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GLOBAL PROPERTY REVIEW – 17th June 2019

June 17, 2019

New York

The Big Apple has been looking for more bites than it saw in a year to forget in 2018, though appetite is far from voracious.

Home sales in Manhattan fell 14 per cent last year, according to a report from Douglas Ellliman and Miller Samuel, the real estate firms, the largest drop since the heart of the financial crisis in 2009. 

The year closed out the fifth straight quarter of price falls.

The top-end in Manhattan and Brooklyn has actually been ailing for the previous two years, truth be told, when a glut of condominiums came to the market just as the Russian and Chinese money that had helped buoy these top-dollar purchases started to tail off. With supply on the market and choice to renters, rental yields for this high end market reduced too.

Investor landlords globally have often been comforted by the fact that – both buoyed and buffeted by global finance – New York could always command ever increasing rents. Research this year in the areas of Manhattan, Brooklyn and Queens indeed show rents to be increasing further. 

But then the bombshell earlier this month: a Democrat-led legislation passed that imposed rental controls on the city. An almost era-defining rule-change, opposed by the big portfolio investors who for decades have wielded such power, the bill also capped the amount of capital spend that owners could pass onto tenants.

Still, commentators such as Forbes have highlighted a potential floor in the price drops throughout the city. This could indicate more buyers coming back to the table who had sat on the fence after the political turmoil of a government shutdown earlier this year.

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Tehran

Some countries’ housing data seem destined to confuse. 

The Iranian capital seems to be falling in terms of sales, with transactions down more than 73 per cent between mid-March and mid-April this year compared to the previous month – down 32.2 per cent against the same month last year, according to the Central Bank of Iran. 

Such a cryptocurrency swing is only made more curious by a supposed 104 per cent rise in property prices over the same 12 months, with per-square metre prices up to an average of $810. So fewer sales, but prices off the charts.

It was the same trend at the start of the (international) year, with home sales down 60 percent between mid-December and mid-January, but prices up another 90 per cent. Month by month, the number of sales fell just 1.4 per cent.

Currency movements go some way to explaining the situation. Price falls in the Iranian rial last year included a drop from 30,000 per US dollar to 180,000 – down six fold. With so many building materials and the fixtures of new builds coming from abroad (and therefore priced in dollars), plus inflation domestically driving up concrete and other basic materials, the market has reduced to wealthier buyers for now overall, at least in the neighbourhoods priced in dollars for that clientele.

Then there are the potential sellers. If prices are shooting up, there is little incentive around the cities more opulent neighbourhoods to sell now if further price gains are expected. 

Numbeo, the property data aggregator, found that apartment rentals in the city centre averaged around $558 per month, compared to $338 outside the city. Apartment prices are as high as $2,692.75 per square metre.

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DUBAI

The first half of 2019 has seen an interesting mix of regulatory development that may to differing degrees affect that of its residential and retail capital.

The Institute of International Finance was the first to sound positive notes about the UAE overall, citing the impact of lower registration costs for new properties, along with lower restrictions on foreign ownership, as progressive signs of a recovery in the property market. 

Other changes may be of benefit, including the announcement of 10 year visas for certain professions. Mortgage-style payment structures for new builds among the major developers may assist towards a recovery in the general market. Or at least, an intended recovery.

Dubai has been broadly stagnant in recent years, following the expansion of box-fresh residential developments into the desert, into areas such as Meydan and Town Square, the mixed use development on the same road as the fast-developing Maktoum airport. 

Such extra supply has reduced prices among the newer build market. Key rental yield areas such as the marina continue to provide returns, while there’s an extra market at the other end of the scale for cheaper property to rent in areas such as Jumeirah Village Circle, areas with fewer frills but both utilities and a certain predictability for landlords.

Arguably rule changes need to strike a balance between prospective buyers – the ultimate supporters of the real estate market – and renters, who represent the steady supply of employees and tenants. 

A prospective three year freeze on rents in the second biggest emirate will bring these two forces into focus. On the one hand, new arrivals can count on their future expenditure and plan ahead; for buyer-landlords, mortgages and maintenance costs may continue to rise.

 

 

 

 

 

 

 

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