Governments of some countries, whose weak housing markets are not able to support the local economy, are resorting to the opening of markets to foreign buyers. However, experience shows that reducing restrictions is not a panacea for the housing market. Other countries, whose economic situation can be called stable, in contrast, deliberately deprive foreigners’ access of certain objects or regions wishing to preserve the balance of supply and demand in the housing market. Recently, just three countries - Cuba, Vietnam and Indonesia - have expressed their desire to meet foreign buyers of real estate. European countries, including Switzerland and Austria, remain faithful to the tactics of "hard constraints" that allows to control their own markets, maintaining the status of some of the most liquid markets in Europe.
Cuba
After the news of the resumption of diplomatic relations between Cuba and the United States after more than five decades of mutual confrontation, many international investors have cherished the idea of successfully entering the market. Nevertheless, Cuban authorities rushed dreamers down to earth: the country is ready to sell property to foreigners, but not as easily as many had hoped. In other words, of course, there is the probability that the Cuban housing market will be opened to foreign investors, however, the right to acquire a local land, which is considered a national treasure, still belongs exclusively to residents of the country. The almost complete absence of a market sale of real estate is reflected in the pricing. Considering that not long ago the locals were not allowed to sell and buy real estate, it would be difficult to determine at what price to sell the objects in the Cuban market, and investors who decide to go to an unfamiliar market, may face speculators deliberately inflate prices. No wonder the real estate market scenario is similar a well-known city in the UAE. A huge number of buyers of assets in Dubai first sparked an incredible rise in prices, but after some time, cost of housing fell sharply because of lack of end-user. Cuban market may repeat the fate of Dubai: after about four or five years after its opening to international investors, prices will move lower.
Prolonged stagnation and isolation from the world economy have not gone without a trace to Cuba. Crisis market is characterized by a dual condition of housing: on the one hand, more than 130 thousand of Havana residents live in shelters or in residential facilities of poor quality and poor migrants from eastern Cuba are forced to settle in the slums on the outskirts of the city, or in emergency apartment buildings. On the other hand, a lot of empty houses stand idle waiting for buyers. In addition, the lack of an effective system of protection of property rights makes the purchase of local real estate too risky for foreigners: state statistics show that 60% of enterprises created by foreigners in Cuba were closed. Low liquidity include lack of a developed banking infrastructure and the local insurance system makes the already risky market in the "black hole" investment. Thus, the potential liberalization of foreign investment rules, allowing citizens of other countries to acquire residential and commercial properties, is unlikely to attract foreign capital in the next few years.
Vietnam
The Asian country, which has had a policy of economic openness since the 1980s, opened its real estate market toward foreign capital July 1, 2015. This date became the starting point for a new stage of development of the Vietnamese market: July 1, non-resident customers finally got a right to become owners of the local housing. From now on, foreigners are allowed to acquire up to 30% of apartments in condominiums and up to 250 homes, which are located within the same administrative area where the property is in lease for 50 years.
In fact, the market is still far from the full opening. Despite the fact that the first signs of recovery of the Vietnamese market appeared in 2014 after several years of decline, the pace of development is too slow. There is not only a weak economy and a lack of sufficient demand from tenants to blame, but also the growing dependence of the Vietnamese credit that risks triggering the formation of a bubble. Improving of credit flows peaked, and in the first quarter of 2015 the total amount of loans for the purchase of real estate objects Vietnam totaled $ 14.51 billion, an increase of 20% compared with the end of 2013. To avoid a complete collapse of the market, the banking sector should closely monitor mortgages and provide maximum transparency with which is very difficult to cope with.
Today, a number of investors confirms that a huge amount of bureaucracy and lack of coordination between the actions of the federal government and local authorities hinders the process of bargaining, which leads to negative consequences for the investors themselves. There was not much time since the easing of restrictions for foreigners, and probably the situation cannot change radically in the next year.
Vietnamese housing market’s indicators also remain modest. Residential property prices in Vietnam in the first quarter of 2015 recorded a drop of 0.39% compared to the fourth quarter of 2014. The average cost of housing in Hanoi for the same period also fell by 1% compared with the previous quarter. The steps that the government made to meet international investors were not able to fully facilitate their entry into the local market. High taxes remain one of the obstacles for foreign nationals wishing to purchase Vietnamese residential. The tax on profits, derived from rental housing, is up to 20% and capital gains tax - 25%. The decisive factor, speaking not in favor of the local housing market, is a valid long-term Vietnamese visa. The yield from 3.5 to 5.5% per annum is not able to hook foreign buyers. As a result, choosing between high taxation, difficulties with registration facility and long-term expectations, investors increasingly prefer European markets rather than Asian.
