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Global Perspectives: October 2012

Global Perspectives: October 2012

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Published by: REALTORS® on Oct 19, 2012
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07/29/2013

 
to local, international & lifestyle real estate
October 2012
4
EXPLORING THE UNITED KINGDOM
London Calling
This issue o
Global Perspectives
takes a closer look at a new breed o British buyers coming intothe global real estate marketplace. Their property search is primarily driven by the challengesthey currently ace in the U.K. market and changes in the global economic climate. Young,nancially savvy urban-dwellers who are interested in investing or growth are looking abroador good returns.While Brits have long been attracted to Florida (USA), these buyers are interested in enticingopportunities all across the U.S. as well as other countries where real estate prospects havebeen good. Spain, France, Italy, and Greece are all viable options. In the United States, the searchhas expanded rom Florida to markets like Los Angeles, Las Vegas, and Miami.Any time buyers cross borders, dierences emerge in nding, viewing and purchasing propertywhich play an important role in real estate transactions. U.K. buyers are no exception to thisrule. Inside, you’ll also learn more about these dierences and what this implies or working withBritish buyers.The contrasts in agency business models, the roles o agents and other real estate proessionals,how properties are marketed and how transactions are closed may surprise you. Likewise, theycould certainly surprise British clients who are buying property outside o U.K. borders or therst time. Learn how to prepare British clients or navigating oreign waters.
GP
Global Perspectives
is a beneft o the CIPS designation. Email
CIPS@realtors.org
or more inormation on CIPS benefts.
 
2
~
Global Perspectives
October 2012
4
EXPLORING THE UNITED KINGDOM
BRITISH
INVASION
Florida has long been a prime spot or British buyers looking to escape their chillywinters. But now snowbirds aren’t the only Brits buying in the states. Lately agrowing base o buyers has emerged interested in the potentially good returnso investment property. In act, NAR’s most recent
Profle o International HomeBuying Activity 
ound that among international buyers o U.S. property, the U.K.ranked ourth, tied with India.Past issues o
Global Perspectives
have examined cross-border transactionsoriginating rom other countries including China and India. What makes theU.K. dierent is that middle-class and rst-time buyers are also jumping into thegame. They see investing in the U.S. market as a way o amassing unds to moveup the property ladder in Great Britain.
Housing stuck in a rut
The U.K. and European Union have suered economicallyor several years and are now experiencing a double-diprecession. Property prices in Great Britain peaked in late-2007 then plummeted, nally beginning to rise slightly in2010 and 2011. Then in the rst hal o 2012, average valuesdropped 2 percent.With its prime properties, London has been the engine ogrowth or national price averages. Remove London rom theequation and the rest o the country shows a bumpy decline,ater adjusting or infation. Recently even London has taken a hit,with July 2012 month-to-month average prices alling 3.6 percent.The U.K. is a buyers’ market, but the buyers just aren’t there. Even withmortgage rates hovering between our and ve percent on 80 percentloan-to-value mortgages, ew buyers are stepping orward.
Buyers caught in the middle
First-time buyers and the middle class are eeling closed out o the market.Renters have ound it dicult to save enough or the 20 percent deposit requiredby most lenders. A recent survey conducted by rental website
Spareroom.com
 ound that over 40 percent o renters say they cannot aord to save or a deposit.Those who can save report average savings o about £12,125, just seven percento the average U.K. purchase price o £165,738.
THE
 
Global Perspectives
October 2012 ~
3
(continued on page 4)
Z
Many rst-timers who work in Londonhave decided that the only way to make itto the rst rung o the property ladder isto give up on the city. The south-east oLondon, historically not a popular spot, isgaining traction. Some buyers are movingto less expensive cities in neighboring Kent,Berkshire and Surrey counties, spendingmore time and money on commuting.Middle-class homeowners who plannedto move up to better housing are alsorustrated. Many who were relying on theirhome’s appreciation to help them jump tothe next level nd their equity decimated.There are ew good options or investmentsexpected to yield a generous return to makeup or the slack.
Sights turn to globalopportunities
Many younger Brits have grown tired owaiting. “Even i they can’t aord to buyin the U.K., they’re moving ahead andbuying property elsewhere,” says Pat Tan,CIPS, GRI, o Your Global Agents teamat Coldwell Banker in Sarasota, Florida.“There’s tremendous pent-up demand inthis market, and it’s nding its way toother countries.Young British investors have decided toinvest in properties they never plan to livein. Tan reports that about one third o hersales to U.K. buyers are now purely orinvestment. They’re searching the globalmarket or rental and investment propertiesthat are aordable, a good value andwill appreciate.“The middle class in the U.K. tends to bequite savvy nancially and internationallywell-traveled,” nds John Mike, CIPS, CRS,GRI, o RE/MAX Prestige Realty in WestPalm Beach, Florida. “They’re not dauntedby the complexities and risks o investingin global real estate.” He reports that in thelast ew years they have been buying inFrance, Spain, the Bahamas, Italy and havebecome a growing presence in the U.S.beyond Florida.
What new U.K. buyers look or
Given their savings situation, these newinternational investors are interested inaordable condominiums, townhousesand in some places single-amily homeswith good yields and expectations oappreciation in the mid-term. Theypreer properties that have depreciatedsignicantly in the economic downturn,yet are in stable markets with low vacancyrates and good yields.Income-producing properties in the U.K.,called buy-to-let, tend to be expensive.They have high carrying costs andmediocre yields that leave little return aterborrowing costs. Yields and prices improveoutside o major metro areas, but vacancyrates rise due to high unemployment. Fora small investor, there’s little prospect oreither moderate income or growth.Certain parts o the U.S. market can givethem both. Mike says he’s seen interestin markets across the U.S. “Chicago,Indianapolis, Denver, Minneapolis—iyou’ve got an aordable investmentproperty that will generate a good return,don’t hesitate to bring it to their attention.”He adds that good property management isa must since the buyer is so ar away.
Niche markets
Some Brits are interested in very specictypes o properties, not ones that willnecessarily appreciate greatly but willprovide a steady stream o reliable income.Mike knows o a middle-class Brit whocame into an inheritance which he wantedto put to work in the U.S. Every six monthsor so he buys a Section 8 property. Theyare inexpensive compared to other rentalinvestments, have low carrying costs, havea government guarantee covering part othe rent, and low vacancy rates due to thelong list o renters waiting or openings.Savvy U.K. buyers with more capital arebuying shopping centers and apartmentbuildings in areas with good prospects or
Reaching U.K. consumers
A Place in the Sun Live
is a U.K.-basedexpo targeting British residents whoare interested in purchasingoverseas properties.
Where:
London or Birmingham, U.K.
When:
Held every spring and autumn;next event spring 2013.More inormation at
aplaceinthesun.comOPPLive and The Property InvestorShow
is a U.K.-based conerence andexpo targeting international propertyproessionals who wish to expandtheir network globally.
Where:
London, U.K.
When:
Held every OctoberMore inormation at
opp-connect.com
,click on OPPLive in the top navigation bar.The
National Association o EstateAgents
, which has recently mergedwith the
Association o InternationalProperty Proessionals
, is a bilateralpartner o NAR. Find more inormationand nd estate agents at
naea.co.uk/
 or
aipp.org.uk/
.

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