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News: Dollars descent sparks US bargain hunt

Fri, 11 May 07

As the dollar continues to slide against the pound, the number of enquiries about USA property on TheMoveChannel.com has risen sharply this month...

In June 2006, the National Association of Realtors (NAR) conceded that the decade-long American housing boom was over.  Since then, economists have looked on nervously, waiting to ascertain just how bad the down turn is going to be.

The NAR’s positive spin on all this is that the current slowdown is creating great opportunities for buyers to pick up real property bargains.  This is particularly true for European buyers, whose sterling and euros have ever greater purchasing power against a falling dollar.

UK investors are starting to sit up and take notice.  Interest in American properties listed on TheMoveChannel.com leapt up in April, propelling the USA up 10 places into the Top of the Props Top 10 at position 5.  The Top of the Props chart reflects the share of overall monthly enquiries to TheMoveChannel.com each country receives.

The biggest US property market slowdown for 30 years

From 1995 to 2005, US property prices rose 100% with year-on-year growth peaking in the second quarter of 2005 at 14.3%.  Since then, however, the great American housing boom has ground to a rather ignominious halt.  By June 2006, with price rises almost flat, even the National Association of Realtors was acknowledging the party was over.  In September, the Office of Federal Housing Enterprise was talking of the sharpest decline in quarterly rate rises since the beginning of the OFHEO’s House Price Index in 1975.

And in 2007, the bad news just keeps on coming.  US house prices have fallen in 17 of 20 of the country’s largest cities and trends suggest that the worst is yet to come.  In March, sales of new homes plummeted by a record 23.5% (year-on-year) and the NAR has projected existing home sales will fall 2.9 percent this year to 6.29 million.  An interest rate of 5.25% is causing serious problems for many American borrowers, economic growth has dropped to a faltering 1.4% and the dollar has hit a 14-year low against the pound, lying at just under $2 to the £1 in May 2007.

A chance for UK investors?

So does the current weakness of the dollar represent a good opportunity for UK investors to snap up US property bargains?  Stuart Law, Chief Executive of Assetz, urged caution, commenting:

“Assetz has not been involved in the US market from a sales perspective as we have been concerned over pricing, rentability and indeed the state of the dollar and its weakness for the last 3 years or so.  Our first target of $2 to the £1 has been reached and we do still expect there is a good chance of hitting $2.40 over the next two years - which would damage rental income in sterling terms and the value of any equity an investor has in US property.”

Law continued: “However, we have to balance this against the state of the property sales market and I suspect that with a substantial and provable discount in areas of strong rental potential, now could be the beginning of an excellent one to two year long buying opportunity in the US.  We are at the beginning of a bull cycle for UK investors taking a 5-10 year view if they buy carefully, don't believe developer or agent hype and do their own research.”

 

Mark Bodega, Marketing Director of currency specialist HiFX, emphasized the benefits of taking advantage of the current strong exchange rate commenting:

“With Sterling performing well against the US Dollar, the UK’s leading independent currency specialists HiFX are recommending that British holiday homers and property investors who are planning to buy property in the USA seek advice on how best to take advantage of the current favourable rate.  Sterling has just reached its highest level against the US Dollar since September 1992 and it’s worth remembering that the last time the pound traded consistently above $2 was in 1975!.”

Bodega continued: “Many of HiFX’s customers are taking advantage of locking into the very favourable rates by use of forward contracts. In essence, a 'forward contract' means that you can buy the currency now (locking into a favourable rate), and pay for it later.  Most property purchases abroad take between 8 and 12 weeks to complete so people need to think about currency fluctuation between the time of signing the contract and the final payment actually being sent.

Bodega added: We always remind people that they would never agree to buy a property in the UK if they did not know how much it was going to cost them; if they agree to buy an overseas property without fixing the exchange rate at the outset, that's exactly the gamble they are taking.”

Other risers and fallers in this month’s Top of the Props chart

This month’s highest climber was Cape Verde, rising 19 places to reach 21st place.  Other high risers included Argentina (up 17 to 19th), Malaysia (up 15 to 14th) and Dominican Republic (up 10 to 31st).

Countries which fared less well this month included Croatia and India (falling 12 places to 30th and 28th positions respectively), Panama (down 11 to 33rd) and South Africa (down 10 to 27th).

To view current opportunities in the American property market, go to www.themovechannel.com/property/usa

Overall Enquiry Volume for April 2007

 

Rank

Country

Share

Change

Comment

1

France

11.41

Non-mover

8 months in top spot

2

Spain

8.18

Non-mover

3

Italy

6.43

Non-mover

4

Cyprus

4.75

Non-mover

5

USA

4.49

Up 10

New to top 10!

6

Bulgaria

4.01

Down 1

7

Brazil

3.83

Up 6

New to top 10!

8

Portugal

3.58

Down 1

9

New Zealand

3.17

Down 1

10

Turkey

3.12

Down 4

11

Germany

2.95

Down 2

12

Egypt

2.53

Down 1

13

UAE

2.41

Down 3

14

Malaysia

2.14

Up 15

15

Greece

1.71

Up 9

16

Morocco

1.64

Down 2

17

Thailand

1.35

Down 5

18

Philippines

1.32

Up 1

19

Argentina

1.21

Up 17

20

Romania

1.18

Non-mover

21

Cape Verde

1.11

Up 19

Highest climber

22

Czech Republic

1.07

Up 1

23

Antigua / Barbuda

0.83

Highest New Entry

24

Bahamas

0.75

Up 2

25

Sweden

0.74

Up 5

26

Poland

0.7

Down 5

27

south Africa

0.67

Down 10

28

India

0.67

Down 12

Biggest faller

29

Slovakia

0.54

Down 2

30

Croatia

0.53

Down 12

Biggest faller

31

Dominican Republic

0.5

Up 10

32

Venezuela

0.35

Up 2

33

Panama

0.31

Down 11

34

Latvia

0.28

Down 9

35

Australia

0.26

Down 4

36

Hungary

0.19

Down 8

37

Nicaragua

0.18

New Entry

38

Malta

0.18

Down 1

39

Canada

0.18

Down 6

40

Sri Lanka

0.17

Down 8

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