FOREIGN INVESTMENT

New FDI Report from NAR Available

The new foreign direct investment (FDI) report from NAR reports that foreign investment in the U.S. real estate sector rose in 2007 to $41.7 (up from $33.6 billion in 2006), continuing the uptrend that began in 2003. This is encouraging in light of downturn in the U.S. market that began in 2006. The 19-page report covers foreign investment in U.S. real estate with a breakdown of the major countries with significant holdings and provides an overview of today's market and a forecast for the coming year. Bottom line: prospects are good for continued healthy investment in U.S. real estate, given the strength of foreign currencies in relation to the U.S. dollar.

Can BRIC Save the Economy?

The global financial crisis is taking a toll on many formerly lucrative sectors, including the four so-called BRIC countries: Brazil, Russia, India and China. Until recently many thought these emerging markets were isolated from the global financial turmoil. Russia has been hard hit be the decline in oil prices; China and Brazil will see a drop in demand from the USA and Europe for their exports; and similarly, India's services sector, oriented towards developed economies, is likely to suffer. The recent terrorist attacks in Mumbai may delay further foreign investment, at least in the short term. Yet many analysts believe that strong foreign exchange reserves and growing domestic demand will allow BRIC to withstand the crisis and continue growing. As of early November, these four nations held 41% of total global foreign exchange reserves and, collectively, represent 2.8 billion consumers. With the U.S. and Europe looking at a slow recovery, eyes are on the BRIC countries with the hope that their growing consumer demand will help "rescue the world," according to Goldman Sachs Group economist Jim O’Neill, who coined the acronym BRIC in 2001

Foreign Investors Prepared to Spend More in 2009--Including in the U.S.

Foreign investors in real estate expect to spend significantly more in '09 than they did in '08, according to the 17th annual survey of members of the Association of Foreign Investors in Real Estate (AFIRE). Compared to transactions completed by October 2008, foreign real estate lenders say they plan to increase lending by 54% globally and by 58% in the U.S. Equity investors plan to increase investment activity by 40% globally and by 73% in the U.S. Survey respondents hold approximately one trillion dollars of real estate, including $371 billion in the U.S. Respondents again ranked the U.S. as the country providing the most "stable and secure" real estate investments, by a wide margin at 53%. Germany and Switzerland tied for second most stable at 11.3%, Tied for 3rd were Australia and Canada, each with 4.8%. Half of the top 10 global cities favored by foreign investors are in the U.S., a shift from last year's survey where half of the top 10 cities were in Asia. Washington, D.C. reclaimed it status as the top global city for foreign investors' real estate dollars, deposing New York City, which was third is a close ranking with second-ranked London. Tokyo and Shanghai ranked fourth and fifth, respectively. When asked about best opportunity for asset appreciation, the U.S. was also named first with 37% of the votes. Brazil jumped 10 places into the #2 spot, replacing China, which dropped to #3, followed by the U.K. (up from 9th) and India (which fell from 3rd). Other key findings included that apartments were the preferred U.S. investment property, followed by office, industrial, retail and hotel, a shift from office being most preferred the past two years. Also, nearly 75% said a U.S. property’s “green” features influenced their purchase decision and were worth a rental premium. Survey respondents reported that finding attractive U.S. investment properties is becoming less difficult. Read a detailed summary of the findings.

REIT Performace in '08

The REIT market was down in line with the broader market in 2008 as all sectors of the economy were affected by the credit crisis and global economic struggles, according to the National Association of Real Estate Investment Trusts (NAREIT). Looking ahead at 2009, the REIT market faces the same challenges as other industries--the need to revitalize frozen credit markets enabling companies to refinance debt coming due, and weathering the economic uncertainty. There are some positives signs, however, within specific REIT sectors says NAREIT, including the home financing sector. NAREIT reports that while Home Financing REITs were down 20.02% for the year, the sector was up more than 14% in the 4th quarter, signaling that the worst expectations of the residential mortgage crisis may already have been discounted in the shares of these companies. Read more about 2008 REITperformance, or watch a short NAREIT webcast

