Some of the most expensive Real Estate Markets

Even with the news of price decline from majority of the property market, buying a real property is still an expensive purchase by any standards, especially if you are talking about one of these expensive markets. Do you think being in the list of the “most expensive real estate markets” is good or bad? Answer to this question is debatable, however going through the list and looking at the prices in the cities like London, Moscow or Tokyo can give you a kind of breather (or nightmares if you happen to be a buyer looking for a piece of property in these cities).

If you thought property prices in cities like Dubai, Singapore or Mumbai are way too high, you must take a look at the prices in London, Monte Carlo or New York. This might gives you an idea, what really is “expensive” in real estate terms.

London:

Often dubbed as the most expensive city, London lives up to its reputation in real estate sector as well. From the property prices to the cost of living, food to transportation, capital of England is not for faint hearted consumers. Property prices are always on the up due to high wages, high demand, and low supply (unlike other developed cities, London doesn’t have a profusion of skyscrapers). West London and Central London are the most expensive areas in city of London.

Monaco:

Monaco, mostly famous for its tourists attractions (and most famous among these attractions is of course, the casinos). The main residential area is called Monte Carlo, and the average per square meter price in this area is actually higher than London. Monte Carlo enjoys the highest property prices in the world, thanks to its no-tax policy that attracts the cream of the crop (rich celebrities and business people).

Hong Kong:

Rich culture, one of the world’s leading economies, and a very impressive skyline, Hong Kong is the most expensive real estate market in Asia, and it might be competing with the top real estate markets in the world if Chinese economy continue to grow at this speed.

New York:

Despite a sharp decline in prices, in the first quarter of 2009, New York property still rates among the most expensive ones in the world, though it may slip further on the list as the prices continue to fall due to the financial crunch. Manhattan, which is the most desired area for property buyers in New York, has recently witnessed a decline in both property prices and sales.

Things to know before investing in some real estate market

You must have heard about those real estate investors, who purchased some property at extremely low prices, in a relatively lackluster real estate market. Then for some reasons the property prices soared and the property owners earned huge profits in no time. They are some lucky guys? Aren’t they? But before you start envying them for being the fortune’s favorite, let’s get your facts straight. The fact of the matter is that it is the market analysis and foreseeing capability that makes the difference, more than luck or fortune. Real estate market plays an important role in the process of property valuation, even more than the property itself. Therefore, next time when you are about to invest in some residential or commercial property, spending some time in evaluating the market can make huge difference.

An overview of the market and economy:

Have a close look at the ongoing situation of real estate market; do you see a bullish or bearish trend? Do you think this trend is going to continue in coming days or there are some signs of change? The overall economy has a direct effect on real estate as well, if there is economic growth in some regions, real estate prices are supposed to grow as more and more people and businesses will step in to take advantage of the growing economy. If you can retain a residential or commercial property or even some vacant land in this region, it can bring huge yields. Projecting a bullish or bearish trend is not an easy task unless you have got the drift of economic ups and down. However, you can take help from some experts (though, they might get it wrong as well).

Vacancy rate, Rentals, Prices:

If you are looking for short term investment, where you wouldn’t have to wait for longer period before you start earning, then look for these indicators. Vacancy rate of a real estate market is obtained by dividing the unoccupied units to the total units available in the market. You can have an idea of the existing property prices and the possibility of rise or decline in rentals or property prices, in near future. A significant change in mortgage rate can also boost or reduce sales.  

You should also check for the infrastructure and development work going on in the real estate market and adjoining areas, in particular if some big companies have recently entered or left the market.

Investing in vocational properties

Buying a vocational property (also known as Second Home) can be a handy investment, for it can serve two purposes. First, it saves you plenty of expenditures when you are visiting that place in holidays, second you can rent it out to visitors on temporary basis and enjoy good monthly income when you are not using it. What's more? You can turn it (or some part of it) into a restaurant or a shop if it is located at a place that gets plenty of visitors, during the course of a year. In short, owing or investing in a vocational property can be advantageous in many ways, but only if you choose the right location and pay attention to details. 

First, you need to make your mind on what will be the primary purpose of this property? Would you be using this place a lot, as a vocation spot? Will it serve mainly as a place away from home and the normal hectic life? Or, the sole purpose of this purchase is getting income? Ideally, if you are going to buy a vocation property, it should be intended (and able) to serve both purposes, so that you’ll be able to derive some value from this investment, in any case.

