Real Estate Market

Because of the exotic beauty and splendour of Thailand most of the tourists who come to visit temporarily end up living in this majestic and tropical country as expatriates.

Generally, under the Thai law, foreign ownership of land is strictly prohibited. Financially smart foreigners however, have found the process of purchasing condos in their own name and renting those units out for income generation to be a very attractive investment.

Thus, resourceful foreigners have directly gained full control over the property they acquired in the form of condominium units. Some expats will live in the Thai condo themselves while other owners choose to have a property management company handle the rental. Some Thailand condo developers will even offer this service to the new buyers.

Since foreigners are forbidden from acquiring real properties in Thailand, they have chosen to purchase the next best thing. Acquisition of condominium units have become the simplest and most trouble-free substitute for foreigners who want to own real property in the country.

Although foreign ownership of condominium units is allowed, acquisition thereof is limited to a maximum of forty-nine percent (49%) of the whole building.

Another method of indirectly acquiring real property in Thailand is through a long-term lease. Although the non-Thai is merely considered as a lessee in this case, he is converted into the virtual owner of the leased premises since the lease agreement may be drafted in such a way as to render the agreement binding for a very long time, the maximum period of which is for thirty (30) years.

Before the expiration of the contract of lease, if the latter changes his mind and decide to sell his rights to the leased premises, he may validly be allowed to do so as long as such an act is provided for under the contract of lease.

Another alternative approach to indirectly owning real estate is the purchase of land through a duly registered Thai company. Although purchase of land by an individual foreigner is prohibited, it isn’t prohibited for the Thai company to own and to acquire Thailand real estate.

As Turkey continues to progress as one of the most sought after emerging markets for property investing, several questions repeatedly arise from potential buyers considering the location. Below is a compilation of ten of the most frequently asked questions about Turkey as a property investment location.

1. What makes Turkey an interesting investment market?

Currently Turkish real estate is one of the strongest emerging international market growth sectors, showing excellent potential for continued demand and expansion. Capital growth for mid to long term investments, along with good rental yield potential are attracting investors to the country’s property sector.

Coupled with the country’s domestic market, demand for property currently exceeds supply, resulting in fast increasing real estate prices. Growth within the tourism sector and interest to re-locate are also areas creating further demand and a strong growth market.

The country features a youthful demographic with a highly skilled workforce with intentions to enter the real estate market, placing demands on supply and improvements to the mortgage financing sector. This market represents strength in the future re-sale and letting markets.

Turkey’s steadily expanding economy and government integration for bringing the country in line with EU accession requirements allow for strong future growth prospects.

Along with the excellent investment opportunities presented in the Turkish real estate sector, the possibility of gaining admission to the EU in the coming years is further fueling demand. The pre-EU entry prices offer a competitive position within the European market.

2. Are there any restrictions for foreign buyers?

Most nationalities are freely able to purchase real estate in Turkey, although restrictions apply to some nationalities. Those who fall into a restricted category will require a legal ‘Letter of Invitation to Purchase’ prior to entering the country. If unsure, details can be obtained from an embassy or consulate.

Other restrictions relating to all foreign buyers are real estate purchases within restricted areas, such as military zones, along with restrictions relating to property over 30,000m2 without obtaining a special permit.

3. What are the associated purchasing costs?

Purchasing costs will amount to approximately 5% of the property sale price. Registration and Notary fees are between 0.1% and 1%, while Stamp Duty fees are 0.75%. Title Deed fees have temporarily been reduced from 1.5% to 1% to assist the housing market during the current economic climate.

4. What are the legal fees?

Legal fees are around 2% of the purchase price, with prices varying between different legal firms. Half of the legal fees may be required when signing the purchasing contract and the remainder on completion.

5. What are the taxes I can expect?

If opting to sell the property prior to completing 5 years ownership, capital gains taxes will be charged at 20%. Following 5 years ownership the property is free from capital gains. VAT at 1% is required on real estate with a surface area greater than 150m2. Other taxes include residential real estate tax is 0.1% of the property value, and rental income tax where different payment method options are available to suit the owner’s preferences.

Rental income is charged at between 15.6% and 24.8% payable by a ‘deduction method’ exempting expenses such as utilities, insurance and administrative costs, or the ‘lump sum method’ deducting 25% of the gross income.

