Good News on the Real Estate Front: Increased Demand for Residential Property

August 07, 2012 / Russell Legato, Residential Property Analyst

Residential property is more in demand than before and the demand is growing. Investment strategists are putting themselves in a position to provide the residential properties investors are going to want. They are making partial and total investments in these assets. Housing association property funds are investing more as of 2010 and again in 2011.

Good News on the Real Estate Front: Increased Demand for Residential Property

There is a price index, FNC, that has its finger on the facts in residential prices. In May, these properties increased in value again, after similar activity in March and April. It is a welcome trend and the strongest rebound in the last five years. It is attributed to decreasing inventory and increasing demand. The trend bodes well for the real estate industry.

Even a market that is super distressed, Atlanta, GA, rose by 2.2 percent. Orlando rose 1.1 percent, Phoenix 2.2 percent; Cleveland was up 3.2 percent as was Miami. Even Las Vegas saw an improvement in May of 2012. The only cities that did not improve are Denver, Baltimore and Charlotte, NC.

A volume-weighted price index, the FNC National Residential, takes 100 highly populated areas into account. The indices are set to capture unsmoothed trends in housing prices. It has been a prominent influence since 1999. It provides automation appraisal, ordering and all information is in compliance with regulations imposed by the government.

Fund managers are not usually interested in residential and it is usually only a portion of large portfolios. However, this is a growing class of assets and has been since 2010.

This market in UK saw new tax changes in 2011. Those investors who purchase in bulk numbers of residences are required to pay stamp duty on average price of each residence. Formerly it was paid on the accumulated price of all the residences.

In Switzerland almost half of managed assets are in residential, 47.5 percent of all investments in real estate. The Netherlands follow closely with 45.8 percent. Lower percentages are seen in France at 15.00 percent, Germany at 12.5 percent and the United States at a mere 8.6 percent. It is even lower in UK, with only 2.6 percent of residential property investments.

One expert says property rents in UK are yielding 3-4 percent net yield. They continue to rise each year by approximately 3 percent a year. This gives the potential to yield income that matches inflation.

Former homeowners in the United States move into rental units after giving the keys to a home with negative equity back to the bank. This increases stock to purchase rental units for income property.

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