Indonesia
Another country, taking steps toward opening its borders to foreign investors, became Indonesia. In May this year, the Indonesian authorities reported that more local real estate will be available for international buyers and investors. Although the exact date of the opening of the Indonesian market is still unknown, the government today confirmed that foreigners will be able to become owners of real estate, including expensive apartments worth more than $ 380 thousand. The announcement was followed by another news, confirming that the program of "open doors" in Indonesia continues : in early June, the country has introduced a visa-free regime for 45 countries.
The Indonesian government not accidentally has decided to step towards citizens of other countries, including foreign buyers. This course is designed to help the government's national economy, the pace of development of which looks pretty weak. In the first quarter of 2015, economic growth slowed to 4.71%, while the country's GDP decreased by 0.18% compared with the previous quarter. The Indonesian housing market continues to fall against the backdrop of an economic slowdown. The weakening of the local currency against the US dollar led to an increase in construction costs, making construction materials at least 30% more expensive.
Reduced purchasing power of the local population also contributed to the fall in housing prices. In the first quarter, the cost of residential facilities in 14 major cities in Indonesia decreased by 0.27%. The rental market is also in recession: in the first quarter, average monthly rental rate dropped by 2% compared to the previous quarter and the apartment in Jakarta area of 60 square meters was worth just $ 1,308.
The sharp fall in oil prices seriously affect the oil-producing emerging markets, to which belongs Indonesia. Of course, there is a drop in economic indicators and the local housing market, especially since the majority of real estate projects is financed by the government today. However, the Indonesian market mostly depends not on the dynamics of the cost of a barrel of oil, but on the development of the infrastructure. Having reduced the cost of subsidies for the fuel sector, the Indonesian government plans to spend on maintaining the infrastructure sector in excess of $ 20 billion, which can significantly increase the investment attractiveness of the country.
Although coming "warming", the Indonesian market is still inaccessible to international investors. In addition, the output of an unknown market is associated with a serious risk of loss of capital: the famous circuits, regularly used by investors, may fail in the untested market. Yield, including that ranges from 2.6 to 5% per annum, is unlikely to convince potential investors to the contrary.
Switzerland
First place in the list of countries, supporting the policy of restricting international buyers, takes Switzerland. The reason was the relentless demand from buyers, including foreign nationals. A stable economy on a par with a clear government regulation of the Swiss real estate market makes the local assets main contenders for a place in the portfolio.
Fearful of an excessive rise in prices, the Swiss government is taking measures to control the real estate market, limiting the demand, including from foreigners. Firstly, non-residents of Switzerland are rather difficult to obtain permission for the purchase of local residential buildings. Secondly, the citizens of other countries cannot acquire a house in the Swiss cantons of Zurich and Geneva. Third, there is a special quota for the purchase of residential property in Switzerland, in which no more than a thousand permits for the purchase of local residential buildings is given a year. Fourth, foreign buyers cannot acquire housing with a total area of more than 240-250 square meters. Finally in the fifth, once purchased in Switzerland, accommodation cannot be put up for sale within five years. All these measures indicate that the government does not lose confidence in the investment potential of local assets. Experience shows that such restrictions are not able to scare off investors interested in preserving their capital.
The Swiss economy has shown stability for more than a dozen years, and against the background of strong growth in demand the cost of housing continues to move up too. Residential property prices in the first quarter of 2015 increased by 2.9% compared to the same period last year. Switzerland, with a typical accuracy of her, has long had a leading position thanks to the yield from the rental of facilities, which ranges from 3.3 to 4% per annum, as well as low mortgage rates, about 1.22 to 2.2%. The Swiss housing market continues to attract foreign investors, the number of which is able to grow at least another 10% in the next few years.
Austria
The second European country, characterized by strict government control, is aimed at including in the residential real estate market restricts the right of foreigners to purchase items on the local market.
Austrian rules mainly concern the non-residents of the European Union: the latter cannot buy a house in the Tyrol, Salzburg and Vorarlberg at registration on an individual, and a citizen of one of the countries outside the EU must obtain a special permit for the purchase of housing in other regions of the Austria. Acquisition of real estate in the whole territory of Austria is available to non-residents of the EU only if they are the owners of a company located in one of the EU countries.
Austrian real estate market remains stable, keeping the prices at a high level. Cost per square meter in the capital, Vienna, in the city center today is about € 6200. In the first quarter of 2015, housing prices in Austria went up by 2.4% compared to the same period last year. Number of rented apartments in Austria during the period from the first quarter of 2014 to the first quarter 2015 increased from 1522 to 1546 units. The cost of monthly rent for the whole of Austria rose from € 465 in the first quarter of 2014 to € 473 in the first quarter of 2015. Steady Austrian market offers a choice between living objects of Vienna, bringing the annual income of 4.5 to 5%, and chalets - commercial facilities in the ski sector, the yield of which is 4% per annum. Due to the developed infrastructure and high level of safety, Vienna received the title of one of the most liveable cities in the world. Austrian Alps, whose ski resorts are a popular tourist destination for recreation, provide virtually year-round occupancy of the investor. A clear government regulation of the Austrian real estate market and its growth over the years show a steady investment potential of the Austrian assets, finding place in a diversified portfolio of large investors.