6. Will I be able to arrange a mortgage?

The growth of the real estate market has opened up mortgage financing on Turkish property to foreign buyers in recent years. Both fixed and variable rates can be arranged, with financing available for both re-sale and off-plan properties.

7. What is the military clearance requirement?

Military clearance is arranged by the buyer’s solicitor prior to completing the property purchase. The documents are required to ensure the property is not located within a restricted zone including military land, or other land protected for cultural, historical or ecological purposes.

8. What is a typical payment schedule?

While payment schedules may vary between different developments or agent’s requirements, a typical payment schedule will require a holding deposit, reservation payment and reminder on completion. Holding deposits are often approximately EUR3,000 or £3,000, while reservation payments may vary between approximately 10% and 40% of the purchase price.

It is also possible that a development may have staged payment requirements throughout the construction process. Re-sale properties are likely to have different payment procedures to off-plan investments, with the full price payable on transfer of the title, minus the holding deposit.

9. What is the time zone and currency conversion rate?

The time zone of Turkey is GMT +2. The local currency is the Turkish Lira (TRY). As the currency rate changes, the following conversions should only be used as a general guide:

1 EUR = 2 TRY / 1 GBP = 2.4 TRY / 1 USD = 2.5 TRY

10. Do I need a visa to visit Turkey?

Depending upon nationality and intended duration of the visit to Turkey, a visa may be required. Contacting an embassy or consulate prior to arranging travel plans is advisable for details of full requirements. This will ensure complete and up to date information to avoid unpleasant surprises.

There has been a whole lot of speculation for quite some time now, about the recession-hit nations around the world, which started from US’s housing and banking sector. It didn’t take time for it to envelop the Middle East, especially the Dubai stock market. There has been a negative trend in the emirate which also originated the news about Dubai Government refusing to bail out Dubai World, of its debts.

Because of this several nations believed the emirate of Dubai is heading towards bankruptcy, as the emirate has stretched itself financially to become a world-class tourist destination, which was beyond the deep pockets the emirate had. The thought is inevitable when, in the emirate you see the world’s tallest building, the most expensive hotel, lavish villas and apartments reflecting the investment is such expansive projects. In the meantime, the Dubai real estate market also saw a falling trend where the projects were put to a halt and several expatriates and workers left the country in haste.

However, did you know Dubai is one of the top reserve holders of foreign exchange, which gives it enough ability to sustain itself and withstand any crisis? Also, few in the world know, Dubai World has the capacity to settle its own debts if it sells its property assets and companies around the world. Abu Dhabi has, also, come forward with US $10 billion, to assist Dubai World pay its debt, which has pumped energy in the Dubai stock market and investment in Dubai is now looking more optimistic. Recent estimates shows, 67 percent of projects have been restarted.

Several experts have their views about, if this is an ideal time to buy property in Dubai or not? Some analysts suggest, the decision of investing in Dubai property would still have to wait and watch the market trends. It also depends on the type of property a buyer is looking for and the place of investment. The marina apartments and villas are still experiencing the rising prices. On the other hand, city apartments and hotel outlook have not been talked about much, the job slash in the emirate has led to the oversupply of Dubai rental units and rents have dropped in favor of the tenants. Therefore, Dubai rentals are most affordable, because the owners had to get a better deal in, when a mass of immigrant workers in Dubai, left.

The analysts believe the developing projects would be completed by the end of 2010 and the apartments available would be 33% in oversupply as compared to 10 to 16% now. That is the time, when it’s ideal to invest in buying Dubai property . Some analysts offer their view on holding on till 2010 mid-summer, when the trends show, the prices are at their lowest. But all real estate analysts say, a rebound will occur in 2011, which has to be waited for.

Ahmadabad is one of the fastest growing tier II cities of India. It is the commercial and cultural hub of Gujarat that is developing with the growing industrialization in the region. Known for its traditional textile industry, Ahmadabad is now becoming a centre of academics and IT and other industries. It is undergoing umpteen changes with varied developments in real estate and construction sector in the city. The boom in real estate is transforming the skyline of the city of Ahmadabad.

