The American sub-prime mortgage crisis that started in the trailer parks of
the poorer parts of the country is starting to spread to the middle classes.
Property prices are plunging and repossessions are on the rise. According to
the National Association of Realtors (Nar), America’s largest trade body,
sales slipped 2.2% in December and 22% against the same period in 2006. And
last month the Case-Schiller house price index revealed prices in December
fell by 8.1% year on year, with an overall 8.5% decline in 2007. So even
with the weak dollar, as America faces a downturn, is it a good time to buy?
Yes, according to Sean Conlon (www.conlonandco.ie),
an Irishman who runs a billion-dollar property empire in Chicago. “The
current downturn and repricing going on in the American economy is providing
potentially the biggest real-estate buying opportunity I have seen in 20
years,” he told a conference in January. “It is the perfect storm.”
Where the investors are heading
Chicago: Building is already underway on the Spire, set to be the
tallest residential skyscraper in the world. The 150-storey tower will rise
7,000ft over Lake Michigan and its iconic status and prime prices — starting
at £385,000 and going up to £20m for its penthouse — mean that Shelbourne
Development, the Dublin-based developers behind the project, believe prices
will stay up.
“Not only is Chicago the birthplace of the skyscraper, it is the
fourth-largest economy in the world,” says Dominic Grace, head of new homes
at Savills, which is marketing the Spire (Savills; 020 7409 9998, www.thechicagospire.com).
Elsewhere, building is underway at the Trump Tower on the Near North Side,
which will feature a £4m penthouse. Prices for XO Condominiums will start at
£110,000 for a one-bedder rising to £1m for a three-bed penthouse, through
Winkworth (020 7691 4269, www.winkworth.co.uk).
Las Vegas: The home of gambling has suffered a glut of apartments and
condos in recent years, but local real estate analysts predict that there
are six more years of developable land available. This limited supply and
plans for five new large casinos will create high demand in sales and
rentals. Prices at Sullivan Square, a mixed-use project that includes 1,300
residential units, start at £171,000 for a studio up to £907,000 for a
three-bed penthouse with balcony (Future Properties; 020 3031 2860, www.futureproperties.com).
New York: “The Manhattan market operates almost independently of the
rest of the country,” says Charles Peerless, director of Winkworth
International. “Values in the heart of New York have risen more than 30% in
the past year. Prices are comparable with London but at dollar-for-pound
levels, UK buyers have a distinct currency advantage.” Prices for one-bed
flats at The Rushmore, near the Hudson River, start at £487,000 and rise to
£3.5m for the top penthouses (www.therushmoreriverside.com
).
Florida: Back in November, Lawrence Yun, chief economist of the Nar,
called Florida “ground zero for the housing market slump”. It is the market
for “bottom feeders”; many of the foreclosed properties are being snapped up
by British buyers. “Florida is developing into a buyer’s market for UK
property investors,” says Virginia Cowie, managing director of British Homes
Group (0800 051 8893, www.britishhomesgroup.com).
The GO-Zone: The gulf coast states of Alabama, Louisiana and
Mississippi, were devastated by Hurricanes Katrina and Rita in 2005. More
than 90,000sq m of property and more than 60,000 homes were affected. The
region is now called the Gulf Opportunity Zone, or GO-Zone, and a government
act to regenerate the area has financial incentives for overseas investors.
Until the end of this year, 50% of the cost of property construction is
deducted from the first year’s tax liability.
“The level of public and private business expansion is fantastic for the
long-term development of Biloxi in Mississippi and the surrounding areas,”
says Danny Silver, managing director of Property Direct America, which is
selling homes starting at £68,000. “Ironically it has put a further strain
on the local property market, with the need for homes to rent soaring. We
have properties made from steel frame — within six months from signing an
investor can take possession, let it out and begin turning a profit.” Brad
Pitt was one of the first celebrities to show solidarity, investing £2.5m
and building eco-friendly homes. This is not your normal holiday-home
investment. The government may be appealing to the big-hearted, but buying
is not for the faint-hearted.
America is not a market for the novice and, as with any financial investment,
it is important to do your homework over the short, mid and long-term and
seek independent specialist legal, financial and tax-planning advice.
On the market
Chicago, £115,000 to £259,000
On the shores of Lake Michigan, 1400 Lakeshire Drive, a 1920s apartment block
on the golden mile is being updated and refurbished. The 22-storey building
will have 391 flats, from one-bedders to large three-bed penthouses. All
have use of concierge and roof-top sundeck
Agent: Global Residential Sales; 0870 211 3033, www.globalresidentialsales.com
They say: Property prices will rise 25% in the next three years
We say: Market may look fair in the windy city now, but could turn rough
Biloxi, Mississippi, £68,000
Three-bedroon steel-frame detachedd house with eco-friendly features
Agent: Property Direct America; 020 7043 0792, www.propertydirectamerica.com
They say: Ready to let and begin turning a profit in six months
We say: Not a holiday home: re-sale market is a complete unknown
The Chicago Spire will be 2,000 feet not 7,000 feet like the article says.
Kyle, South Florida, United States