Tag Archives: houston
Apartment rent growth slows in the United States
Apartment rent growth in the United States has slowed nationwide over the past year, with the higher end of the market most affected, new research shows. After growing at a blistering pace for much of 2015, apartment rents across the county are growing at a slower pace thus far in 2016, according to the data from real estate firm Zillow. Overall, apartment rents nationwide grew by 3.6% for the year ending in April 2016, almost 2% points slower than the 5.4% pace reported for the year ending in April 2015. And in 23 of the nation’s 35 largest housing markets, the slowdown in rent appreciation has been more acute in luxury ZIP codes area than metro-wide. In four additional markets of Washington D.C., Sacramento, Miami-Fort Lauderdale, and Kansas City broader apartment rent growth has accelerated from 2015, but it has accelerated less in luxury ZIP codes than in the metro as a whole. Aaron Terrazas, a senior economist at Zillow, said that substantial investment in new construction, particularly at the high end of the market, has contributed to some of this pattern, although in some areas weak labour markets may also be a contributing factor. The research also shows that in the Houston metro, essentially all ZIP codes where the median rent per square foot is above $1.10 have experienced a deceleration in apartment rents. In the New York metro, the natural cut off appears to be closer to $2.30 per square foot and in the San Francisco metro, it appears to be around $3.80. The exception is the Seattle metro, where higher apartment rent growth continues to accelerate in luxury ZIP codes, although the acceleration has perhaps not been as dramatic as lower priced ZIP codes. Terrazas explained that part of this is due to rapidly rising rents in neighbourhoods north of Seattle’s Lake Washington Ship Canal. Meanwhile, the latest national index produced by Florida Atlantic University and Florida International University shows that housing market as a whole is moving deeper into buy territory, suggesting that, on average, residential housing markets around the country are sound. The Beracha, Hardin & Johnson Buy versus Rent (BH&J) Index measures the relationship between purchasing property and building wealth through a build-up in equity compared renting a comparable property and investing in a portfolio of stocks and bonds. It says that in terms of wealth creation the US housing market, when considered as a whole, has swung marginally more in favour of home ownership over renting a comparable property and investing monthly rent savings in a portfolio of stocks and bonds. Overall, 16 of the 23 metropolitan markets investigated moved in the direction of buy territory. The metro areas of Boston, Chicago, Cincinnati, Cleveland, Detroit, Milwaukee, Minneapolis, New York, Philadelphia and St. Louis remain solidly in buy territory. ‘These cities should have room for price growth without much worry of overheating,’ said Eli Beracha, co-author of the index and assistant professor in the T&S Hollo School of… Continue reading
Experts pick out markets that are too hot in the US
San Francisco's housing market has grown so unaffordable that some experts say the market is already in a bubble and it's not the only market in the United States that they are concerned about. A third of the experts surveyed in the latest Zillow Home Price Expectations Survey said the San Francisco housing market is in a bubble and another 20% believe the market is at risk for bubble conditions within the next year. The survey, sponsored quarterly by Zillow and conducted by Pulsenomics, asked more than 100 panelists about their expectations for the housing market. Of those, 66 answered a question about bubble conditions in 20 local housing markets. The survey responses revealed that some housing experts are concerned about over valuation in some of the nation's hottest housing markets and that there is significant disagreement among experts about whether the rapid home value growth in those markets puts consumers at risk. ‘A handful of markets, especially the Bay Area, are very hot right now, and it's possible home values may actually begin to fall somewhat in these places as more residents are priced out amidst rising affordability concerns, especially when interest rates rise,’ said Zillow chief economist Svenja Gudell. ‘Whether those local conditions constitute a 'bubble' is up for debate, even among economists. Without 20/20 hindsight, it's difficult to identify bubbles as they're happening, but it is very clear that nationally we are not seeing a return of the conditions that caused the last national bubble,’ she explained. ‘Tighter lending restrictions today mean we aren't seeing buyers get loans they realistically can't pay back, like we did in years past. It's significant that some experts are starting to worry about bubble conditions, but in my opinion, there's no real danger of a severe crash like the one we all remember from the last decade,’ she added. Some experts said they think bubble conditions are already present in Miami, Los Angeles, Houston, San Diego, and Seattle. A quarter of respondents said they think there is significant risk of a housing bubble in the next three years in Boston. However, the same number of panellists said there is no risk of a bubble in Boston in the next five years. The bubble fears are coming to the surface even as home values overall are expected to gradually level off over the next several years. The ZHPE panel projects an annual growth rate of 3.9% through to the end of 2015, a gradual slowing of the US housing market. Over the next five years, among all 108 panel respondents, the expected average annual home value appreciation rate is now just over 3%. This scenario would result in a national median home value of more than $215,000 by the end of 2020. ‘The long term outlook for US home values has diminished to a three year low, and a clear cut consensus among the experts remains elusive, even at the… Continue reading
Chinese Property Investors Widen Footprint in U.S.