Ahmadabad is also popularly called ‘Manchester of the East’ for its thriving textile industry. But it is also identified with architectural delights as it is a wonderful fusion of both Hindu and Muslim architectural ideals. It is now generating state-of-the-art designs for residential, commercial and industrial properties like houses, retail shops, office buildings, etc. The city is also witnessing infrastructural developments in the form of flyovers, roads, etc.

The real estate developers of Ahmadabad are undertaking construction of various residential townships, glitzy malls and office spaces. The honchos of real estate like DLF, Unitech, Raheja Group, etc have also been developing various construction projects in the city. Developers like Saumya Constructions, N.G.Developers, Navratna, BGP Builders, etc are creating high standard residential buildings. Even a major player like Reliance is considering commercial development plans in Ahmadabad. The government is further encouraging various kinds of mini townships like Technology parks, medical and health care townships, logistics parks, etc.

The cityscape of Ahmadabad will further be improved with the permission for upcoming Ahmadabad-Dandi heritage route in Gujarat. The plan to introduce metro rail service in the city is no less than a boon to Ahmadabad infrastructure. The construction of another ring road is planned with three of them already existing. Ahmadabad seems to be converting into a metropolitan city soon with well planned infrastructure and contemporary amenities.

As expected, the rates of property in Ahmadabad have risen in due to various reasons. Firstly, the deficit between demand and supply for property due to the increasing need has led to a rise of 15-20 percent in property prices every year. Secondly, the changing face of city due to large scale infrastructural, retail and commercial activities by major real estate developers has directly led to higher property prices. Thirdly, there has been an increase in the spending powers of the inhabitants, thus, upping the rates of property.

Ahmadabad has also been gaining the position of a lucrative investment market for both the city dwellers and the NRIs. Its developing economy has instilled confidence in both investors and bankers to invest their money in the real estate sector. With the coming up of IT parks, SEZ parks, etc., real estate has brought about a boom in the investment market too. The aim of real estate developers of making Ahmadabad a self sustaining city and the good quality of life offered here attracts NRIs and others for both living and investing money in the city.

Well developed infrastructure, wide roads, improved connectivity and promise of a high class living has amounted to two to three fold increase in Ahmadabad property rates. Even after this hike in costs, it is much lower than the rates in metro cities. One of the reasons could be the boost in prospects of business in Ahmadabad. Easy availability of labor and the strategic location of Ahmadabad prove beneficial for businessmen. It is closer to Mumbai, one of the important business centers and to countries in Western, African and Middle East.

Ahmadabad offers great opportunities in both education and employment sector and this also helps encourage the real estate industry. It has world’s most reputed institutes such as Indian institute of Management, Ahmadabad (IIMA) and National institute of Design (NID) that fetches students from all around the world. Students come in large numbers to study in these top schools and to work in highly progressing industries.

With so many activities lined up, Ahmadabad is an incomparably splendid place to invest in for both property buyers and property developers.

With the bust of the real estate market in the United States, many investors were left wary and wondering when and how to do business again. It seemed, and to many it still does, that the bottom is still falling out of the domestic market, and many people’s plans and dreams are falling out right with the dismal market projections. However, for those who aren’t afraid to step out of their own backyards, plenty of investment opportunities still await. These gems are simply waiting to be discovered by someone. One such investment is Portugal property. Investing in real estate in Portugal is a surprisingly great move.

Europe’s real estate market is, in many ways, nothing like its counterpart in the United States. For Europeans, both the tourism markets and real estate markets are more stable. The country of Portugal is uniquely poised to take advantage of these two trends, as the country is one of Europe’s top vacation destinations. Portugal has many miles of beautiful beaches, and also offers ample opportunity to golf. Tourism is a year-round trade in Portugal, making investing in tourism through Portugal property a nearly sure bet for investors all over the world. Investors may purchase homes in order to sublet them to vacationers, and thus generate income through their home. On the other hand, they may simply purchase a place to call their own, to use as a second home or a vacation and retirement destination, and capitalize on the appreciation that the unit brings. Either way, Portugal has plenty to offer.

Two of the main investment destinations in Portugal property are Algarve and the Silver Coast. Algarve is located to the extreme south of the country, and boasts beautiful hills, beaches, and cliffs. The area is green, fertile, and lush, also making it an extremely popular golfing destination. Obviously, this increases the draw for the retired crowds! Algarve also boasts historical relics dating back to medieval times. The Silver Coast has a booming economy and prices there are generally seen as strong with great potential for capital growth. The area is strictly regulated by the government in order to ensure that over-development doesn’t threaten the beauty, so investors can be reasonably confident that the area will continue to grow both in popularity and in the economy.

