Five Reasons Why You Should Invest in International Real Estate

International real estate may be the best possible way for investors to amass a fortune over the coming decade. In times of great change and flux, the returns can be stratospheric. Supply, you see, can’t be turned on like a tap. It’s finite in the case of land.
Famed investor Jim Rogers said of beachfront “they ain’t making any more of it”. In the case of residential or office space, supply reacts with a multi-year lag. So, what happens when a growing swell of cash and investors in hot emerging markets chase a finite or slow-reacting supply? Prices and value appreciate at an accelerated rate…far faster than the economy or other assets.
With real estate, you can invest a relatively small amount of money to control a large asset. In parts of north-east Brazil for example, I’ve seen the value of some condos increase by 60% in two years. Better still, you could control this condo over the two year period with an investment of just 20% of the purchase price.
Real estate is also a great way to protect hard-won capital. Your asset is real, productive and has a use. You certainly can’t print any more of it. Historically, land has been one of the best hedges against inflation and turmoil. People will always need somewhere to live. Price bubbles may come and go… and come again. Meantime, your real estate always retains an intrinsic value.
Today, the best real estate opportunities are outside of the US. The great growth phase of the US economy is over (for now at least). Investors are concerned about where growth will come from, the security of their investments, and the value of their paper assets.
Things are different outside America’s borders. There are real growth opportunities. In fact, there’s a full spectrum of opportunities to profit. These range from high-growth frontier markets…to overseas powerhouses such as Brazil…to places so cheap that they represent true long-term value.
Brazil, for example, is now a middle class country. Half the population now falls into the middle class bracket. Last year, the country created 2.5 million jobs. Credit and mortgage finance is opening up. As soon as people move into that middle class category, they become consumers. That includes putting themselves in the market for a shiny new condo. And the 2.5 million new working folks need to work somewhere…an office, a factory, or maybe even a Starbucks!
Think about what this means: a surge in demand for these categories of real estate. We know from what we have seen elsewhere that this means prices should rise— as should the income you derive from these assets. There has been a flood of money into the stock markets of these new powerhouses. Some markets seem expensive. Yet prices of real estate may not reflect this. You can bet on these powerhouses effectively at a lower valuation.
Buying international real estate has five major advantages right now:

1. You retain control. You can buy, sell, rent, or develop, according to your schedule and your requirements.
2. You can generate a cash flow in another currency. This is a great way to diversify your portfolio towards appreciating currencies such as the Brazilian real.
3. It’s a great inflation hedge. Real estate is better than just cash flow in another paper currency. It’s a hard asset. That means it retains a value independent of any paper currency’s nominal value.
4. Real estate has multiple uses. Land you buy can be used for agriculture or forestry while you wait for the people, the tourists or industry to come. The new middle classes in China, Brazil and India are eating more meat (which means more land is needed to grow feed such as corn). They also need wood for construction and furniture in their new homes.
5. Real estate investing is fun. Your real estate investment can double as a personal retreat, part-time residence, or vacation getaway.You can enjoy it while it’s appreciating in value…generating rental returns…and safeguarding your net worth.

Source: International Living

Mexico, the real estate market where you must invest

Summary: Mexico’s commercial real estate industry is growing due to different factors such as the creation of investment trusts, significant changes in regulations, competitive land prices and the economic development of new business centers across the country.

The Mexican Association of Real Estate Professionals, is expecting to see a growth of 6% in 2014 in the sector, which, according to its president, Martha Ramirez Gallegos, will exceed the predicted 2.77% GDP growth for this year.
In a recent annual survey conducted by The Association of Foreign Investors in Real Estate (AFIRE) Mexico was listed as the third highest emerging country for commercial real estate investments, following China and Brazil.

The Roots of Growth
Jorge Castañares, business director for Aguirre Newman Mexico and specialist and professor of real estate says that the creation of the Real Estate Investment Trust (FIBRAS) as well as the Capital Development Certificate (CKD) boosted the growth in this sector. “In 2005 the Rental Tax Law was modified, entitling certain legal and trust entities to a fiscal allowance enabling them to absorb said tax and allowing structured long-term investments,” Castañares explained. Currently there are eight FIBRAS operating in the country that invest in real estate through the Mexican Stock Exchange and whose value has been estimated in the region of 170 billion Mexican pesos (US$13 billion).
Besides, Mexico has become attractive to the energy industry, the manufacturing industry and corporate industry, according to Castañares. Over the last few years several industrial, logistic, business and techno parks have been built. These currently cover around 50 million square feet, spread out over 300 industrial parks of international quality. The amount of available office space has also shot up outside of Mexico City, in areas such as Toluca, Puebla, Hidalgo and the Bajio region. It is estimated that currently there are in the region of 4.5 million square meters of class A and B offices in Mexico, a figure that could well be doubled by the year 2020, states Castañares.

