Rich French Fleeing Hollande Taxes Find Portugal Haven – Bloomberg 07-25-14

Salient to Investors:

  • Paulo Silva at Aguirre Newman said wealthy French are fleeing French taxes to invest in Portugal to take advantage of preferential tax treatment.
  • The French have overtaken the British as the largest group of foreign home buyers.
  • Gustavo Soares at Sotheby’s International Realty said the tax benefits Portugal offers foreigners has been extremely important in attracting French investors.
  • Luis Filipe Sousa at PricewaterhouseCoopers said French pension income may end up not being taxed at all. Foreigners living in Portugal may have their pension income exempt from taxes as long as it’s paid from a foreign source, while France only taxes its residents.
  • France has the highest tax burden in the euro region: 75 percent on annual incomes of more than 1 million euros and capital-gains tax.
  • The French, British and Chinese accounted for more than 50% of the 3,500 property purchases made by foreigners in Q1 2014.
  • The Chinese are seeking to take advantage of the country’s property-for-visa program.




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Malaysia’s Biggest Pension Fund Buying Stocks as Foreigners Sell – Bloomberg 09-12-13

Salient to Investors:

Mohamad Nasir Ab. Latif at EPF, Malaysia’s largest pension fund, said they were net buyers of Malaysian stocks during recent declines as foreign investors cut their holdings, and are looking at real estate in Europe and the US to diversify risk. The fund also plans to raise its overseas investments to 23 percent from 20 percent to widen its earnings base, he said.

Malaysia’s second-biggest pension fund Kumpulan Wang Persaraan (Diperbadankan), Thailand’s Government Pension Fund and Indonesia’s state retirement scheme PT Jamsostek also bought local equities.

The KLCI index is at 15.6 times earnings estimates on August 28.

EPFR Global said global funds have pulled $44 billion from emerging-market stock and bond funds since the end of May.

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Italy to Spain Beckon as Yields Beat Germany: Real Estate – Bloomberg 07-16-13

Salient to Investors:

Europe’s biggest real estate managers are making their first investments in southern Europe since the financial crisis as low prices and diminishing risk make commercial properties more attractive.

Anne Kavanagh at Axa Real Estate Investment Managers said we are at or near the bottom and starting to see a rotation from defensive to riskier investment, and sees more reality in European pricing than 12 months ago. Countries such as Germany and the UK attract the bulk of investments because of their reputations as havens.

Insurance companies, private-equity firms and sovereign-wealth funds are seeking deals in Spain and Italy as the economic prospects for the countries improve and the likelihood of a euro-currency breakup recedes. Investors are targeting hotels, homes, offices and warehouses, insurers are focused on modern, high-occupancy office buildings on busy streets, private-equity firms are targeting distressed homes held by Spain’s Sareb.

Georg Allendorf at Deutsche Bank Asset & Wealth Mgmt is considering buying real estate in southern Europe for the first time since 2010.

Peter Damesick at CBRE said buyers are attracted by the prospect of an improved economic outlook in Spain and Italy and growing confidence that the euro will survive. Returns in the commercial hubs of Madrid and Milan have become more attractive compared with other European cities after a slide in investment in both countries last year boosted yields. CBRE said yields for prime offices were 6.25 percent in Madrid in Q1, 6 percent in Milan, 4.9 percent in Frankfurt and 4.75 percent in London.

Mauro Montagner at Allianz Real Estate said many international investors are coming back, or coming into the market for the first time, realizing they are no longer like trying to catch a falling knife. Montagner said the market is more dynamic than it appears, and is competing with 8 other investors for an Italian property that probably would not have attracted any interest a year ago.

Magali Marton at DTZ said investment in Spain and Italy fell in 2012 to the lowest level since at least 2001, but will begin to recover this year and return to pre-crisis levels as early as 2014. Marton said Italy’s appeal lies in robust consumer spending and increased political stability as the political class demonstrated its capacity to manage the country and reduce public debt, and says Italy’s real estate market is more promising than Spain’s because of Italy’s strong industrial sector and lack of the construction boom that burdens Spain with an oversupply of buildings. 

The European Commission predicts Spain will grow 0.9 percent and Italy will grow 0.7 percent in 2014.

Spanish property owners face financial and regulatory pressure to sell after holding assets for years to avoid realizing losses.