Location:

Whatever your intended future usage of vacation property is, the location is going to play an important role. Being a vocation property, it is supposed to be at a less crowded area, away from the normal hustle and bustle of urban cities. It can be a small hill station (especially if you are looking for a vocation property in South Asian countries like India & Pakistan), a cottage at some beach or a farmhouse in some peaceful vicinity. You should make a choice after considering both, your inclination and the investment viewpoint. Also, keep in mind the travel factor.

Price:

Prices depend mostly on the popularity of area and the number of visitors it get. The availability of the basic necessities like electricity, gas, clean drinking water or the facilities like internet access and security, also matter. If you can foresee some place getting more tourists in the future (for example a new road is under construction, which will make it more convenient to reach there), you can expect significant hikes in near future. Generally, the closer some vacation spot is to a big city, the higher its land and properties will be priced.

Types of Vacation Property ownerships:

You can own a vocation property in more than one ways, in accordance with your budget and usage. For example “timeshare”, where more than one party use the property for a prearranged, fixed period. You can use it personally or rent it out for the time period allotted to you. You can also go for fractional ownership, where you actually own a fraction of property (in contrast with timeshare, where you are entitled to “use” the property for only 1 – 2 weeks in a year).

Dealing with the First right of refusal in property business

When you hold an FROR (First right of refusal) on a real estate property (or any other asset for that matter), it basically means the current owner of the property is obligated to offer you the property (to purchase) whenever he/she decides to sell the property. In case the owner sidesteps the person holding First right of refusal, and sell it to another buyer, the FROR holder can take them to court for reparation.

To understand how FROR works, let's have a look at this example. Mr. A owns an apartment and rents it out to Mr. B. After living there for some months, Mr. B develops an interest in purchasing that apartment, for some reasons the transaction cannot take place straight away. However, Mr. B asks for an FROR agreement and Mr. A agrees. Now, once the agreement is signed by Mr. A, he is now restricted to offer this apartment to Mr. B before he finalizes the deal with any other party. For example, when he's approached by a third party with an offer of say, $450,000 USD, and he is willing to accept, he must first contact Mr. B and make an offer for him to buy this apartment for the same amount ($450,000). It is only after Mr. B refuses to buy, when Mr. A will be free to sell the property to the third party. Remember, Mr. A can not ask for a better price, he must offer the property to Mr. B for the same price, which was being offered to him by the third party.

Question is why a seller in his /her right mindset would agree on presenting someone with an FROR contract. Answer is, because it doesn't really hurt the seller in anyway. However, there are some minor plus and minuses attached to this contract. For example, seller can ask for a small amount as a fee for an FROR contract, also such contract may add a little value to the property. Coming to the negative side, real estate agents are reluctant to deal with such properties, in case the holder of FROR accepts the offer and make a purchase; the agent will be deprived of any commission whatsoever. However, the best thing about First right of refusal is that it doesn't have some predefined clauses or terms, seller and buyers are free to negotiate and jot down their own specific conditions.

There are some modified versions of FROR as well, one of them is Right of First Offer, in which seller has to approach the holder before putting the property on sale.

One of the most important forms of consumer loan is “real estate loan”, issued for the purpose of construction or acquisition of land

One of the most important forms of consumer loan is “real estate loan”, issued for the purpose of construction or acquisition of land, apartments, homes, shops or any other residential or commercial property. Mortgage has transformed into an industry, helping many middle class families to have possession of home. However, real estate loans (especially mortgage loans) are always regarded as the most risky types, mainly because of the amounts involved (and also because of the maturity time). That is why the banks who are lending must look into many aspects before issuing residential loans, in order to minimize the risk (because the maturity time often extends to 20 – 25 years in these loans).

Below are some of the factors that a banker may consider before it approve or disapprove a loan application.

Income level:

Bankers have got to make sure that the person applying for real estate loan has a steady and reasonable income coming every month. They will look into the source of proceedings and determine the net income. In case you are a salaried person, they may need some confirmation from your employer, the reputation of your employer may also come into play; for example Government employees are often preferred over private sector employees. They will also check the duration (for how long you have been working with the current employer). Similarly, business people should be having a stable, incoming cash flow; huge ups and downs in the profits are not a good indication.  

Necessary Documents:

Depending on the type of loan you have applied for, you may need to present different kinds of documents. These documents can be, National Identity Card, Birth Certificate, Employment letter, pay slip, Title insurance, profit and loss statement, proper plan of construction (if you are applying for a construction loan), or credit history (if you have any). All of these documents should be indisputable because the verification department will double-check all of these documents; and any vagueness means your application will be rejected.