Valuable Space
After the real estate bubble burst in the United States and Spain, it set off a far-reaching financial crisis towards the end of the last decade; but the Mexican market has shown, at least to the experts, real signs of growth.
Early in 2014, ProMexico published a study regarding the price per square meter of land for industrial use across Mexico City and 52 other locations. The study, based on facts supplied by the Colliers International Real Estate Firm, revealed that the highest prices are in Queretaro, with an average of 2,793 pesos (US$262), rising to as much as 4,781 pesos ($370.86). This was followed by Mexico City’s Federal Disctrict, with an average price of 2,152.80 pesos ($167); Pachuca, Hidalgo, with 1,951 pesos ($151); Tijuana, Baja California with 1,799 pesos ($139.50) and Guadalajara, Jalisco with 1494 pesos ($116).
However, businesses that contract installation areas for commercial and industrial use can find prices ranging from $55 to $75 in the Federal Distict, $50 to $60 in Guadalajara or Monterrey and $40 to $50 in Queretaro.


Bajio, the Place to Invest
KPMG’s survey “Mexican’s Upper Management Outlook for 2014” reveals that 45% of the Mexican executives that are looking to expand their operations in Mexico over the next three years will do so by expanding into the area known as the Bajío region, which encompasses the states of Aguascalientes, Guanajuato, Queretaro and San Luis Potosi.
“The fact that nearly half of the country’s executives are interested in investing in the Bajio region shows the possibilities for its economic and business growth over the next few years,” states Ricardo Arellano, the associate in charge of the KPMG office in Leon, Guanajuato.
The real estate industry has developed significantly in this area. According to Castañares, the area has become one region instead of four separate states. “They will be complementary states that offer commercial, manufacturing, hotelier and residential possibilities; they will become a macro region where complementary real estate services will be provided,” Castañares said.
Although the general consensus is optimistic, the Economic Ministry’s recently revised expectations of 2.77% national growth have prompted conservative forecasts from experts. “If the country does not regularly increase by at least 3.5% over a reasonable period, it runs the risk of investors slowing down.  The sector moves according to demand,” Castañares said.
So, the greatest challenge for the Mexican government is to accelerate the infrastructure plan required by the country, spend prudently, promote the creation of new businesses and thus generate employment, as sustainable growth is needed.

Are housing prices about to rise in the USA?

Summary: The recovery of the American economy is generating great housing demand which eventually might lead to an increase on housing prices due to a very slow building rhythm. 

In a new analysis the National Association of Realtors measured whether new home construction has kept up with job creation to determine the impact of construction on housing supply.

The analysis shows that the labour market, which is a key to overall economic health, has recovered all of the eight million jobs lost since the recession and that new home construction is underperforming in 32 states and the District of Columbia.

Lawrence Yun, NAR chief economist, says there’s a strong relationship between new jobs and an increase in demand for housing. ‘Historically, there’s one new home construction for every one and a half new jobs.

He added that their analysis found that a majority of states are constructing too few homes in relation to local job market conditions and that the disparity was the greatest in Florida, Utah, California, Montana and Indiana, where job creation has been particularly strong.

‘A persistent lag in new home construction will lead to faster home price growth, which will negatively impact housing affordability,’ said Yun.

Additionally, real estate agents home price growth expectations in the first quarter of 2014 was generally strongest in states facing housing shortage conditions. Lack of inventory has pushed prices up and put pressure on affordability, especially for first time buyers.

‘Agents have an intuitive sense of how fast prices are likely to rise from on the field observations. Their price outlook largely shows gains to be the strongest in states with slow home construction in relation to job growth,’ Yun pointed out.

Looking ahead, Yun said that home builders will have to produce amidst the current challenges facing the building market. Limited access to credit for smaller builders, rising construction costs, concerns about the re-emergence of entry level consumers to the market in the face of student debt and a tight credit box, and general decline in affordability and purchase power over the last year.

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