International Real Estate

I just wanted to share this piece with everyone regarding International Real Estate

It is a global economy and a small world. Apathy can be costly no matter where you live. Don’t get caught sleeping while the boat ships out seems to be the message in the UK as well as the USA.

R. Rempfer

Confusion Reigns and April Showers

April is traditionally the month of rain showers in the UK. But the real estate industry is having trouble with another form of shower. Over on this side of the Atlantic the word ‘shower’ is also used to describe a group of hopeless or worthless people. So that would go for the bankers then, who are currently the biggest shower we have to contend with. They continue to stifle mortgage borrowing and throttle the market. Rather like in the States, the banks have readily taken money from the public purse yet still refrain from regenerating it as sufficient mortgage funds in the public interest.

But is the decline in the real estate market all down to the banks, and to our governments for that matter?

John Maynard Keynes, the brilliant economist, argued that governments should use fiscal and monetary measures to mitigate the adverse effects of economic recessions. They should also encourage the population to spend more to help stimulate the economy. As both the UK and the US governments currently seem to subscribe to this view we may soon know if Keynes was right. If he was then we may also receive the answer to the question many homeowners are anxiously seeking: when will the property market turn for the better?

But despite interventionist policies, Keynes may have also argued that it is the lack of movement in the real estate market today that is, in effect, causing diminution of equity - the very thing that homeowners fear most. This is a self-fulfilling prophecy: the fewer real estate transactions there are, the greater the loss in real estate values. This view would suggest that it is not solely up to governments to turn the tide of the property market, it is up to each and every one of us to get off the fence. If we start moving again we may see real estate values and equity rise. If we do nothing we will surely watch them fall. Like economies, real estate equity growth is aligned with confidence.

Of course Keynes had his detractors - many of them anxious to disprove the great man’s theories. Winston Churchill famously said of Keynes, “If you put two economists in a room, you get two opinions, unless one of them is Lord Keynes, in which case you get three opinions.”

But to be fair Keynes never saw this current market, although he did experience the Great Depression. He never had to grapple with financial institutions falling over themselves not to lend money despite the lowest interest rates ever. Nor did he need to ponder on the law of supply and demand in a property market which has precious little of either.

This is a perfect storm of lack of lending and lack of confidence. But the signs in the UK this spring add another dimension. Despite all the conflicting factors we have a market that is showing some very encouraging signs. Cash rich buyers and investors are suddenly re-entering the market in large numbers to take advantage of adjusted prices.

They feel we are nearer the end of this recession than the beginning, and understand that it is only a matter of time before prices stabilise and then begin to rise.

On this side of the pond, at least, the message to real estate buyers seems clear. Sit this one out now and the sitting could be costly. Get on and make the move into that investment, first home, larger family home or dream home and you may yet, in this month of April showers, be home and dry.