source: rbcnews.com
Cuba
After the news of the resumption of diplomatic relations between Cuba and the United States after more than five decades of mutual confrontation, many international investors have cherished the idea of successfully entering the market. Nevertheless, Cuban authorities rushed dreamers down to earth: the country is ready to sell property to foreigners, but not as easily as many had hoped. In other words, of course, there is the probability that the Cuban housing market will be opened to foreign investors, however, the right to acquire a local land, which is considered a national treasure, still belongs exclusively to residents of the country. The almost complete absence of a market sale of real estate is reflected in the pricing. Considering that not long ago the locals were not allowed to sell and buy real estate, it would be difficult to determine at what price to sell the objects in the Cuban market, and investors who decide to go to an unfamiliar market, may face speculators deliberately inflate prices. No wonder the real estate market scenario is similar a well-known city in the UAE. A huge number of buyers of assets in Dubai first sparked an incredible rise in prices, but after some time, cost of housing fell sharply because of lack of end-user. Cuban market may repeat the fate of Dubai: after about four or five years after its opening to international investors, prices will move lower.
Prolonged stagnation and isolation from the world economy have not gone without a trace to Cuba. Crisis market is characterized by a dual condition of housing: on the one hand, more than 130 thousand of Havana residents live in shelters or in residential facilities of poor quality and poor migrants from eastern Cuba are forced to settle in the slums on the outskirts of the city, or in emergency apartment buildings. On the other hand, a lot of empty houses stand idle waiting for buyers. In addition, the lack of an effective system of protection of property rights makes the purchase of local real estate too risky for foreigners: state statistics show that 60% of enterprises created by foreigners in Cuba were closed. Low liquidity include lack of a developed banking infrastructure and the local insurance system makes the already risky market in the "black hole" investment. Thus, the potential liberalization of foreign investment rules, allowing citizens of other countries to acquire residential and commercial properties, is unlikely to attract foreign capital in the next few years.
Vietnam
The Asian country, which has had a policy of economic openness since the 1980s, opened its real estate market toward foreign capital July 1, 2015. This date became the starting point for a new stage of development of the Vietnamese market: July 1, non-resident customers finally got a right to become owners of the local housing. From now on, foreigners are allowed to acquire up to 30% of apartments in condominiums and up to 250 homes, which are located within the same administrative area where the property is in lease for 50 years.
In fact, the market is still far from the full opening. Despite the fact that the first signs of recovery of the Vietnamese market appeared in 2014 after several years of decline, the pace of development is too slow. There is not only a weak economy and a lack of sufficient demand from tenants to blame, but also the growing dependence of the Vietnamese credit that risks triggering the formation of a bubble. Improving of credit flows peaked, and in the first quarter of 2015 the total amount of loans for the purchase of real estate objects Vietnam totaled $ 14.51 billion, an increase of 20% compared with the end of 2013. To avoid a complete collapse of the market, the banking sector should closely monitor mortgages and provide maximum transparency with which is very difficult to cope with.
Today, a number of investors confirms that a huge amount of bureaucracy and lack of coordination between the actions of the federal government and local authorities hinders the process of bargaining, which leads to negative consequences for the investors themselves. There was not much time since the easing of restrictions for foreigners, and probably the situation cannot change radically in the next year.
Vietnamese housing market’s indicators also remain modest. Residential property prices in Vietnam in the first quarter of 2015 recorded a drop of 0.39% compared to the fourth quarter of 2014. The average cost of housing in Hanoi for the same period also fell by 1% compared with the previous quarter. The steps that the government made to meet international investors were not able to fully facilitate their entry into the local market. High taxes remain one of the obstacles for foreign nationals wishing to purchase Vietnamese residential. The tax on profits, derived from rental housing, is up to 20% and capital gains tax - 25%. The decisive factor, speaking not in favor of the local housing market, is a valid long-term Vietnamese visa. The yield from 3.5 to 5.5% per annum is not able to hook foreign buyers. As a result, choosing between high taxation, difficulties with registration facility and long-term expectations, investors increasingly prefer European markets rather than Asian.
Indonesia
Another country, taking steps toward opening its borders to foreign investors, became Indonesia. In May this year, the Indonesian authorities reported that more local real estate will be available for international buyers and investors. Although the exact date of the opening of the Indonesian market is still unknown, the government today confirmed that foreigners will be able to become owners of real estate, including expensive apartments worth more than $ 380 thousand. The announcement was followed by another news, confirming that the program of "open doors" in Indonesia continues : in early June, the country has introduced a visa-free regime for 45 countries.