CULTURALLY CORRECT

Hispanic-Owned Business Growth

Commercial REALTORS® take note! The growth of Hispanic-owned and operated businesses in the U.S. grew 31% between 1997 and 2002, a rate three times higher than any other business sector, according to a 2006 report by the U.S. Census Bureau. By 2007, 45.5 million Hispanics were in the U.S., a 29% increase of the 35.3 million present in 2000, according to the National Population Bureau, making up the majority of people in Texas, California, Hawaii and New Mexico. That growth is positively affecting Hispanic-owed businesses and subsequently the homebuying power of Hispanic residents. In 2002, the most recent year for which data is available, a reported 1.6 million Hispanic businesses generated $222 billion in revenue. The U.S. Hispanic Chamber of Commerce projects that the number of Hispanic-owned businesses in the U.S. will grow to 4.3 million within the next six years, with total revenues surging to $540 billion annually and a purchasing power $1 trillion. REALTORS® serving this group may want to be prepared to advise on financing options. The recent credit crunch may impact the Hispanic market harder as histoically some have no credit or collateral to apply for loans. Many Hispanic business owners stockpiled the money needed to open their shops because of a lack of lending opportunities.

U.S. Immigration to Go Paperless

The Bush administration has formed a coalition to improve the handling of some 7 million applications annually for citizenship, visas, and work authorization in the United States, reported the Washington Post on November 7. The five-year, $500 million project is designed to convert U.S. Citizenship and Immigration Services' case-management system from paper-based to electronic. It is estimated that the change could reduce backlogs and processing delays between 20% to 50%. The new system would enable the U.S. Border Patrol, the FBI, and the Labor Department to access immigration records quicker and with greater accuracy. Efforts also have been launched to link unique identification numbers to digital fingerprint scans, allowing the new system to create a life-long digital record for applicants. The need to fill out paper forms would be eliminated as well; such documents are currently stored across 200 locations.

France Retains Top Place in the World to Live

For the fourth year, France has earned International Living magazine’s top spot as best places to live in the world on its Quality of Life Index. The retirement and relocation publication compared about 200 countries in nine categories including, cost of living, culture, economy, environment, freedom, health, infrastructure, safety and risk, and climate. Information was combined from official government sources, the World Health Organization and The Economist. Then editors asked for opinions from knowledgeable people around the world. France scored high marks across the board, but its main appeal is its culture and leisure activities. For Americans seeking a European retirement home or investment opportunity, France is a relative bargain compared to six months ago when the exchange rate made the euro worth nearly $1.60. Currently the euro is worth roughly $1.30, a difference which translates into a more than a $50,000 savings. Following France on the list of top places to live are Switzerland, United States, Luxembourg, Australia, Belgium, Italy, Germany, New Zealand and Denmark. See the complete list of countries in order of overall rankings. Click on any country to view individual category rankings.

Who is Most Friendly to Expats and Where are they Buying?

REALTORS® working with international relocations take note! A survey by HSBC International of 2,155 expats in 48 countries found that Canada, Germany, and Australia are seen as the friendliest countries for foreign workers, as indicated by ability to befriend locals, join community groups, buy property, and learn the local language. With the loss of jobs at home, Americans are increasingly looking abroad for opportunities and many are finding Canada highly welcoming because of its accessibility and large expat community. Only countries that resulted in more than 30 responses were included in the final report, which ranks 14 countries as top rated places to live based on expats' living standards, ability to earn and save, a country's popularity, and the level of luxury experienced. When it comes to buying property, France is the hotspot, ranking highest in the category of expats buying property, with 64% of respondents stating that they had purchased a property there. Canada and Spain also ranked highly in this category with more than 50% of expats buying property there. The U.S. ranked 4th in this category. Expats based in Asia are the least likely to buy a home, with India, China and Singapore ranking lowest. Expats from the UK are the most likely group to buy property abroad, with almost half indicating they had sone so, followed by 40% of South Africans and 37% of Indians. In overall rankings (all categories considered), Germany, Canada and Spain were top on the list. The U.S. was tied with Hong Kong for 7th out of 14th. Read more about the survey, or download the full report

