An Anatomy of a Property Bubble: Case Studies On Malaysia, Singapore, the UK and US Part 3

Properties in Singapore reached their inflexion points in 2H2009. For KL, it never fell (but I don't trust the property indices because they comprise newbuilds which are at premiums). Central London properties recovered in 2H 2009, but greater London properties have still not recovered. It's funny because newbuilds prices in greater London started recovering in 1H 2012. It's a two tiered market like Iskandar. For Iskandar, newbuilds and resale started to recover in 2H 2012. The US reached the trough in 1H 2012. For most of Europe , prices are still falling.

The US presents by far the greatest opportunities. The average gross yield in New York is around 6% against a borrowing cost of 3%. But property, income taxes whip away pretty much your yield spreads. Conservancy fees, or service charges as they call it in the UK, or conservancy charges as we call it in Singapore makes the nett yield almost zero in New York.

Yields are higher in cities like Houston , which can reach7-8% gross and around 1-3% nett. There's also capital gains tax of around 15% when you sell it.

A greater opportunity is found in single family homes. They cost around USD15k - USD150k. Can give you yields of up to 9% net. This is an incredible spread of 600 bps. This is the sale of the century.

Since the inflexion point is only 1 year ago, supply is still in short supply at least until late 2015 (takes 3 years to build a condo and 1 year to build a single family home). From now till 2015, recovery will be like what Singapore and Hong Kong experienced between 2009-2012. Many new millionaires and billionaires will be minted, especially those with deep pockets.

Price to income ratio is the lowest in the world. Again I would avoid New York because it is a crowded trade. I would go for cities with strong employment growth. Population must be over 1.5 million and growing.

It is very difficult to Lena bunch of single family homes if you live far away. The best thing is either to migrate or live there, or invest in a private equity fund like Blackstone or Colony capital.

I am now exploring non UK European properties because I believe they are still in a downturn and the banks are not lending.

I love to buy properties in Countries where the banks are so hurt that they are unwilling to lend. The UK mortgage market is only just beginning to open up. The US banks now only begin to lend to institutions but not to retail. In Europe, few banks are lending. That's where I will operate. When banks cannot lend, you can be sure prices will be depressed. When the mortgage market recovers the masses will push up prices.