The IMF said house prices in Spain are still falling sharply and further correction is likely.

Paul Danks at NAI Global said it is a very good time to expand into these markets as the majority of the big-name investors have always been there, but clearly inactive over the last few years.

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Bubble, Bubble, Money and Trouble – Barron’s 06-01-13

Salient to Investors:

Marc Faber at the Gloom Boom & Doom Report says:

  • High-end assets from stocks to art to real estate are in a bubble caused by central bank money-printing. This money doesn’t increase economic activity and asset prices in concert, instead creates dangerous excesses in countries and asset classes. Money-printing fueled the stock-market bubble of 1999-2000, the housing bubble in 2008, and the commodities bubble.
  • Owns equities because easing money is flowing into the high-end asset market, including stocks, bonds, art, wine, jewelry, and luxury real estate.
  • The government bailed out S&L depositors in the late 1980s. Treasury and the Fed bailed out Mexico in the mid-1990s. The Fed-supervised bailout of Long-Term Capital Management in 1998 gave a green light to Wall Street to keep leveraging up. Neither Keynes or Friedman would have approved current policies.
  • In the fourth year of an economic expansion, near-zero interest rates will lead to a further misallocation of capital. The S&P 500 is a near a long-term top and could rally to 2000 in the next month or two before collapsing.
  • Money-printing leads to a widening wealth gap. In the Western  democracies, large numbers of people will at some point target the rich through wealth taxes or significantly higher tax rates. The rich have seen huge wealth accumulation in Asia in recent years but the middle class has seen diminishing purchasing power. Growing wealth inequality has always been corrected either peacefully, through taxation and wealth redistribution, or by revolution, as in Russia. European voters will turn against the arrogance of the bureaucracy.
  • China will not tolerate US interference long-term in their region.
  • 25% in equities – no US, some Asian shares and Singapore REITs.
  • Except for some high dividend stocks, Philippines, Indonesia, and Thailand markets are unattractive having quadrupled from post-crisis lows. Dislike Chinese equities unless conditions worsen and China prints money like crazy, when the currency will weaken and stocks will rise.
  • Japanese stocks made a generational low in 2012 and won’t go below that. Like Japanese REITs.
  • Vietnam exports are strong, and the people are hard-working. The beach between Danang and Hoi An will be a huge resort area in the future and is only an hour and 10 minutes by plane from Hong Kong, and two hours from Singapore. Likes stocks with yields of 5% to 7%.
  • Many rich Asian companies have been buying other Asian companies. Asia long-term economic outlook is good. Laos, Cambodia, and Myanmar are opening up, and Vietnam is reopening. Myanmar market is hot but like Vietnam near its peak in 2006-07, looks dangerous for investors.
  • The huge credit bubble in China won’t end well. The economy officially grew 7.7% in Q1 but in truth is growing 4% a year, at best. China reports export figures to Taiwan, South Korea, Hong Kong, and Singapore that are much larger than those countries report as imports.
  • Markets in Europe have made major lows so own European shares – and plan to buy more – and corporate bonds, and real estate. Money in European banks is no longer 100%.
  • Like Singapore REITs whose yields of 5% and 5.5% compare favorably with US REITs. If inflation picks up, REITs can raise their rents.
  • 25% in gold and add to positions every month. When the asset bubble bursts, financial assets will be particularly vulnerable.

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Warehouses Win Investors as Unsung Internet Heroes – Bloomberg 04-15-13

Salient to Investors:

The growth of Internet shopping in Europe is luring investors to warehouses, where yields are beating showy storefronts and sleek offices amid a space shortage.

Jones Lang LaSalle say Europe needs 296 million square feet of new distribution and storage warehouses in the next 5 years, 11 percent of existing modern space, to keep up with Internet sales growth, while a lack of construction in the US has helped rents at “big box” assets above 250,000 square feet outperform the rest of the industrial market since 2009.

Remy Vertupier at the Logistis fund says warehouses generate annual income 2 percent higher than offices and shops in Europe relative to their value, and a lack of space will lift prices.

Axa Real Estate estimates that 90 percent of retail growth in the UK, France and Germany will come from online shopping in the next 4 years.

Forrester Research says internet retail sales in Europe will grow 50 percent through 2017.