GLOBAL MARKETS

Online Property Registration Introduced in Dubai

The Dubai Government has launched an online property registration scheme, called Oqood, designed to provide greater transparency and eventually create an online property price index. Dubai's Land Department in conjunction with the Real Estate Regulatory Authority (Rera), said the online application will enable the effective implementation of Law No. 13 of 2008 for regulating the interim real estate register in Dubai, which protects the interest of all parties through closely monitoring sales transactions. Among other benefits, Oqood will help to minimize conflicts arising between developers, investors and sellers, while contributing to cutting down the escalating off-plan selling (sold before they are built) and reselling costs. There is a need for more transparent data as until the recent global credit crunch, many properties were being sold off-plan. A property price index database will help investors and end-users to determine price in a very transparent way. More than 80,000 units have already been registered with Oqood.

Forbes Prediction for 2009 Real Estate: Bleak

Keep this mantra in mind as we approach 2009: "All markets are local." This has never more true than right now when the global credit crunch seems to have left no market unscathed. Previously red hot markets (such as Slovakia and Bulgaria) and reportedly "bubble-proof" markets (think Dubai) are all feeling the impact of the market slowdown which began in the U.S. and spread globally. Forbes.com recently took a global look at the real estate market and identified "10 Top Real Estate Challenges," a snapshot of 10 global market areas and forecasts for 2009. In short, Forbes suggests that the barometers are expected to remain bleak, and that many economists believe the bottom has yet to arrive. The "bottom" being defined as 2003 price levels, which is the point at which price booms began around the world. Others counter that the composition of the housing market has fundamentally changed during the past five years, so a 2003 mark is not reliable, but remember...."All markets are local!"

Real Estate on the Rise in Select Emerging Markets

While much of the world's property markets are grappling with a drop in prices and the global credit crisis, a few markets, among them Brazil, Mexico and Turkey, are on the rise, according to a recent series of Knowledge@Wharton (KW) reports. Markets that tend to be less dependent on credit are faring better with the global credit crisis, whereas much of Western Europe, the U.S. and Japan, where there was easy access to debt, are being most hard hit. Investors should not assume, however, that all markets with a low debt ratio are good for investment. A lack of transparency and corruption both ranked high as reasons to avoid particular markets by participants in the 2009 KW Real Estate Emerging Markets Forum. Other factors included poor infrastructure, unhealthy regulatory environment, bureaucracy and a deficient legal environment. Knowledge@Wharton is an online resource providing access to the thinking of some of the top business minds on issues including finance, marketing, business ethics, and real estate. Read comments by participants on markets to avoid as well as healthy markets, or read a summary article from the Forum on Where the Deals are in Emerging Real Estate. Regardless of opportunity, Forum participants agree that investors should not try to enter a market without a trusted local partner who understands the local environment and business norms. Search for a Certified International Property Specialist (CIPS) in more than 50 countries to assist with outbound investments.

Captial Gains Tax Cut Would Make Japan one of the Cheapest Investment Destinations

Japanese government officials are talking about eliminating a 40% capital gains tax for most foreign investors, with an eye towards attracting some much-needed foreign investment capital. According to Bloomberg News, the government is planning talks with state-owned sovereign wealth funds from Saudi Arabia, UAE, Qatar and Kuwait to discuss more favorable investment conditions in Japan. Japan has one of the highest capital gains taxes, which has impeded foreign investment, contributing to the down climate. Only 4% of the funds managed by Japan’s private-equity and venture-capital comes from abroad, as compared to the 75% in the UK, 60% in the EU and 20% in the U.S., reports The Wall Street Journal. The economic news from Japan, as like other world regions, has been gloomy. In Q4 of 2008, Japan’s unemployment jumped from 3.9% to 4.4% as consumption fell 4.6%. As consumers abroad pull back on consumer spending, Japan’s population is unable to consume enough to offset the losses. The tax alteration could come as early as April 1 and boost investment from foreign funds by as much as 400% in the next few years, says Japan's Ministry of Economy, Trade and Industry (METI). If the Parliament passes the measure, the lack of a capital gains tax would make Japan, which is the 2nd largest economy in the world, one of the cheapest places to invest. While the METI website does not yet speak specifically to this plan, there is extensive English language information on inbound FDI.

