A place in the sun

PUBLISHED : Friday, 24 October, 2008, 12:00am
UPDATED : Friday, 24 October, 2008, 12:00am

Florida offers some worthwhile homes at low prices that can make nice nest eggs, and year-round clement weather, hurricanes permitting

For the international investor looking to commit some money to foreign property, or even to set down a marker for a pleasant future retirement home, Florida ticks all the right boxes. At least in principle.

Firstly, the aptly named Sunshine State virtually guarantees year-round good weather (we'll leave the hurricanes out of the equation for now). It also possesses the most attractive quality possible for those looking for investment property: a unique tourist-driven rental market, which has arguably the world's only 52-week season.

A four-bedroom villa with a pool in Orlando, within a 20-minute drive of Disney World, will rent for between HK$6,000 and HK$9,000 per week, while a quality two-bedroom apartment in the same area can achieve HK$3,000 to HK$5,000 per week.

There is also a domestic rental market worth looking at. Statistically, Florida's job and income growth have been among the highest in the country, with the prospects for economic growth attracting job-seekers from other states.

This has led to annual population growth of nearly 350,000 over the past four years. The population of Florida is just over 17 million, and will rise to more than 19 million by 2010 and is projected to hit 28 million by 2028, by which time Florida will be the third most populous state in the United States.

That's the good news. The bad news, as everyone knows, is the subprime crisis. Florida has the highest rate of foreclosure listings in the US, with some areas showing one in every 66 properties on the distressed register. Even in sleepy retirement haven Palm Beach one in every 300 homes is on the list.

Miami has the steepest rate of decline in real estate values, too: a jaw-dropping 28 per cent fall between June last year and June this year. The rate of decline, according to the benchmark S&P/Case-Shiller Index, is slowing, but there is certainly no new dawn on the horizon just yet.

However, according to Relocate America, seven of the 'Top 100 Places to Live 2008' in the United States are in Florida.

If you search foreclosure listings for Sarasota, Cape Coral, Fort Myers and the others that figure in the Top 100, you will not find one in every 66 properties begging to be snatched up at a fraction of their already steeply reduced market value.

It is more likely to be one in 8,000. But there are many bargains to be found and, according to analysts, many more are still to come on the market, irrespective of how much money is pumped back into the system by the US government.

There is still a high volume of new developments coming on stream, including many prime location high-end condominiums and single family houses that were planned in the boom and now have to be sold in the bust. Potential foreign investors are advised to look for long-term rather than short-term upside.

The recent rescues of Fannie Mae and Freddie Mac, combined with the US government's commitments to buy the 'toxic' debts of the lending institutions, are expected to help stabilise the market and create the platform for new growth and prosperity in the real estate industry once the economy and financial community have recovered their nerve.

However, no one expects that to happen overnight. On the contrary, buyers may even expect values to continue to fall over the coming year, but at a far lower rate.

If your objective when investing in American property is a safe haven for your money for the long term, then tracking the S&P/Case-Schiller Index is as good a place to start. Everywhere in the US has taken a hiding, but New York, San Francisco and Washington have hurt less than most.

Similarly, when searching in a state such as Florida, the more you narrow down your search, the more likely you are to find elements of stability. There may not be huge instant profits but there are unlikely to be huge instant losses either.

And, with the prospect of a revived domestic economy and market even two or three years down the road that, alongside Florida's year-round sunshine and never-ending stream of tourists, could make for a very tidy nest egg.