By now, everyone is quite familiar with the unique set of circumstances that lead to the collapse of financial markets across the world in 2008. This was a perfect storm and boy did it pack a punch, hitting hard and fast!

Many investors saw their retirement portfolios cut in half as global economies came to an abrupt halt. Since then nervous investors have wondered if they’ll be able to retire when they originally planned. They know their money must work even harder for them just to recover what they have lost, and yet they also want greater security because they can ill afford a repeat of recent history.

Some have turned to real estate investing. While investing in real estate can be profitable, it isn’t realistic for most busy professionals since being successful at it requires time and knowledge – both of which are in limited supply. Therefore most don’t give it any serious thought.

For those who decide to pull back the curtain in their search for investments that are secure, require little time or knowledge, and offer exceptional returns, they’ve discovered a virtual secret called rent-to-own (RTO) properties. This article covers the 5 keys to becoming a rent-to-own property investor in Canada.

Availability of Cash Funds

Becoming a RTO investor begins with having cash available for the down payment necessary to qualify for a CMHC (Canadian Mortgage and Housing Corporation) insured mortgage. The key word is available. This means that the investor already has liquid cash in their bank account that doesn’t need to be transferred from other accounts, or involve selling investments to access the money. A RTO investor should have 20% ready for a down payment (or $50K – $60K for a typical home purchase) even if less is required because CMHC rules can and do change.

Employment and Income Verification

Every RTO investor must also be able to prove their income. To be able to qualify for most RTO deals in Ontario an investor should have a minimum household income of $50K – 60K.

In order to be approved for a mortgage an investor needs a letter of employment, their two most recent pay stubs, all T4s for the past two years, and copies of their two most recent Notice of Assessments from the Canada Revenue Agency. If the investor is self-employed then they must provide copies of all T9s for the past two years instead of T4s.

Excellent Credit

This one should be obvious considering that most tenants who use a RTO to purchase a home do so because their credit sucks. The banks won’t look at you any differently because you’re an investor with money. The higher your credit score is the better. Different banks also have different lending rules so to ensure that you can qualify an investor should have a minimum credit score of 680.

Low Gross/Total Debt Service Ratios

These ratios are used to answer the question Are you in too much debt already? For RTO investors all that this means is that your debts should be within acceptable ranges before jumping on an opportunity. Your RTO specialist and their accredited mortgage professional will be able to assist you in answering this question.

Mortgage Pre-Approvals

With the previous four items checked off a rent-to-own investor should be able to obtain a mortgage preapproval for between $200K – 250K quite easily. A mortgage pre-approval is very important as it is a commitment from the bank confirming that based on the above information, they will lend you a specific amount of money towards a mortgage if obtained within a given time period.

Becoming a rent-to-own investor involves the same things required of any home buyer. Having cash funds available and accessible, excellent credit, low debt ratios, being able to verify your employment and income, and obtaining a mortgage pre-approval are required by every RTO investor before they can start investing in rent-to-own properties.

RTO opportunities move quickly because the cash flow, passivity, security, and high ROI make it an ideal investment strategy. It is important that a rent-to-own investor be able to close the deal. The Canadian RTO specialist makes it possible by ensuring these 5 keys are met and providing a team of RTO friendly lenders, lawyers, and insurance brokers to complete the deal and secure your investment.

It is said that there are many real estates in Australia which are worth investing for. One excellent place is Perth’s Western Suburbs.

Perth’s Western outer reaches is a typical residential area for well-to-do residents of Perth. The communities belonging to this town are City Beach, Claremont, Cottesloe, Crawley, Daglish, Dalkeith, Floreat, Jolimont, Mosman Park, Mt Claremont, Nedlands, North Fremantle, Peppermint Grove, Shenton Park, Subiaco, Swanbourne, Wembley, West Leederville and West Perth. This area is accessible to parklands, cafés, restaurants and metropolitan Perth trips.

