Foreclosed property opportunities in the USA

It is getting to the point where Australians and NZ'ers, indeed Canadians and South Africans, Chileans and Brazilians, indeed the people's from all commodity-producing countries might want to consider buying foreclosed property in the United States.

The reasons are clear in this article “Bank of America lifts foreclosure freeze in 23 states” by Charles Riley, staff reporter, Yahoo News, website, 19th Oct 2010:

"All told, 1.8 million loans are in foreclosure in the 23 so-called judicial states, while 1.3 million are pending elsewhere in the country, according to a Morgan Stanley analyst report".

The implication of this article is that there is a great deal of property in the United States, principally California, Florida, Nevada and Wisconsin from my understanding, which is offered at very low prices, at a time when the USD is very cheap. I believe the USD has bottomed against the Yen, so buying property makes even more sense for Japanese and European buyers, as I believe it will be the Europeans and Japanese which are going to see the greatest currency debasement moving forward. It is of course all good news for 'hard currency' commodity producers.

The other appealing market for foreclosed property is Japan. In fact, this market is more appealing because the yields on property are 13% now, whereas the US market will never be so attractive. One might wonder however....does one want to invest in debasing currencies? That need not concern you so long as you hold real assets like property. The question you need to ask is whether there will be an eventual market for your property, so this depends on questions like:

1. Is it imminent that Japan will open up to immigration?

2. Will US population (or immigration) growth absorb all the new property?

3. What is the base value of US property? Japan I would suggest has already bottomed.

4. How long will it take for the USA foreclosed properties to clear?

The other question is - do you want to invest, or is this purely a lifestyle property. I bought one of each in Japan...a dormitory 1hr from Tokyo, and a more distant investment property in a tourist area offering 13% yield. You can buy a house in rural Japan for as little as $US10,000. In the USA, you will pay from $US30,000. It is hard to imagine a place in Japan which would pose a threat. I don't even both insuring my property in Japan. Its so safe. Some properties are cheaper than land value if they burned down. In Japan, only foreigners with generous holidays can utilise these properties because the Japan Rail Pass is such a 'bonus' for foreign tourists. Japanese people pay $300 to go from Tokyo to Fukuoka...foreigners can travel in Japan for up to a week for that cost.....unlimited travel on Japan Rail lines...including the Shinkansen. A great country to holiday and visit. If you have not travelled up these remote river valleys by train, you have indeed missed an experience. I have acquired several JR Passes for this purpose...always returning to my Tokyo base most nights. i.e. I would board a JR Shinjuku train at 6AM to say Niiagata, then I would get there at 8AM, so I was free to explore the countryside in local trains for the day, before returning on the 'bullet train' at 4-5PM, so I'd be back in Tokyo for dinner.

There I would enjoy some jazz or blues in Nerima basement restaurant, or a beer in a izakaya, or the Hub English pub chain. I particularly like a bar in Nerima which serves Hoegarden beer on tap...its my favourite beer...aside from Londonite (India)....a place I'd never go back to enjoy it.

Yep... I love Japan. I'm going back this May 2011. Love it!

NZ Property Guide Philippine Real Estate Guide Japan Foreclosed Guide

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Advice for Japanese savers

The Japanese Yen is close to a record high point. This is not likely to be sustained because of the need to maintain Japan's export competitiveness as well as the need for the Japanese government to finance its current domestic debt. I therefore advice Japanese investors to place some of the Japanese savings in foreign assets in order to protect themselves from a future currency debasement.

The question is where?

I would suggest several attractive destinations:

1. High yielding Philippine property. It offers yields of 8%, it is close enough to enjoy as a holiday house, its a booming economy with strong population growth. We have a report in English.

2. United State foreclosed property for future capital and yield growth, but also immediate currency protection, and the prospect of holidaying.

3. Mining stocks in the USA - such as gold and copper stocks. See gold price

Please excuse my Japanese (Google) translation:

日本の円は過去最高点に近いです。これは、必要が日本の輸出競争力を維持するためにのために持続する可能性はない。私はそのためのアドバイス日本の投資家は、将来の通貨変造から身を守るためにいくつかの外国資産の日本の貯蓄を配置する。

問題はどこですか

私はいくつか魅力的な目的地をお勧め：

1。高降伏フィリピンプロパティです。これは、8％の利回りを提供し、それは十分に近い別荘として楽しむためには、強力な人口増加との好景気。私たちは英語でレポートしています。

2。将来の資本と歩留まりの成長のための米国国家抵当流れプロパティだけでなく、即時通貨保護、および休暇の見通し。

3。アメリカの鉱業株 - 金と銅の株式など。See gold price

NZ Property Guide Philippine Real Estate GuideForeclosed Japan GuideAuthorAndrew SheldonApplied Critical Thinking | www.SheldonThinks.com

Property investment - USA or Japan?

