End of Boom Need Not Be Dire
Peaking in 2004 after more than two years of annual price appreciation of 15% or more, Australia appears to be succeeding in ending its housing boom without widespread economic distress or a sudden crash in home prices. The nation’s central bank started raising its key overnight lending rate in May 2002, and it now stands at 5.5%, compared to 3.25% in the U.S., and is among the highest in the developed world. In early 2003, Reserve Bank of Australia Gov. Ian Macfarlane said that scaling back household borrowing and property development would be in “the longer term interest of the Australian economy.” In a move to discourage speculators from buying and flipping properties for quick profits, the state of New South Wales, which includes Sydney, instituted a 2.25% tax on the sale of investment properties. Recent data suggest that Australia’s home prices haven’t changed over the last year and have fallen slightly in the country’s two biggest cities, Sydney and Melbourne. Australia hasn’t experienced widespread job losses, and a likely scenario is that its overall economy will keep growing as home prices stagnate. (www.realestatejournal.com)
RealEstateJournal (7/15/05); Patrick Barta, Wall Street Journal
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European Housing Sizzles
Housing price appreciation looks almost calm in the U.S. marketplace compared to some other countries that are a part of today’s global housing boom. Since 1997, prices in France have climbed 87%, compared to 73% in the U.S. Over the same period, real estate prices are up 154% in Britain, 145% in Spain and 192% in Ireland. Driving the boom in Europe are low short-term interest rates. They are at 2%, compared to 3.25% in the U.S., and expected to decline in coming months. Also, more European banks have started offering more flexible-interest and interest-only loans, as well as mortgages with 35-year amortization schedules. Banks “had to make it easier for people to buy homes because prices were rising so quickly,” says Patrice Brunet, director of Talleyrand, a small real estate company near the Eiffel Tower in Paris. A retired health care consultant from Louisville, Ky. looking for a two-bedroom apartment in a fashionable quarter of the French capital thought she could find something for about $1.2 million, but discovered that she had underestimated the price by about $500,000. A nurse in London says he is considering changing professions, even driving a taxi, so he at least can afford to buy a studio apartment, which would cost almost $300,000. (www.usatoday.com)
USA Today (7/21/05); Noelle Knox, Eric J. Lyman and Lisa Abend
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Encouraging Home Ownership Actually Helps Apartment Owners
Rent-to-buy programs that enable residents to eventually purchase their homes could represent the best strategy for apartment communities to compete with the allure of homeownership and ease turnover problems, according to a new white paper by SatisFacts Research for RE/MAX Heading Home. The paper finds that offering renters a program that provides assistance in buying a home can increase occupancy rates, increase resident retention, delay or reduce turnover costs, reduce marketing and leasing costs, provide a competitive marketing advantage, and increase net operating income and goodwill. About 20% of residents say they are not renewing their leases in order to buy a home, which is the leading reason for moving out of an apartment. (www.rismedia.com)
RISMedia (7/20/05); Beth Bresnahan
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Texas Eminent Domain Bill Appears Dead for Now
Legislation to protect property owners from government land seizures in the wake of a recent Supreme Court ruling allowing eminent domain powers to be used for private economic development failed in a special session of the Texas legislature when the House and Senate were unable to reconcile their differences before adjourning. A major sticking point was a House provision that would have required governments to pay replacement value instead of fair market value when property is seized. “That’s just a litigation nightmare,” said Sen. Kyle Janek, who was the author of the bill in the upper chamber. Gov. Rick Perry had added the issue to the agenda for the special session, after lawmakers were flooded with phone calls from worried property owners. Lawmakers are likely to return to the legislative effort if another special session is called. (www.chron.com)
Houston Chronicle (7/20/05); Polly Ross Hughes
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Condos Proposed at the Fairmont
A proposal to turn a 23-story tower annexed to San Francisco’s landmark 100-year-old Fairmont Hotel in 1961 into condominiums has caused a furor among the city’s leaders, prompting one supervisor to pursue a measure that would prohibit tourist hotels with more than 50 rooms from converting lodging space into condos or other housing units. The project would convert 226 rooms in the 591-room hotel into 60 housing units, according to the owners, and would generate $1 million to $1.5 million in annual taxes and revenues and create about 300 union jobs during the conversion, they say. Last year, New York City Mayor Michael Bloomberg helped negotiate a compromise that preserved nearly half of the rooms at the Plaza Hotel from a proposal to convert the entire building into stores and apartments. (www.sfgate.com)
San Francisco Chronicle (7/19/05); Cecilia M. Vega
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New York City Seeing a Homebuilding Frenzy
From the northern Bronx and eastern Queens to western Brooklyn and southern Staten Island, builders in New York are squeezing extra homes and apartments onto lots where a single house once stood. Developers are using lax zoning laws that were last updated in 1961, and the mismatch between the housing that exists and what the zoning allows wasn’t an issue in the 1970s when people were fleeing the city for the suburbs and in the 1980s when developers wouldn’t go near neighborhoods that had become crime-ridden. Local groups, community boards and city officials are fighting back by downzoning to allow builders only to put up homes that match the existing neighborhood character. “Where are people going to live?” asked Allen Cappelli, who represents the Building Industry Association of New York City. “When you look at the city’s housing crisis, you can’t have this kind of blind downzoning.” (www.nydailynews.com)
New York Daily News (7/13/05); Elizabeth Hays, Warren Woodberry Jr. and Adam Lisberg
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Are Antsy Consumers Browsing for Housing or ‘Bubble’ Information?
Although visits to real estate Web sites are up almost 20% from a year ago, anxiety about the possibility of a crash in residential real estate values could be the factor that is driving a growing portion of the traffic. According to Hitwise, a New York City-based company that tracks Internet use, in the last 12 months searches on such major search engines as Google, Yahoo!, Search and MSN Search were up 311% for “real estate bubble” and 174% for “housing bubble.” Earlier this year, four in 10 of those surveyed for an Experian-Gallup Personal Credit Index said there’s a likelihood that the housing bubble will burst within the next three years. “Recent Internet search activity suggests that some activity in the category is being driven by curiosity of rising property values and the possibility of a bursting bubble,” said Bill Tancer, vice president of research at Hitwise. “Should we undergo a market decline, it will be interesting to see how site traffic and search activity correspond.” (www.realtytimes.com)
RealtyTimes (7/20/05); Broderick Perkins
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A House That Turns Into an Ark Might Save Lives
After watching people on television cleaning up flood damage to their homes, Thomas Meere, a 65-year-old builder based in Hampstead, northwest of London, developed a scale model of a floating house that will rise with the water. A seven-foot-thick block of polystyrene is fastened to the underside of a reinforced concrete slab on which the walls of the house are based. When water pours into a 10-foot deep basement below the slab, the polystyrene has enough buoyancy to lift a one-and-a-half story house. When there is the threat of a flood, the home’s owners open the basement windows to allow the water to pour in. Rails on each corner of the foundation extending to the roof ensure that the house will not tip over. Meere said that the extra work and materials needed to build the house would raise its costs by about 25%. (www.mailonsunday.co.uk)
Financial Mail on Sunday, London (7/18/05); Donald MacGillivray
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