Rental returns from warehouses are beating other types of real estate and outpacing assets that typically attract pension funds and insurers. Investment Property Databank says annual rental income from UK logistics centers equaled 6.8 percent of building values in 2012, versus 5.8 percent for stores and 5.5 percent for offices.

Prologis says warehouse tenants like typically want little more than four walls and a roof with loads of doors and a deep truck court. Davis Langdon says that means building warehouses costs an eighth as much as offices and a fifth of the price of shopping malls.

Tidjane Thiam at Prudential said investors such as life insurers and pension funds are looking to buy infrastructure such as warehouses because the income generated fits well with obligations like paying out pensions.

JPMorgan Chase says growing online sales may lead to mergers and acquisitions in the warehousing industry, and Europe’s retail-focused REITs should buy logistics property companies so they can offer tenants both stores and warehouse space to supply Internet sales.

However, Jones Lang says Europe’s income-producing warehouses sold at yields of 7.5 percent at the end of 2012 versus 7.4 percent a year earlier, indicating a decline in prices, while yields for office buildings fell to 5.2 percent from 5.3 percent and shops declined to 5 percent from 5.1 percent.

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Irish Homes Drawing Buyers After Market Crash: Mortgages – Bloomberg 11-06-12

Salient to Investors:

Dublin, the epicenter of Western Europe’s worst housing-market crash, is showing signs of life for those with cash.

Keith Lowe at Douglas Newman Good said people are going to look back and see a lot of missed opportunities in Ireland if they had the cash.

Goodbody Stockbrokers says cash now accounts for half of all sales as banks balk at taking on more mortgage debt.

Dublin house prices are down 55 percent from their peak in 2007, apartment prices down 63 percent. Outside Dublin, prices are down 46 percent.

Bank of Ireland, which accounts for 40 percent of new mortgage loans, saw a noted pick-up in mortgage demand in September and October.

Owen Callan and Frank Oeland Hansen at Danske Bank said the housing market may have turned around after bottoming in June.

About 10,000 homes in Dublin were completed last year, down from about 93,000 in 2006.

Alan Dukes is skeptical about reports suggesting prices may continue to rise.

Karl Deeter at Irish Mortgage Brokers said banks are now only offering mortgages of 80 percent and making more deductions to disposable income. Deeter said it’s nearly impossible for families with a few children and living off one income to get a mortgage, unless the person who is working is earning more than 100,000 euros.

30 percent of Irish home loans by value, including buy-to-let mortgages, are in arrears or have been modified.

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Swiss Property in ‘Risk Zone’ for First Time Since 1991 – Bloomberg 11-05-12

Salient to Investors:

The UBS Swiss Real Estate Bubble Index entered the risk zone for the first time since 1991.

Matthias Holzhey and Claudio Saputelli at UBS said:

  • Population growth continues to favor price increases, but prices are increasingly being supported by investment demand and by low interest rates, Continued strong increase in household mortgage debt shows no signs of abatement.
  • The average Swiss household income required to buy a home rose in Q3 due to a renewed increase in real estate prices and stagnating income – the 5.9 times income needed to buy is is still below the 6.8 times peak in 1990.
  • Zurich, Geneva and Lausanne are most at risk from residential real- estate bubbles because of their national importance.

Holzhey expects the rise to continue next year, driven by interest rates that are too low.

50,000 people a year migrate to Switzerland, where unemployment is lower and income higher than most of Europe. The tax rate of 28.5 percent of GDP is below the OECD average of 33.8 percent.

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U.K. Home Values Drop as Olympic Knock-On Extends Summer Lull – Bloomberg 10-12-12

Salient to Investors:

David Brown at LSL said the lack of lending, especially to first-time buyers, is choking off first-time buyer sales outside of prime London.

Acadametrics said house prices rose 2.2 percent from a year earlier in September due to a shortage of properties, but the rate of increase is slowing. London average prices jumped an annual 8.2 percent, 3.7 times more than in any other region.

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London Jumps to Second Behind NYC in PwC Rank of Finance Cities – Bloomberg 10-12-12

Salient to Investors:

PricewaterhouseCoopers ranks London a close second behind New York as a financial center on its economic clout, ease of doing business, innovation and attraction as an international gateway. Toronto and Paris rank 3rd and 4th, Singapore 7th, Hong Kong 8th.

Paris topped the livability category.

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