Photo from Grand China Fund Grand China Fund owns a stake in this Atlanta residential complex. SHANGHAI—The upswing in the U.S. property market is attracting Chinese developers and investment firms, and they are dipping their toes into new cities. While Chinese institutional investors are still drawn to their traditional favorites of New York, Los Angeles and San Francisco, many are now also headed to cities such as Houston, Boston and Seattle as they seek geographic diversity as well as bigger lot sizes. These other cities—lesser known to some Chinese firms—now appear to offer fresh opportunities as energy or technology drives their economies and local Chinese communities expand. In the second quarter of this year, Beijing-based real-estate investment firm Grand China Fund took an 80% stake in a 286-unit residential rental complex in Houston. That followed a 2012 investment in a 170-unit residential project in Atlanta, with another local partner. The firm put a total of about $15 million into the two projects, which are valued at more than $50 million. For both projects, it said it was attracted by the prospect of higher yields amid the lower prices compared with property in California and New York. Gaw Capital Partners, a Hong Kong-based private-equity firm, is planning to raise $500 million for a real-estate fund that will invest in U.S. commercial property in the fourth quarter, targeting investors from Asia and North America. The fund manager said it will look at assets in “innovation centers” such as Portland, Ore., and Austin, Texas. China Vanke Co., 000002.SZ -2.23% the country’s largest property developer by market capitalization, is interested in investing in Boston, partly because of its sizable Chinese community, said the firm’s president, Yu Liang, at a news briefing in Hong Kong last month, without providing further details. Vanke had already jointly invested in a 655-unit high-end condominium in San Francisco with U.S. developer Tishman Speyer earlier this year. Chinese investors still are eyeing assets in New York and San Francisco, “but we are also witnessing increased interest in cities like Washington, D.C., Boston, Houston, Seattle and Chicago,” said Alistair Meadows, who oversees cross-border Asian-Pacific real-estate transactions at consultancy Jones Lang LaSalle JLL -1.20% . “Cities like Seattle and Houston are enjoying strong job growth driven by the technology and energy sectors. As a consequence, core office investments in these cities offering higher yields are proving attractive.” Slower domestic economic growth in China as well as rising risks in the country’s financial sector are prompting investors to look abroad. The U.S. has become the most popular real-estate market to invest in so far this year for Chinese firms, followed by Hong Kong, the U.K., Macau and Singapore, according to data tracker Dealogic. Chinese property investors—from big players like sovereign-wealth funds and insurers to smaller ones such as local fund managers—are attracted to the U.S. market in general because of the economic recovery, ample market liquidity, and the stability of returns, real-estate consultants say. Rental properties in the U.S. typically have longer leases compared with China’s, and hence are less prone to disruptions or volatility. Tishman Speyer China Vanke invested in a condo project in San Francisco earlier this year. Acknowledging that Houston and Atlanta aren’t usually the first places Chinese investors think of when investing in the U.S., Zhang Mingeng, board chairman at Beijing’s Grand China Fund, cites costs as a key attraction. He said prices of some projects in these areas are still down around 20% from their peaks, and that growth prospects in these cities are positive. “Our investors, which include lawyers, exporters, merchants, accountants, have U.S. incomes and want us to branch into the U.S. for diversification,” Mr. Zhang said. “They are looking for safe assets that they can see and touch.” Grand China Fund manages yuan-denominated funds totaling four billion yuan ($653 million) investing in Chinese real estate, and a $60 million dollar-denominated fund investing in the U.S. Houston, in particular, has become more familiar to Chinese investors. China Petrochemical Corp., known as Sinopec, has operations there, and the city gained recognition with Chinese investors with the help of former Chinese basketball star Yao Ming, who played for the Houston Rockets. Mr. Zhang said he is looking for more real-estate projects in Miami, Orlando, Dallas and San Diego, in addition to New York and Chicago. “While the returns from the U.S. are not as high as what we get in our mainland China projects, they are good enough,” he said, declining to reveal the investment yield of his U.S. projects. “We like residential projects near universities, hospitals and military bases.” Asset managers said investors who aren’t eager to place all their eggs in one basket are looking for diversity, not just in asset classes, but also in their geographic footprint. “The large Asian institutional investors, including Chinese investors, are looking for safety, more stability and exposure to diversified currencies and returns,” said Goodwin Gaw, chairman of Gaw Capital Partners, which also provides outbound-investment advisory services to Asian institutional investors. To be sure, foreign investment in the U.S. still makes up a small portion of the market. Around 15% of the $25 billion invested in New York’s real-estate market in 2012 was from foreign investors, for instance, compared with 75% of the $24 billion invested in London in 2012, according to data from Jones Lang LaSalle. Not all Chinese investors are branching out. The coastal cities in the U.S. still attract plenty of Chinese investors, with deals this year such as Greenland Holdings Group’s $1 billion investment in a mixed-use project in downtown Los Angeles, and Soho China Ltd. Chief Executive Zhang Xin ‘s personal investment in a stake in the General Motors Building in New York, which attracted considerable media attention in China. Beijing-based property developer and investor Feng Lun, chairman of Vantone Holdings Co., said he is sticking to investing in New York City. Vantone has leased 20,000 square meters of space in One World Trade Center, and has invested in joint ventures in two residential projects in the city. “We’ll focus on New York City, preferably Manhattan, to ensure our current operations are successful before branching to other cities,” Mr. Feng said. Write to Esther Fung at esther.fung@dowjones.com A version of this article appeared September 25, 2013, on page C8 in the U.S. edition of The Wall Street Journal, with the headline: China Casts a Wider Net Over U.S. Market. Continue reading