BUSINESS RESOURCES

Looking Beyond the Current Market Crisis

The roller coaster economic market of the past few months and global credit crunch are having a big impact on the market right now, but there are longer-term forces that REALTORS® need to consider when reviewing business plans. An aging global population, rapid urbanization and new migration patterns are among the key demographic trends driving real estate strategy, according to a 2008 report, Global Demographics 2008: Shaping Real Estate's Future, published by the Urban Land Institute (ULI). The report is available for purchase ($49.95 for nonmembers with December shipping specials). The ULI publication looks at demographic trends in global markets, including how aging, household size, the labor force, income levels, and more will impact the underlying demand for real estate. This is the first volume in an annual series. This edition, while global in coverage, focuses on North and South America. While the U.S. is now "officially" in recession, turns out we've been in one for nearly a year, which is good news as, historically, recessions last about 11 months on average. This one may be a little longer than average, but most economists are predicting a turnaround by the end of 2009, which means REALTORS® need to be focused on the longer-term market as well as managing the current slowdown.

Watch, Listen and Learn!

NAR recently announced the creation of a Educational Media Library (EML) with the goal of being the global real estate industry’s most dynamic web-based learning tool. Given the current market challenges, global real estate professionals need more resources than ever before to stay informed of the latest trends and develop innovative strategies for success. The EML will provide these resources in an efficient and cost-effective format. Set to go live in January, the EML will offer top-quality video resources including webinars, seminars and self–produced user submitted sessions that draw from a large pool of subject matter experts in global real estate. Content formats include timely analysis, market updates, how-to sessions, panel discussions and more. Sessions are geared for different levels of professional experience and live webinar participation allows the participant to ask the instructor questions in real-time. The web-based content will be translated into several languages. The EML will be accessible through Real Estate Connections TV website, which is currently in a beta launch. The site is available for registration and global market networking. January 14--Global Networking Day--will mark the full blown launch of the site. Go online on that day to be entered to win prizes, and look for more information on the Educational Media Library!

NAR Global Business Guide Now on Internet

Every REALTOR® has an expert global business partner--the International Operations program area at NAR--which offers more than 75 tools to assist REALTORS® with international business development. A new business guide outlining all of the resources and services NAR provides to its members (most at no cost) is now available as a "wiki" through Realtor.org/International. The wiki format allows members and REALTOR® Associations to easily view resources by related functions (research, information, planning, education, network, etc.), or in a single all-inclusive list. Hyperlinks, which are plentiful throughout Guide, are automatically updated as changes are made to ensure you always have quick access to up-to-date information. For those who still wish to have a print version of the Guide, single copies (or in bulk for REALTOR® Associations) can be ordered. Learn more about this new NAR member resource or to access the link to the online Guide.

U.S. Drops on 2009 Economic Freedom Index

The financial crisis in the U.S. is reflected in the 2009 Index of Economic Freedom, published by the Heritage Foundation and the Wall Street Journal. "Economic freedom" is defined here as the fundamental right of every human to control his or her own labor and property. In an economically free society, individuals are free to work, produce, consume, and invest in any way they please, with that freedom both protected and unconstrained by the state. The United States dropped to 6th place in this year's index from 5th place in 2008. The index is based on data collected between July 2007 and June 2008 and so does not reflect the deepening global financial crisis since the collapse of Lehman Brothers in September and subsequent industry bailouts. This suggests that the 2010 ranking may drop further, as government intervention during a financial crisis results in lower scores. The index scores on 10 categories, including property rights, where only New Zealand surpassed the U.S. and other top-ranked countries' scores. Other key categories rated are investment, trade and business freedom. Hong Kong was rated the world's freest economy for the 15th straight year. The Index ranks 183 countries; helpful for REALTORS® working with outbound investors. Read the Executive Summary, view the full list, or compare regions or countries.