Interview:

Meeting with a loan officer is actually the first and an integral part of the process; the officer will inquire about your requirements and form an opinion about your credibility. The interview also serves as a verification of your physical address. When meeting with the officer, stay calm and do not go to extremes for showing how desperate you are for this loan, as it is not going to make any difference. You can also ask the officer to lay down terms and conditions (especially the interest rate or any other service charges) in simple words.

A closer look at Indian Real Estate market and its future

It has been the same story in most parts of the world, when we look at the past and present situations of real estate sectors in different region. On the face of it, investors are edgy and at least cautious if not scared. Sales and construction work is decelerating and investors are much more watchful when putting in their money into real estate properties. Financial crisis may have caused plenty of bad’s, but one good thing it did, is bringing back some sense in the financial markets. Even though some people may oppose the idea, but slow and well founded growth is much better than that groundless rapid growth that we have seen in previous years.

Coming back to our topic that is Indian real estate, seemingly the market that got a good boost-up in past few years, (thanks to a very healthy growth in Indian economy) has now slowed down. To get an idea of its future, let’s take a look at some of the positives and negative signs associated with the market.    

Negative Signs:

Apparently, it will take some time before the international investor can think of investing in Indian real estate again, at this point of time they are holding back their capital and waiting for some stability to build on. Similarly, the local investors are also on back foot and they will continue to hang around for some time now. Banking sector is not in a very good shape either, banks from all over the world are quite uneasy when lending out huge loans, towering prices of construction material like concrete, steel or cement are not going to help either All of these factors means, big developmental projects will be coming to a halt for some time, which means fewer units in the market for sale.      

Positive Signs:

India is one of those countries who were not directly affected by recession; instead it was more affected by the shockwaves that reached here, effectively ending the exhilaration and slowing down the markets. Whereas the low property prices are disheartening for real estate investors (and speculators), they provide a good opportunity for people looking to purchase a property for their personal (residential or commercial) usage, especially for NRI (Non Resident Indians). One can also count on Congress getting reelected in recent elections as a positive sign, which means the economic policies will continue. Indian economy continues to grow at a healthy rate, improving purchasing power parity, which means a constant demand in future.

World’s most famous Real estate tycoons

Real Estate industry has bestowed many with richness and wealth, but there are some who were fortunate enough, to enjoy lady luck smiling on them for an extended period, as their investments brought huge profits one after another. Real estate is one of those few investment types that can actually bring about overnight riches, as it happened in the case of following tycoons. They were not really switched into tycoons straight away, and they had their fair share of failures, but at the end of the day they managed to establish themselves as the moguls, in realty kingdom.

Donald Bren:
76 years old Donald Bren is presently the richest real estate tycoon in the world with a net worth of 12.0 billion, according to Forbes.com. Today Donald Bren owns round about 400 office buildings and 90 apartment communities, pretty impressive for a man who built his first home with a loan. Though the figures quoted by Donald himself are at variance, but there’s little doubt about his success and brilliance in the realty business.

Donald Trump:
Donald Trump summed up his success in real estate business when he said “Well, Real Estate is always good, as far as I’m concerned”. Real estate industry has indeed been good to Donald Trump, who has constantly been moving up and down (but remains) on the lists of World’s richest people. From “Swifton Village Complex” to “The Trump Tower”, Donald succeeded in hitting the bull’s eye numerous times. He may be more popular as the host of “The Apprentice” or the owner of “The Miss Universe Organization” but it is real estate that has given him the celebrity status.

Sam Zell:
An entrepreneur by birth, Sam Zell was capable of perceiving the demand and then making the most out of that. In his own words “I’ve always been called a professional opportunist, and in the future I m open to anything”. Son of Polish parents, Sam Zell is now ranked at # 68th in the Forbes list of richest Americans. Sam Zell was the man behind the real estate companies like “Equity Residential” and “Equity Office Properties”. Sam Zell has assets reaching a net worth of more than 6 billions. 

Lee Shau Kee:
Although, last year has been quite destructive for Henderson Land Development, its owner Lee Shau Kee is still considered a real estate magnate. Despite losing almost 8 billion of net worth in the last two years, Lee Shau Kee is still regarded as one of the richest persons in the whole Greater China Region.