anonymous said...

Spain is a joke - I looked at flats in Barcelona. Many are empty and are owned by the banks. They still want 250,000Euros even for a small flat - i.e. they are still selling at peak prices. The government is trying to force them to sell at market value - but with huge unemployment market value is virtually nil. If the banks admitted this they would all be insolvent. However, when reality does replace these fantasy economics I suspect there might be some real bargains in Barcelona - unless civil war has broken out again in which case Barcelone is likely to be in the thick of it.

I wouldn't have anything to do with property anywhere near China. The whole Chinese economy is a massive Ponzi scheme. Think of it like this - in the UK we have 30million people working getting paid an average of £10 per hour. In China they have 300million people working in these new factories getting paid an average of £1 per hour. So the real Chinese economy is about the same size as the UK, except the qwealth created is spread over 1.3billion people. Does that seem something to get excited about? Why do they seem to be so rich? Because they have PRINTED $3trillion worth of Renimbi to buy US treasuries to keep their currency low and competitive. The West have no use for $3trillion worth of Renimbi except to buy CHINESE REAL ESTATE. Ooops, that's where the Chinese property bubble started - and its a biggy. Well, all that hot money that found itself with no home after the crash was looking for a new bubble to inflate and they found it in China. When that bubble bursts (immediately after reality hits European banking) all hell will break lose. Still, this time it will be the super-rich families of America that will get screwed as their tax-efficient trust funds take a hammering.

Steven_L said...

German property is a disaster zone

No, they sensibly see house prices and rents going up as like any other inflation and have sensible policies on tenancy.

Buy a House with the Property Buying Agents said...
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