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IS the US a good place for property investment after 2008?

Robert Reid Oct 2014//

  • New CEBR forecasts show UK house prices to fall by 0.8% in 2015.
  • London house prices to decline by 2.6% in 2015 – first decline since the financial crisis in 2009 source: (New CEBR forecasts)
  • “UK property is increasingly looking like a less safe investment. Uncertainty over the next election, some uncertainty about UK governance following the fallout from the Scottish independence referendum and the risk of an uncertain relationship with the EU make the UK appear inherently more unstable than in the past, while the proposed mansion tax raises the prospect of expropriation of wealth in the future” CEBR – Oct 2014
  • Gross rental yields have fallen to 5.0% given the even fast rate of house price appreciation over the last year. Realistically then, net rental yields post these costs could dip well below 4% (LSL Property Services)

What happened to US property investors in 2008 crisis? 

Rent prices dipped slightly, therefore property holders did not take a significant hit

Less people bought houses so the demand for rental property actually increased 

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There is still a gap of 30-50% in some areas providing potential to high yields 

 

The economic recovery and apartment price gains have not favoured all markets equally, and some have yet to fully recover the loss in value incurred during the recession; resulting in high yields 

 

  • The U.S. economy demonstrated exceptional perseverance in 2013, beating expectations and adding nearly 2.5 million new jobs.
  • GDP estimates reflected surprising strength as of third quarter 2013, posting 4.1 percent annualized growth.
  • U.S. employment recorded gains across all sectors, climbing 1.7 percent, and has now recovered 88 percent of the total jobs loss in the recession.
  • The US unemployment rate dipped to 5.9% in September 2014, a six-year low, official figures have shown.
  • GDP is forecast at 3.0 percent in 2014 and the economy should generate an estimated 2.7 million new jobs.

  • solid economic growth is now raising pressure on interest rates.
  • a surge in equity prices and home prices has restored net household wealth to a new record high of $77 trillion.

 

US property market

 

  • Late recovery secondary markets and mid- to lower-tier assets led revenue gains and effective rents grew 4.2 percent in 2013.
  • Capital will flow to most market segments and product tiers. Equity funds and institutional and cross-border investors create steady demand for core product in primary markets,
  • Investors have increasingly targeted secondary and tertiary markets in pursuit of higher yields. While these markets often carry additional risk, the superior yields can warrant the risk, particularly when the economy is building momentum and performance gains have not yet been baked into pricing.
  • GDP growth is forecast for the 3.0 percent range and the U.S. should add an estimated 2.7 million jobs in 2014.
  • Rising Immigration, Employment and Income Growth Drive Household Formations and Apartment Demand 1.4 million/year).
  • Tapering the Fed’s Quantitative Easing Policy Marks a Return to “Normal” Credit Environment.
  • More “young” people stayed at home. Now with the improvement in the economy and employment, they will be looking to rent…

 

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