The houses in this western suburbs of Perth are made and designed to take up the entirety of a block with no space for yards or gardens. For communities with beach settings, you may choose City Beach, Cottesloe and Swanbourne. Dalkeith, meanwhile, is in a peninsula setting on the Swan river with boat ramps, clubs and water-borne activities. Located above the city is West Perth from which the magnificent CBD may be viewed.

The city of Perth is regarded as the most beautiful all over the Australian land with a modern metropolitan area. Its streets and parks are regularly maintained and kept, its modes of transportation are sophisticated and efficient.

There are many advantages for investing money on this western suburbs of Perth. Aside from being a prestigious location, it also has a satisfactory record for increase in price(with exception of 2005 and 2006). It is situated accessibly to the central business district and majority of the retail outlets in addition to surrounding beach, river and parkland. The houses and apartments in Perth’s Western Suburbs are excellently designed. However, there are some disadvantages for Perth Western Suburbs investment. Its population grows slowly and the prices of houses have been held up. Perth can be a very dry city and residents suffer from water shortages. The weather here is very hot and during summer the temperature may reach as high as 40° Celsius. Humidity is fortunately low.

The condition of this neighborhood’s local roads are in good condition. There is also the Perth Airport which is a 25 minute drive from City Beach. Train rides are available to Shenton Park to Fremantle line. Buses, coaches and taxis are also offered as modes of transportation. Large hospitals(Sir Charles Gairdner Hospital and Royal Perth) are present to offer medical health services. For elders, there are various retirement facilities from independent-living villas to full care centers. And who would not be lured to beach outings (especially during summer )on Cottesloe Beach, City Beach and Floreat Beach.

Bold Park and Kings Park have shared pathways. And from Kings park, the Perth Central business district views may be viewed beautifully. Pets like dogs may be allowed to wander in off leash areas along the foreshore and Bold Park. For women who can’t seem to live without shopping, there are numerous shopping malls and department stores like the Forum and Boulevard centers.

Once bored from shopping, bush walking or beaching, there are sporting venues like golf courses to visit. At the rise of summer heat, the Margaret River and other coast areas are popularly visited to wash away the heat.

I’ve been hearing rumours recently that CMHC was changing their financing criteria for real estate investment properties.

Over the last couple of weeks, we’ve heard about raising the minimum downpayment that an investor would need to put down on a rental property (that wasn’t owner-occupied, meaning the owner or a close relative was living there), and that rates will be heading up come July 2010.

This week I’ve learnt that CMHC is also likely planning to, effective April 19, 2010, change things a whole lots more for Real Estate Investment in Canada.

Rental Offsets

Currently when you buy a rental property, CMHC will allow you to use a 80% rental offset, which means that they used to take 80% of the gross rental income that the income property generated, and subtract that from the borrowers total debt, to establish the total debt service (TDS) ratio.

What that means is that you don’t have to have the household income to cover 100% of the value of the rental property, like you do with a home you live in, because the bank will let you offset the debt using 80% of the revenue the rental produces (does that make sense?).

They’re tentatively changing this amount to 50%, which makes it much tougher for people to qualify for investment properties, but the real kicker is that…

CMHC is also changing how they evaluate the current debt and income on your existing rental portfolio – they are treating the rental income here the same as other non-salaried income too, meaning your current portfolio, while it generates cash flow every month, might hinder the growth of your portfolio going forward.

We also think that most lenders are going to adopt these standards, even for non high ratio loans that are not CMHC insured, just to be cautious.

Bottom Line

If you qualify under today’s standards for a loan for 1 or 2 townhouses that you planned to rent out and hold as long term assets, come April 19, under New Mortgage Rules you may no longer qualify for them. Let’s talk before then so you know all of your options.

PS – if we have an agreement of purchase and sale (a real estate contract) dated before April 19, and the mortgage is approved, the rental property can close after (they may set a timeframe, contact me for full details). You don’t have to complete the purchase by April 19, just have the contract written and accepted.

If you’d like to talk to a mortgage broker to explore your options, I can recommend one who does a lot of work with real estate investors.

Leave me a comment below with any questions, and please contact me for more information at 519-772-4376 or via email at Benjamin@BenjaminBach.com.