Anyone noticed how the Japanese Yen is close to its previous highs. I am sure I have wrote about this before, however it kind of defeats the idea of foreigners who are non-residents investing in Japan. Anyway you can check out the price action on Google Finance. There are few currencies which are performing as well as the yen. In fact I could not find one. I was expecting the AUD to hold its own, but its about where it was 5 years ago.

The implication is that it only makes sense to buy property in Japan if you are planning to live here for a while, and you will otherwise be paying high rental yields. Even then, I think if I was a US citizen living in Japan, I would be sending my money to the USA and buying foreclosed properties or gold/copper/tantalum stocks, and perhaps a few other strategic metals. There are two reasons:

1. The very low USD compared to the yen

2. The depressed property market, which must be close to a bottom.

3. Metals are denominated in USD so benefit as the USD falls

4. The US will benefit from immigration and recover quickly, whereas Japan will be a slow process

5. The Yen is destined for the same debasement as the Euro and USD. Why? Because the govt has to repay a lot of debt to the people. It does not have the courage to raise taxes when demand is so weak, and for the same reason, it is not going to be cutting spending so much. It has no choice but to print money. That equals debasement given that the debt is 200% of GDP. Yes, I know its owed to Japanese. But last time I looked, Japanese investors expected interest, and they don't like to be taxed.

If you are looking for a protracted US recession of the type experienced in the 1930s, think again, it will not be as bad for a number of reasons:

1. There is no huge over-capacity in the world

2. The central banks back in the old days made a lot of mistakes, so the commercial banks lost a lot of credibility. There has consequently been no run on the banks like in decades past. Too soon to say? I don't think so. Most are adequately capitalised, and they are backed by paper money. Worthless? Yep, but so are all the paper currencies, and that is why I'd go for gold for protection against debasement.

3. The global story is not as bad as indicated for several reasons - (a) The trade liberalisation of China, India, Latin America, Africa has resulted in an escalation of commercial activity on an unprecedented level. This is reminiscent of the sugar, coffee, cotton booms of centuries past. We are having the same technological boom, but on so many levels, i.e. Miniaturisation of products, high strength steel alloys, outsourcing to Asia, the internet, voice over the internet (i.e. less travel), work from home. There is more coming in energy saving technologies and solar cells, new steel making technologies like HIsmelt.

If you must buy property in Japan, and we like to help, I'd confine myself to a lifestyle home in the countryside. You can avail of the Japan Rail Pass and travel around the country on a tourist visa from your new-found home base. That is what I do. A $300 gets me a week on Japan trains. I have the odd night out on the far-reaches of the country, but otherwise I return home. i.e. Get up early to get to Shibuya by 6AM. Shinkansen to Yokoyama, overland train to Tottori or such places, staying at some lodge, drinking in some small bar with weird people, then next overland train along some great canoeing/kayaking rivers. Its actually amazing how much forested wilderness Japan has.....if only the Japanese people could afford to see it. But you can with a Japan Rail Pass!

NZ Property Guide Philippine Real Estate GuideForeclosed Japan GuideAuthorAndrew SheldonApplied Critical Thinking | www.SheldonThinks.com

Should you buy property in Japan?

Now is not a bad time for Australians or Canadians to buy property in Japan, but Americans ought to be sending their money the other way. Consider my latest blog post in my Forex blog. The USD is narrowing the gap with its lowest exchange rate for the yen ever. I don't expect the Yen to breach this level by much. There are 2 reasons:

1. The Japanese government has their own deficit to finance, as well as wanting to stabilise deflation in the country. For this reason I expect the Japanese government to resort to printing money in order to stimulate the economy. This might be performed by offering greater welfare. Certainly the Democratic Party of Japan is the party to implement such a policy. This will of course stimulate some domestic spending.

2. The other reason is the uncompetitiveness of Japanese exporters. This is not a desirable quality, though perhaps there is no hurry, since global demand is pretty weak.

The US presents a far better prospect for investment at this time, and the prospect of the USD falling to 81.86 yen over the next few weeks provides you with the best opportunity to shift your money. This is easily said if you hold Japanese equities, but a little harder if you are holding Japanese property.

Of course the fact remains that if you are living in Japan, you need to live somewhere, and if you are planning to spend a long time there, you may as well buy a place there. But I would only buy if you are planning to buy in the outer suburbs (with are cheaper). I would not be buying into any growth boom. But the very high yield of 12% does make buying more sensible than renting. Of course since is Japanese low interest rates you are using, there is some scope to leverage your investment in Japanese property. Rest assured that Japanese (and indeed international) interest rates are going to remain subdued.

