Assetz® News - US Optimism for investment in property

US Optimism for investment in property

18th June 2009 |

When it comes to investing in property in the US, there has been a distinct trend in the sector in recent months, with sales rising again in a number of locations thanks to the increased affordability of homes and the availability of distressed and foreclosed sale bargains.

Such opportunities to buy at low costs may have benefited many people. Americans simply wishing to own a home at all may now do so, provided they can get the mortgage finance. Overseas investors such as Britons may find it a good time to grab a low-cost property near the beach in sunny Florida or California, or among the bright lights of Las Vegas.

A third reason will be the one that many investors who have thought the matter through carefully will focus on. Buying cheaply now is one thing, but in the longer run what is needed is a price recovery. Of course, it may be reasoned that such a thing is bound to happen eventually and those whose approach is to buy cheap and then hold on to their assets for many years will expect to reap the dividends sooner or later. Whether it is sooner rather than later is not so important if the long term is the paramount consideration.

Those investors may be cheered by news this week that the American Bankers Association's Economic Advisory Committee believes that the recession is shortly to end, with gross domestic product increasing by 0.5 per cent between September and July. As in the UK and other places, however, this is not based on a prediction of a rapid recovery. Unemployment, for example, is expected to go on rising for some time after the contraction ends, while undoing the damage done to the financial system is an ongoing process.

Summarising the anlaysis - which said the banking bailouts and the stimulus package will do much to bring the country out of recession - committee chairman and chief economist at JP Morgan Chase Brice Kasman said: "The economy will return to growth but not to health."

But while this may only be the start of things getting better, the key issue for the property market was that Mr Kasman said prices will start to rise next year, albeit modestly.

Such a synopsis could suggest that long-term investors would do well to buy now or soon. By doing so they can enjoy bargain prices in the immediate term, time their investment to come close to the bottom of the market and start to see values rising again next year. If the perspective is one with farther horizons, they will be able to see greater gains in years to come, with the committee predicting that normal growth levels will start appearing around a year from now.

Some have seen early signs of a property market resurgence already. Last month director at real estate agency Mayfair International Realty Annette Reeve said the Miami market "seems to be one of the quickest to be coming back" among all US cities, having slumped more than most in the past couple of years.

She added: "One of my offices out there had agreed record sales in March, mostly under $500,000 (£329,500), but they were virtually all new-build and virtually all from investors and that is always a very good sign. It is hopefully looking hot and good in Miami."

Whether Miami sustains a recovery or suffers a few ups and downs along the way, the wider picture for investors in the US may be clear. Once the recession is over, it seems a matter of time before property becomes hot again.