Recent press reports reveal that Spain’s 8 biggest, listed developers have seen their balance sheets shrink by 40% over the course of the Spanish property market crash, thanks to tumbling asset values and disinvestments to pay down debts. It’s always worth keeping an eye on the listed developers: They have to declare their results, which shed some light on what’s happening in the market. Between them and their bank creditors, they are also giving us a good example of how not to solve a problem.

Right now, the only game in town for Spanish developers is managing debt levels. In total, Spain’s developers have a combined debt of 323 billion euros, or about 30% of Spanish GDP, according to the Bank of Spain. Around 9% of that, some 29 billion Euros, is owed by the biggest 8 listed developers, including companies like Martinsa-Fadesa that are already in court administration, unable to meet their debt payments. All these developers are essentially now in the business of flogging assets and renegotiating debts, not building homes. Makes you wonder if they should still be referred to as developers, if they don’t actually develop anything.

Unfortunately, negotiations between the banks and developers seem to have focused more on kicking the can down the road then solving the real problem – the over-valuation of asset prices. The pattern is familiar: They reach an agreement for debt repayments but months later it unravels and they have to start over. One has to assume that even they know they are wasting time. It’s obvious to everyone else.

And the longer they put off effective solutions, the longer the Spanish economy will suffer. Billions of euros are tied up in unproductive loans instead of financing productive business and creating jobs. Officially the bad-debt ratio of developers is 10% (32.5 billion euros), but I suspect it is much, much higher than that.

At some point banks and developers alike are going to have to grab the bull by the horns and deal with their over-valued property portfolios. When that happens you will see widespread price declines for certain types of Spanish property. That means there will be some great opportunities for investors in a position to exploit the market. When will this happen? As always, difficult to say, but it’s only a question of when, not if. In my opinion, the sale will begin in the second half of the year or early next year. But first of all, the key players have to learn how to solve a problem.

Eligibility leases with rents that incorporate a minority variable rate.

Investments in tourist residences are based on a “triangular” theory:

DEVELOPER (D) – INVESTOR (I) – OPERATOR (O)

Put simply, “I” acquires a property from “D” and then signs a commercial lease with “O” who then pays the rent to “I”. Rent is at this point guaranteed, that is to say “fixed”. ie. A property worth €200,000 at a flat rate of 4% rent per annum will therefore be paying rent of €8,000 per annum.

In order to avoid pitfalls, some property managers felt it would be more realistic to use “sliding scales” (variable rates). This usage of variable rates would mean that, for example, managers could guarantee a flat rate of 2.5% over a 9-year period and then at the end of each year, they could pay back a percentage of the residence’s or manager’s turnover to the investors. In this case, there are elements of both “fixed” and “variable” rates.

BEFORE: This “mixed” rent incorporating the two types posed taxation problems in leasebacks located in the ZRR, Zone de Revitalisation Rurale or “countryside under re-development”. The tax would depend on each tax office’s interpretation of the make-up of fixed incomes, so the investor would lose his tax advantage.

NOW: It is no longer an issue as the line is “if the income is erring on the side of fixed rates, then there is no need for independent interpretation.” It means that the tax deduction will not be affected any more within the ZRR.

Changes to commercial lease systems for 2010.

Up until the end of 2009, in the event that the management company could not fulfil its contractual obligations, property investors were required by law to sign a commercial lease with a new management company otherwise they would lose their tax advantages such as the VAT rebate on New Build properties. Now, with the law changes made for 2010, potential investors can avoid tying themselves to a new precarious lease with another management company. Investors can avoid the commercial lease altogether and grant a management mandate to a professional manager. For example, an experienced manager specialising in hotel management or in holiday centres, or if the owners decide to run the whole operation themselves without the involvement of middle-men (although it might be very complicated to do so due to the number of owners in those types of residences who usually have 100 apartments).

There are 2 conditions to this new law:

1) The so-called “self-management” of the residency must involve at least 50% of it.

2) The “self-management” of the residence is possible after 1 year only if the owners could not agree on another management company. In practice, this period of 12 months isn’t ideal for residences in difficulties, “It would be necessary to allow investors, who are already without rent, to find a solution to their money woes more quickly,” according to Yannick Aure, the Head of Exhore, (Exploitation d’Hotels et de Résidences).

Yannick, himself a specialist in hotel management, has proposed a management mandate to investors who agree a re-sale price of the lease for a token sum will receive the commercial funds of their property in line with a judicial proxy.