NZ Property Guide Philippine Real Estate GuideForeclosed Japan GuideAuthorAndrew SheldonApplied Critical Thinking | www.SheldonThinks.com

Australian property buyers set for retirement

On many occasions I have spoken of the huge amount of investment which is set to provide a huge amount of stimulus for the Australian economy over the next few decades. In the 1960s and 1970s we saw a rush of Japanese investment into Australian resources. Well in the next 20 years I would not be surprised to see $300-350 billion of mining investment in the industry, encompassing mostly offshore gas, iron ore, coal, coal seam gas, gold, base metals and alumina. Am I missing anything? Probably. The Chinese population is 10x Japan's and I have not even considered the other billion in India, which will also need a large amount of resources. India and China are not exactly mineral-poor economies, but mining in them is relatively disruptive compared to mining in Australia. There resource quality is not as good either. eg. India's coal is dirty, particularly its coking coal. China lacks coking coal, so these are good areas for investment.

The implication however is that Australia is going to have a strong market, so I would not be expecting property prices to fall. They will go sideways at worst, if the government opens up land releases. The reason to keep property prices hard is that it makes you work harder, you pay more taxes, and it ultimately makes you compliant with our fascist punitive government.
Sovereign risk is a problem in any country, and its easier than ever to shift funds and buy assets abroad. There are other reasons as well....foreign exchange benefits.

There is no question you will benefit from having assets in Australia. The AUD will be strong, though when our terms of trade is so strong usually Australians spend a lot on consumption. This is just one for reason to have assets overseas. The AUD is one of the most volatile currencies in the world. If you have the flexibility to be transferring funds at opportune times, you can save a great deal. For instance, we bought a house in NZ at USD0.50-0.53, its now 70c to the USD. The implication is the same for Australia.

Of course we want to be buying in markets with good fundamentals, or perhaps simply lifestyle benefits. My partner and I have property in NZ, Japan and the Philippines. We like these markets. I believe 84yen was a low for the Yen. That has not been my position for the last 2 years. That target was essentially reached. There will be a stronger currency looking ahead because of higher interest rates. Eventually the property market will recover, so you might want to look at foreclosed property. Of course if you can't borrow money in these markets its a bit more difficult, as you have to time your investment well. So you need to watch the charts. Of course we have provided guidance before through this site.

Japan is very cheap if you want a rural lifestyle place for just $USD20-50,000; its more in the city, but you don't need to live right in the city and pay $500,000 plus. Japan is a great place to be a tourist. The Philippines is not a lifestyle place for everyone, however it does have appeal as an investment destination as well.

From a currency perspective there is no need to rush your dollars out of Australia because the AUD is strong, and any interest rate increase to slow the economy will only aid the currency. The greater issue is timing. Key dates to consider are the elections coming up in the Philippines and Japan, plus I would not wait too long in the USA, as the surplus property will be soaked up. High apartment vacancy rates in places like Miami will be absorbed.

NZ Property Guide
Philippine Real Estate Guide
Foreclosed Japan Guide
Author
Andrew Sheldon
Applied Critical Thinking | www.SheldonThinks.com

Philippines property ranks highly on yields and forex rates

I'm in the process of updating my Philippines Property Report. This will be the 2nd edition. A part of this report is helping prospective retirees, investors and expats to find investment opportunities in the Philippines. We do this for our own benefit as well as yours. The focus of this blog is exchange rates. The Philippines peso has tended to suffer along with the USD, though it has generally fared better. Click on the charts to the left and it will be apparent that foreign or Filipino investors holding Australian dollars, Canadian dollars or US dollars are in a pretty good position to invest in the Philippines. The same is true for expatriates or Japanese people holding Yen. The Yen is also trading a favourable exchange rate to the Philippines. The attraction of investing in the Philippines is particularly attractive given the better than average yields - 2nd only to Indonesia in East Asia at 9% per annum according to Global Property Guide. Investing in the Philippines makes less sense for Europeans given the weaker Euro, but having said that, its far easier for foreigners to raise finance in the Philippines than other countries. Some people take out loans in their partners names. Its even easier if you are buying foreclosed assets because some of the banks will not require proof of income. The implication is that even Germans, French, Dutch and other investors can buy property in the Philippines with the expectation of paying off the loan when the currency is optimal.


NZ Property Guide
Philippine Real Estate Guide
Foreclosed Japan Guide

The outlook for US property prices

If you are interested in the US property market, I would suggest considering the following chart. It provides an indication of the remaining overhang of ARM resets; but by no means is that the full story, so please read on.
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Andrew Sheldon www.sheldonthinks.com