US housing posts double-digit price gains
Double-digit price gains across America are a happy note for local investors that have been snapping up distressed properties at record levels. Chinese investment in the US has nearly doubled every year since 2009 and is expected to do so again this year. Chinese are the second largest international buyer group in the United States. Continued price growth is expected in markets throughout the country including New York, Florida, Las Vegas, Los Angeles and Hawaii.
The US national housing data is overwhelmingly positive, according to the latest National Association of Realtors (NAR) report. The existing home median price is up a dramatic 15.4 per cent over last year posting the sixth consecutive month of double digit price growth.
The gains are fuelled by a severe supply and demand imbalance which is unlikely to change in the short term. Properties are still being sold below the replacement value in many markets stultifying new development. As a result, decreasing inventory, accelerating absorption and further price growth is projected through next year.
The number of properties sold in the US last month increased 12.9 per cent to a seasonally adjusted annual pace of 4.59 million units while the number of properties available for sale is down 10.1 per cent. The months of remaining inventory dropped to 5.2 from last year’s figure of 6.5. Months of remaining inventory is the measurement of supply and demand with the tradition balance between buyer and seller’s market at 5.5 months.
All three price indicators in Manhattan posted double digit increases in the latest report released by Douglas Elliman Real Estate. Condo average price, median price and price per square foot jumped 11.4 per cent, 13.6 per cent and 15 per cent respectively. The average price stands at US$1,892,924 with the average price per square foot at US$1,381. The number of sales increased 36.1per cent over last quarter while inventory dropped 35.4 per cent compared to last year. Months of remaining inventory sits at 4.7 per cent indicative of a seller’s market.
Outlook: Double digit price growth and shrinking inventory
Insider tips: Multiple-offers on new listings are now common. Plan on non-contingent cash offers to get the best properties. Look to the Downtown area for the highest rental yields.
Florida values plunged over 70 per cent during the housing meltdown and now are among the fastest appreciating markets. Prices across the Sunshine State are up 15.9 per cent and 13 per cent at US$171,000 and US$128,000 for homes and condos respectively. The number of closed sales increased 18.7 per cent and 11.5 per cent for homes and condos over last year. Florida is the top state for foreign investment in the US according to NAR. Orlando and Tampa have been favourites with Hong Kong investors with the cities posting annual median price gains of 25 per cent and 17 per cent.
Outlook: Double digit price appreciation and dropping inventories
Insider Tips: Florida has no income or capital gains tax. The Orlando and Tampa areas provide good high yield properties under US$150,000.
The shining city was one of the hardest hit housing markets in the country in 2008 with values plummeting over 70 per cent in some areas. Partially propelled by increased international purchases, the rebound which began last year is now one of the most dramatic. Single-family and condo values posted annual gains of 32.8 per cent and 43.5 per cent according the latest GLVAR market report. The rapid price growth is expected to continue with condo supply down 9.2 per cent and sales volume up 12.3 per cent. The report indicates less than 2 months of remaining inventory, one of the lowest in the country.
Outlook: Double digit appreciation and increasing foreign investment
Insider Tips: Las Vegas has no capital gains or income tax. Look to new developments for the best buys. The Residences Mandarin Oriental recently reduced prices over 50 per cent and has sold 90 units in the past 45 days.
According to a recent report by Polaris Pacific, the City of Angels is continuing to see price growth and shrinking inventories with median condo prices up 23.5 per cent annually to US$503,444. The declining inventory has resulted in months of remaining inventory of 3.8 per cent indicating a return to a seller’s market. Even the hard hit Downtown area has recovered with condo values up a dramatic 63.8 per cent this year.
The new developments that languished after the property collapse are now nearly sold out with over 80 per cent of inventory sold or under contract.
Outlook: Accelerated price growth and dropping inventory
Insider Tips: Prices have still not returned to peak values so some bargains are available. Downtown and Hollywood has the highest growth projections.
Honolulu continues to be one of the strongest performing markets in the country suffering only slightly during the housing crisis. The sustained price growth started in 2011 continues with annual median price gains of 9.2 per cent for homes and 11.1 per cent for condos. The undersupplied market and increased foreign buyer appetite have resulted in 2.7 months of remaining inventory compared to 4.2 one year ago. The average price of a single family home sits at US$797,561 ranking one of the highest in country.
Outlook: Double digit value gains and decreasing inventory
Insider Tips: Expect multiple offers on well-priced properties. The Ritz Carlton Residence Waikiki opened last month and is 80 per cent sold out.
Resources for investors
This month several US property exhibitions are scheduled throughout the city by various companies and in December the biannual US Property Conference returns to Hong Kong. For a list of upcoming US property events and further resources visit www.ogrouphk.com
Patrick W ONeill is a 30 year property veteran and chief executive of the ONEILL Group Hong Kong, which specialises in international purchases of US properties with offices in Hong Kong and the United States.