News

 March 18- 2005– US demand for rental apartment homes continued to gain momentum in the fourth quarter of 2004, according to the latest Multifamily Market Index (MMI), released by the National Association of Home Builders (NAHB). Meanwhile, the same survey showed no signs of the hot condo market cooling off.

“The improving job market is driving a rebound in apartment rentals,” said David Wilson, NAHB president and builder from Ketchum, Idaho. “At the same time, attractive interest rates and strong price appreciation rates continue to spur condo sales.”

A similar demand for condos is taking place in Central Florida and yet for very different reasons.

In Orlando, especially within the theme park catchments, an ever- increasing supply of overseas and “out of State” property investors and 2^nd home buyers are eagerly snapping up homes with “short term rental approval” for the purpose of renting them out to tourists.

With property price rises in certain instances in excess of 30% over the past year alone for a single-family pool home and despite this type of home still being an attractive purchase option with many foreign buyers, the purchase of a condominium is now proving to be a more favourable option with many investors.

The reason is that some condos will attract a similar kind of rent to that of a single-family home, plus most are more conveniently located closer to the theme parks than the single-family home counterpart. Often they can be bought for a lower price and therefore offer a favourable potential yield.. Nowadays a current favourable exchange rate in particular for UK buyers plus several off plan purchase opportunities is making the market for condos in this region of Florida a booming industry!

For Graham Pyle and Allen Jackson of specialist UK & Florida based real estate brokers and estate agents Florida Countryside it is proving to be an exceptionally busy time.

Says Pyle, “2004 proved to be an exceptional year for us with the number of sales concluded far outweighing those of previous years. It is interesting to note that we have experienced a large swing in favour of condo purchase over the past year.”

“Typically we would be selling single family homes with a private screened swimming pool to the majority of out of State buyers and foreign nationals, for it use to be easier to try and obtain sufficient rental income to help cover the purchase costs on thisparticular  kind of home. However with the recent prices, such an option has become increasingly difficult to achieve, for the rental rates have not yet risen in line with the purchase price rises and it will probably be some considerable time before they do!.

However with a suitable condo purchase it could be a different story........

 Subject to a few most important caveats, it is possible for the purchase of a correctly priced suitably sized condo in a convenient well located community, that offers  comprehensive resort and leisure facilities, to achieve what use to be possible in respect of rental return from a single family home a year or so ago.

However I cannot emphasise sufficiently that great caution is required, should anyone want to achieve this and a certain degree of owner participation as always, would still be required. We spend a considerable period of time with each individual client in order to clarify all our recommendations for any such achievement and we encourage this by conducting information seminars around the world. This is our way of explaining all of the details, emphasing in particular the pitfalls to avoid, as wells as the natural advantages" 

Says NAHB Chief Economist David Seiders,  “I believe the numbers indicate that a healthier multifamily housing market is emerging, one in which demand more clearly aligns with supply. The positive outlook for the economy in general, and for job growth in particular, means that the news for multifamily housing should continue to be good.”

The MMI is based on a quarterly, nationwide survey of multifamily builders and property owners who are asked a series of questions about current market conditions as well as their expectations for the next six months. Survey answers are assigned numerical values to calculate two separate indexes, one tracking demand and the other tracking supply. The scale is from 1 to 100, with a rating of 50 generally indicating that the number of positive responses is about the same as the number of negative responses.

Continuing the previous quarter’s trend, all classes of rental apartments showed gains on the index gauging demand in the fourth quarter of 2004. The biggest increase in demand was reported for Class B apartments – the mid-range rent category – which jumped 8 points from a year ago to its current index value of 50.8. Demand for luxury units rose 5 points during the fourth quarter of 2004 over the previous year’s fourth quarter, while demand for low-rent communities rose about 7 points during the same period And survey respondents expect that rising trend to continue over the next six months.

The index tracking the number of apartments available for rent continued its downward trend, registering a 13.2-point drop from 69.6 in the final quarter of 2003 to 56.4 in the fourth quarter of 2004. During that same period, the index tracking the volume of calls from prospective renters increased, rising nearly 4 points to 50.0, up from 45.9. The current average vacancy rate for rental apartments is 7.8 percent, down from 8.5 percent in the previous quarter.

On the supply side, market-rate apartments showed the biggest gain, with the supply index for that category up more than 4 points to 49.3 for fourth quarter 2004, from 34.7 during fourth quarter 2003. Builders participating in the MMI survey said they expect even greater gains over the next six months. Condos continued to be the strongest category; although the 57.1 index during fourth quarter 2004 is down from the 59.5 reported a year earlier, any value above 50 reflects market strength.