Staggering rise in US farmland values

The United States Department of Agriculture (USDA) has just released its latest farmland values report and some of the figures are staggering.

While the UK media has always been fascinated by the ongoing strong performance of farmlandover here  relative to other asset classes, what is happening across the Atlantic puts that growth in the shade.

In North Dakota, for example, cropland values rose by 41.5% between 2012 and 2013 to $1,910/acre (£1,248/acre).

While the relatively low value of land in that part of the US could partially help to explain this sudden rise, values in what is known as the Corn Belt also rose incredibly strongly.

Iowa, which has the highest land prices outside New Jersey and California, saw values rise by almost 18% to $8,600/acre (£5,620/acre).

Over the past five years prices have jumped 112%, says the USDA. In England, average price growth over the same period has been 26%, according to the Knight Frank Farmland Index.

A number of commentators are now suggesting that US farmland is a bubble set to burst.

Whether this happens remains to be seen. But US farmland values are certainly more dependent on the support provided by cash rents, which are closely linked to commodity prices, than in the UK where other factors also play a strong role.

With wheat prices well down on the year on the back of bullish predictions for the 2013 global harvest, some of that support could start to weaken.

As an aside, it is interesting that the USDA regards the price change of farmland as sufficiently important to keep track of. In the UK, the government stopped producing its own farmland index some time ago.

Hong Kong luxury house prices and rents fall in July

Hong Kong’s residential sales market was quiet in July as Government cooling measures continued to have an impact on transactions.

A series of as anti-speculation moves including the doubling of Stamp Duty in February for all transactions over HK$2 million, has had the desired effect on the residential property market.

Investors and mainland buyers have retreated from the market – in fact the proportion of mainland Chinese buyers has dropped from around 30% in October 2012 to only 9.4% in January 2013 (in the Hong Kong luxury market).

In July, prices in the luxury residential sales market dipped by 0.3%, while rents fell by 0.9% month-on-month.

On the supply side, the latest statistics released by the Transport and Housing Bureau show that the number of new flats commencing construction surged 500% quarter-on-quarter, in the second quarter of this year, to reach 6,600 units – the highest number since 2004

Thomas Lam, Director and Head of Research & Consultancy in Hong Kong, said: “Government data show that 70,000 new units could be available in the next three to four years. Of these, about 60% will be small to medium-sized units with saleable areas of less than 753 sq ft, meeting the demand from first-time homebuyers.

“However, residential supply will remain tight in the short term. With various cooling measures remaining in place, we expect the residential market to stay quiet and sales to fall about 10% in 2013. We believe mass residential prices will drop around 10%, while prices in the more resilient luxury sector will fall 5%.”

Spanish housing market shows signs of recovery

There’s no doubt that Spain’s property market has endured a difficult few years and residential prices in the country tumbled in the wake of the economic downturn. 

But now Knight Frank’s representative office in Spain, says buyer confidence in the market is starting to return

Barcelona based agent Lucas Fox notes that the fall in prime residental prices in Spain is begining to slow and as a result investors are sensing a potential turnaround in the market.

Data released by the agent suggests that prices in some of Spain’s most desirable areas have fallen up to 50% since the property crash of 2006/7. However, sales have begun to rise more recently as British and Scandinavian buyers return to the market.

• In Barcelona, the Costa Brava and Marbella, prices have fallen between 20% and 50%. In some areas, they may have reached the bottom.

• Property sales in Barcelona are up 13.5% from January to May 2013 compared to the same period last year

• Lucas Fox has seen the strongest two quarters of trading since the start of the property crash of 2006/7

• The luxury property market is doing particularly well, primarily in Barcelona, the Costa Brava, Ibiza and Mallorca where the average sales price of properties sold by Lucas Fox in the first six months was over a million Euros. In these key areas the property markets are still being driven by international clients

• Mallorca was the most popular tourist destination in Spain in the first half of 2013, with many British and Scandinavians returning to the market

• On Ibiza, prices remain buoyant and the demographics of buyers is changing with more young European buyers in the 30 to 40 year age group

Alexander Vaughan, co-founder of Lucas Fox, said: “The first six months of 2013 saw further encouraging developments in the property market in prime areas of Spain. In all regions we cover, the numbers of offers and sales completed were significantly up on the same period in 2012.

“It remains a buyer’s market with even the best properties transacting at 20% to 30% below their peak prices and sellers increasingly open to negotiation on asking prices. Our advice to potential buyers is to focus on location and quality.

“There are some great deals to be had and we think that in most areas, particularly Barcelona, the Costa Brava and Marbella, prices are at, or very close to, the bottom. We expect the trend of sellers lowering asking prices in line with buyer expectations to continue for at least the rest of 2013 and quite possibly the next couple of years.”

How do waterfront locations affect prices around the world?

Waterfront properties in sought-after coastal locations cost 63% more, on average, than similar properties that are landlocked, according to Knight Frank analysis.

To find out what the biggest premiums for coastal views are, they surveyed local agents in 10 popular second-home destinations around the world to find out the premium paid to live on the water.

Across the board, prime waterfront properties in coastal locations around the world are worth an average of 63% more than their inland counterparts.

However, there are regional differences from city to city. Waterfront properties on Italy’s Lake Como and in Barbados have the highest price premium. In both locations coastal homes can command prices 100% higher than equivalent homes inland. They were followed by homes in Phuket in Thailand and the central Algarve along Portugal’s southern coast where values increase by 89% and 75% respectively.

At the other end of the scale prime waterfront properties in coastal locations in Dubai are only worth an average of 10% more than inland homes. In The Hamptons, home to some of the most expensive residential properties in the US, the presence of water only increases the value of a property by an average of 30%.

The full list can be seen below.

Lake Como, Italy: 100%

Barbados: 100%

Piglet, Thailand:89%

Central Algarve, Portugal: 75%

Miami, USA: 60%

Cannes, France: 40-60%

Cape Town, South Africa: 56%

Mallory: 50%

The Hamptons,USA: 30%

Dubai 10%

Dubai's luxury home prices rise 6%

The price of luxury homes in Dubai rose by more than six percent in the second quarter of 2013, according to the Knight Frank Prime Global Cities Index.

The index also showed that prime real estate prices in the emirate have increased by 21.6 percent over the past year, making it the second best performing market in the world.

With prices also up 11.9 percent in the last six months, only Jakarta in Indonesia has seen prices rise more in the the year to June, Knight Frank said.

"The price of luxury villas began to rise in early 2012 and apartments are now following suit," the real estate consultancy said in a report.

"The city is attracting demand fromNorth African, Asian and Middle Eastern buyers,many are cash buyers which may mitigate the impact of the prospective mortgage cap which is currently under discussion," it added.

The average price of luxury homes in 28 of the world’s key cities increased by 2.4 percent in the second quarter of 2013, a marked improvement on the 0.4 percent fall recorded in the first three months of the year.

Although Europe, with an annual fall of 0.9 percent, remains the weakest performing region it is up from -3.4 percent a year earlier.

Madrid was the weakest performing prime residential market in the last 12 months, declining by 11.9 percent, the index showed