The Indonesian government not accidentally has decided to step towards citizens of other countries, including foreign buyers. This course is designed to help the government's national economy, the pace of development of which looks pretty weak. In the first quarter of 2015, economic growth slowed to 4.71%, while the country's GDP decreased by 0.18% compared with the previous quarter. The Indonesian housing market continues to fall against the backdrop of an economic slowdown. The weakening of the local currency against the US dollar led to an increase in construction costs, making construction materials at least 30% more expensive.
Reduced purchasing power of the local population also contributed to the fall in housing prices. In the first quarter, the cost of residential facilities in 14 major cities in Indonesia decreased by 0.27%. The rental market is also in recession: in the first quarter, average monthly rental rate dropped by 2% compared to the previous quarter and the apartment in Jakarta area of 60 square meters was worth just $ 1,308.
The sharp fall in oil prices seriously affect the oil-producing emerging markets, to which belongs Indonesia. Of course, there is a drop in economic indicators and the local housing market, especially since the majority of real estate projects is financed by the government today. However, the Indonesian market mostly depends not on the dynamics of the cost of a barrel of oil, but on the development of the infrastructure. Having reduced the cost of subsidies for the fuel sector, the Indonesian government plans to spend on maintaining the infrastructure sector in excess of $ 20 billion, which can significantly increase the investment attractiveness of the country.
Although coming "warming", the Indonesian market is still inaccessible to international investors. In addition, the output of an unknown market is associated with a serious risk of loss of capital: the famous circuits, regularly used by investors, may fail in the untested market. Yield, including that ranges from 2.6 to 5% per annum, is unlikely to convince potential investors to the contrary.
Switzerland
First place in the list of countries, supporting the policy of restricting international buyers, takes Switzerland. The reason was the relentless demand from buyers, including foreign nationals. A stable economy on a par with a clear government regulation of the Swiss real estate market makes the local assets main contenders for a place in the portfolio.
Fearful of an excessive rise in prices, the Swiss government is taking measures to control the real estate market, limiting the demand, including from foreigners. Firstly, non-residents of Switzerland are rather difficult to obtain permission for the purchase of local residential buildings. Secondly, the citizens of other countries cannot acquire a house in the Swiss cantons of Zurich and Geneva. Third, there is a special quota for the purchase of residential property in Switzerland, in which no more than a thousand permits for the purchase of local residential buildings is given a year. Fourth, foreign buyers cannot acquire housing with a total area of more than 240-250 square meters. Finally in the fifth, once purchased in Switzerland, accommodation cannot be put up for sale within five years. All these measures indicate that the government does not lose confidence in the investment potential of local assets. Experience shows that such restrictions are not able to scare off investors interested in preserving their capital.
The Swiss economy has shown stability for more than a dozen years, and against the background of strong growth in demand the cost of housing continues to move up too. Residential property prices in the first quarter of 2015 increased by 2.9% compared to the same period last year. Switzerland, with a typical accuracy of her, has long had a leading position thanks to the yield from the rental of facilities, which ranges from 3.3 to 4% per annum, as well as low mortgage rates, about 1.22 to 2.2%. The Swiss housing market continues to attract foreign investors, the number of which is able to grow at least another 10% in the next few years.
Austria
The second European country, characterized by strict government control, is aimed at including in the residential real estate market restricts the right of foreigners to purchase items on the local market.
Austrian rules mainly concern the non-residents of the European Union: the latter cannot buy a house in the Tyrol, Salzburg and Vorarlberg at registration on an individual, and a citizen of one of the countries outside the EU must obtain a special permit for the purchase of housing in other regions of the Austria. Acquisition of real estate in the whole territory of Austria is available to non-residents of the EU only if they are the owners of a company located in one of the EU countries.
Austrian real estate market remains stable, keeping the prices at a high level. Cost per square meter in the capital, Vienna, in the city center today is about € 6200. In the first quarter of 2015, housing prices in Austria went up by 2.4% compared to the same period last year. Number of rented apartments in Austria during the period from the first quarter of 2014 to the first quarter 2015 increased from 1522 to 1546 units. The cost of monthly rent for the whole of Austria rose from € 465 in the first quarter of 2014 to € 473 in the first quarter of 2015. Steady Austrian market offers a choice between living objects of Vienna, bringing the annual income of 4.5 to 5%, and chalets - commercial facilities in the ski sector, the yield of which is 4% per annum. Due to the developed infrastructure and high level of safety, Vienna received the title of one of the most liveable cities in the world. Austrian Alps, whose ski resorts are a popular tourist destination for recreation, provide virtually year-round occupancy of the investor. A clear government regulation of the Austrian real estate market and its growth over the years show a steady investment potential of the Austrian assets, finding place in a diversified portfolio of large investors.
source: rbcnews.com
