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- Global Commercial Property Market Strong
- China FDI--Money Now Coming Out of China
- Think Globally, Sell Locally! Revised "Expand Your Market" Training
- State Foreign Policy Policies
- Online Foreign Market Briefs--Tune In and Keep Informed
- Countering the "Ugly American" Sterotype
- Changes to S&P REIT Composite Index
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Investment in commercial real estate worldwide is rising at its fastest pace in 18 months, shaking off the pressures of high oil prices and investment competition from strengthening stock markets, according to the 2006 Global Investment Survey from the Royal Institution of Chartered Surveyors (RICS). Of note from the just released survey, the UK property market, although performing well, no longer leads the pack. Investor and business demand is picking up in other European centers, notably in Germany and Italy. The emerging markets of Asia and Europe led in business demand for commercial space in the second half of 2005. In India and China demand is driven by rapid economic expansion, while economic growth following EU membership has created high demand for office space in Eastern and Central Europe. Low interest rates have been the primary driver for growth, though the RICS chief economist predicts that by the end of 2006 interest rates will begin to rise across the eurozone, USA and Japan for the first time since the late 1980s. With global bond yields already on the rise in these three economic blocs, the property market will feel the impact as foreign investor interest cools. Read a report summary.
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After months of news of FDI money flowing into China, now comes news that new guidelines will allow commercial banks in China to invest public money in overseas financial markets, a move likely to free up the country's mounting foreign exchange. Designated banks can file applications for the amount of domestic deposits from individuals and institutions that they plan to pool to invest overseas. Initially, Chinese investors can only purchase financial products with regular returns, such as bonds, but mortgage back securities may be a target. On August 24, 2005, the Wall Street Journal reported that bankers were just beginning to test the U.S. mortgage market. At that time, China's Bank of Communications, the only bank mandated to help manage China's $700 billion of foreign-exchange reserves, put a "sliver of those reserves into mortgage-backed issues." A bank manager was quoted saying his mortgage-backed portfolio had "plenty of room to grow." According to the Treasury, as of June '05, China held $55.9 billion in agency asset-backed securities, which mainly includes Freddie and Fannie mortgage securities, along with other federal agency securities. Chinese citizens have amassed great personal savings--31.8 trillion yuan (US$3.87 trillion). The guidelines come as the country's foreign exchange reserves hit a new high of 875.1 billion U.S. dollars, having recently surpassed Japan as the world's largest reserve. Analysts say the new guidelines will help slow the rapid increase in foreign exchange reserves and lessen the presssure on the rise of the yuan's value. Although China revalued its currency last July, American manufactures contend the yuan has not risen high enough, and that the undervalued currency hurts American jobs and contributes to a hefty U.S. trade deficits with China. The WSJ reported that net foreign purchases of U.S. government-agency debt (e.g., Fannie Mae and Freddie Mac) edged up $100 million to $30.6 billion in February '06, and Bloomberg reported that International investors purchased 45% of the $3 billion of three-year notes sold in March '06 by Fannie Mae. A country breakout was unavailable. NAR members can access the full text of the August '05 WSJ article via Proquest at the NAR Library online.
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REALTORS® are increasing business by expanding their markets to include culturally diverse buyers and sellers. The Expand Your Market Program will help you take advantage of international business opportunities by understanding how cultural differences impact business transactions. Expand Your Market can be taught by any experienced international real estate practitioner (or trainer) at a local or state REALTOR® association, company sales meeting, real estate convention, etc. NAR can recommend qualified instructors in your area, or check the NAR International Speaker database. The Expand Your Market Kit includes a CD ROM containing a sponsor guide, student and instructor manuals and other instructor resources, PowerPoint presentation and cultural sensitivity video clips.
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In spite of a long-standing U.S. embargo on communist Cuba, 30+ states export goods there. Travel is also limited, but governors can bypass the restriction because they are overseas on government business, an allowed exception. Although there are risks that accompany a state operating under its own foreign policy, and the U.S. government sometimes frowns on state initiatives, international trade is a powerful magnet for states, as discussed in a recent Kansas City InfoZine feature. Since 2003, governors have led trade missions to link state business with overseas partners to China, Cuba, Ecuador, England, France, Germany, India, Ireland, Japan, Peru, South Korea and Taiwan. What once would have raised constituent's eyebrows is now seen as legitimate business tied to the state's economic health. REALTORS® and REALTOR® Associations should track state foreign trade activities, targeting those that have real estate implications. (Learn about the NAR-supported Asian trade initiative in September.) Most states have an economic development office which can be found at the state government web site (state gov. URLs are: http//:www.(state name).gov/). Track locally-focused global trade initiatives through the U.S. Commercial Services local office sites. The U.S. Export portal lists a wide range of initiatives and allows you to search by state. National trade mission activities are also posted at the Dept. of Commerce site.
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REATORS® targeting a specific foreign market should learn all they can about that market to advise and assist clients with transactions in that market. This means more than just understanding the culture, market conditions, foreign ownership laws, etc.; all addressed in the CIPS program. It means staying abreast of current business and political activities. Commercial Services of the U.S. Dept. of Commerce offers a series of Market Briefs Webcasts that speak to potential American business investors about market opportunities and prospects for continued growth, bilateral and multilateral trade patterns, and costs/benefits of market entry strategies for U.S. companies. Market Briefs run 10-15 minutes and can be viewed at no charge. Current featured markets include China, South Africa, Chile, Russia, Israel and Singapore. Webcasts are also available on general topics such as global exports. Stay abreast of business news for a specific market or topic by setting up a daily Google News Alert.
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Being "ugly" (loud, arrogant, uninformed about local culture) is not be the sole provenance of Americans abroad, but given the pervasiveness of our culture and impact of our foreign policy on the world, Americans tend to get noticed more. Some might argue that it's the American policy that foreigners disdain, not the people, but recent surveys conducted in 100 countries suggest that Americans have a definite global image problem. The nonprofit Business for Diplomatic Action has responded with a "World Citizens Guide." Available for online reading (or download an abridged version), the guide offers tips for Americans traveling abroad. It also has sections on 1) Resources: websites related to basic global interests (news, money, travel); 2) Flags of the World & Interesting Facts: a fun online tool giving tidbits as you move your mouse over a flag (When you hail a taxi in Guatemala, the bigger the hand motion, the greater the distance.); and 3) 100 People: a graphic depiction of the world if it had only 100 people based on current demographics. Move your mouse over a descriptor for a visual depiction of how few/many people in the world are like you (only 9 would speak English). Multiple print copies can be ordered free for businesses (until the first 30,000 have been distributed). After that they can be purchased for a modest fee. A great resource for REALTOR® Association organizing a foreign study tour or trade mission!
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To provide a more accurate picture of the global investment landscape, Standard & Poor has changed the definations for several Global Industry Classification Standards (GICS) categories and implemented new categories. Changes in the Real Estate Industry Group include replacing the 'Real Estate Industry' with two new Industries: 'Real Estate Investment Trusts' and 'Real Estate Management & Development.' The new Real Estate Investment Trusts Industry will see the creation of seven new Sub-Industries: Diversified REITs, Industrial REITs, Mortgage REITs, Office REITs, Residential REITs, Retail REITs and Specialized REITs. The new Real Estate Management & Development Industry will include a Real Estate Management & Development Sub-Industry. Standard & Poor is a leading provider of independent credit ratings, indices, risk evaluation, investment research and data.
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Report compiled by NAR International Operations, narglobe@realtors.org.
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