Is it time to buy US property?
It seems that the US house prices are at a fork juncture. Overall sales have dropped in July, after four months of increasing. The explanation expounded by the real estate “experts” is a combination of, too few houses available for sale on the market, and higher prices that have risen around 5% compared to last year. This has resulted in less choice for buyers and the absence of attractively cheap prices.
The Western US is the only region that saw sales increase and the average home price was at around US$ 350,000. The North East averaged around US$ 285,000, the Midwest around US$ 195,000 and the south East around US$ 215,000. Continue reading “Is it time to buy US property?”
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E-COMMERCE IMPACTS TRADITIONAL RETAIL BUSINESS
The war of attrition between e-commerce and traditional retailing business just got bloodier.
Macy’s, the famous US department store chain is closing down 100 stores, which represents 15% of its total stores. Other US retailers are also closing stores by the hundreds. Walmart, the biggest, will shut down 450 stores. So far this year, some 44,000 retail employees have been laid off. A good part of this is due to heavy competition from the Amazon e-commerce machine.
Walmart just paid US$ 3.3 Billion to buy jet.com, an aggressive e-commerce retailer, to counter Amazon and expand its e-commerce market share, which is presently at the US$ 12.5 Billion compared to Amazon’s US$ 80 Billion. (Walmart’s total sales are US$ 482 Billion).
This represents a structural change in the US market, which will, sooner or later, impact commercial real estate and pull it down. Ergo, don’t expect US commercial real estate booms in the foreseeable future.
However, real estate is a long-term investment and, as long as landlords curb their enthusiasm and greed, to accept a theoretically realistic return of 5%, they should weather the coming storm – provided they had bought their properties prudently, i.e. not paid top Dollar at the cycle peaks and with borrowed money.
As all US trends eventually spread throughout the world (usually over a 5 – 15 years’ span), it would be wise for the rest of the world to prepare for the conquest of e-commerce over traditional retail space.