International briefs

Fears of a bubble for Australian housing

Is Australia facing a real estate bubble?

A survey on global housing published by The Economist last month found that Australian prices were the most overvalued of 20 economies tracked in Europe, Asia and North America.

Home prices rose this year after Australia’s Reserve Bank — fearing a big recession in 2009 — drove down mortgage rates from 9 percent to 5 percent.

Some market observers argue that growth is unsustainable since housing trades at nearly 7.5 times family income today, versus about 3.5 times in earlier times.

Other experts think that average prices could rise a bit further or fall a bit over the coming year, but they will not drop significantly, as happened in the U.S.

“The recent 30 percent drop in U.S. house prices is a very poor guide to what might happen here,” wrote Rory Robertson, an economist at Macquarie Bank, in an editorial in The Australian newspaper. “The relative strength of our economy — 5 percent unemployment here versus near 10 percent there — is part of the story.”

Robertson also pointed to more conservative lending standards as reason for the continuing health of the Australian market.

Paris saying au revoir to pieds-à-terre?

In an effort to augment the stock of affordable housing in downtown Paris, Mayor Bertrand Delanoë is pushing enforcement of an often-flouted law that could potentially hamper the city’s booming pied-à-terre market, according to the New York Times.

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The law, which blocks homeowners from renting out their properties for less than a year at a time, could render the short-term pied-à-terre market — which includes tens of thousands of properties — obsolete. A significant proportion of these rental apartments are owned by foreigners who bought them as investment properties or vacation homes.

Industry experts say that the move will have a profound affect on the vacation real estate market. “No one seems to know what this crackdown means, but I feel my business will have to change,” property manager Susie Hollands told the Times.

For many vacation property owners, the newly enhanced law will mean that anyone hoping to rent out their home as a pied-à-terre will have to reclassify it as a commercial site, through an arduous permit application process.

But French real estate experts say that solution could prove vexing to the average homeowner.

“It isn’t difficult; it’s impossible,” said Fabrice Luzu, who specializes in helping international clients invest in Paris.

Morgan Stanley takes leap of faith with German CRE investment

While the U.S. commercial real estate market may still be struggling, Morgan Stanley’s real estate unit is planning a $1.1 billion investment in German properties, according to Reuters. The portfolio, which includes 62 retail properties, has been nicknamed “Bavaria.”

The move comes as somewhat of a surprise since in May, the bank told investors that its open real estate fund P2, valued at $8.8 billion, was in danger of losing two-thirds of its value. The fund had included numerous high-profile international properties, according to the Wall Street Journal, including the European Central Bank’s Frankfurt headquarters.

This new portfolio, however, will be formed through a partnership with Hamburg-based real estate firm Redos.

Historically, Germany has been one of the most active commercial real estate markets in Europe. It saw the second-highest volume of commercial sales of any European country in 2009, according to Real Capital Analytics.