What a strong US economy means for your investment

The word from pundits is that the US is retaking its place as the global engine of economic recovery with a growth rate above 3% predicted for 2015. This would be its best performance since 2005.

A stronger American economy, and a gradual relaxation in mortgage lending criteria, mean more buying power for Americans purchasing homes. And consumer confidence is returning. This allows YDL’s flipping model to come into its own as we purchase, upgrade and sell houses to an improving market.

US Property Market

Although national home price growth has tapered somewhat, it still grew by 5% last year, according to Corelogic (Dec 2014), with home prices still 13.6% below the April 2006 peak. They believe that prices will be up by 4.8% a year from now as continued economic growth fuels buyer confidence. Buyers are demonstrating an increased willingness to purchase a home and invest in their future.

Atlanta Property Market

Atlanta prices grew by 6.3%, which is still around 9.5% below its peak at the height of the bubble. Prices have been helped partly by the tailing-off of “distressed” sales which followed the 2008 financial crisis.

It’s our view that growth rates will remain in single-digit territory this year, with the pace of growth slowing down somewhat. The reason for this view is that market fundamentals remain strong. Low stock availability and a growing population conspire to ensure that property in Atlanta is a sound investment.

The Southeast Region of the US, of which Metro Atlanta is the largest economy, is the 5th largest economy in the world with a GDP of $3.4 trillion, around 22% of the nation’s GDP. The region has 25% of the nation’s population, and 52% of its net migration.

But the property crash limited new supply. Although the pace of new construction is increasing, this imbalance has led to demand currently outstripping supply. The number of properties on the market represents approximately 3.6 months’ supply, which means a strong seller’s market (more than six months’ worth of properties becomes a buyer’s market).

Buyers are eager to purchase houses requiring little to no renovation. These properties typically spend less than a month and a half on the market, and frequently sell for as much as 95% of their asking price.

“Real Estate is always good” – Donald Trump

All in all, conditions are favourable for South African investors wanting to invest in offshore property as a rand hedge.

As the seller’s market in Atlanta supports YDL’s “flipping” programme, we will intensify our efforts during 2015. But the recent boom in the Atlanta property market has affected the way we work. A recovering economy means that there are fewer distressed properties on the market. This has changed our model, in that we’re less likely to buy and refurbish distressed properties. Rather, we’re more likely to purchase properties at market value or just below, and add substantial value through the rehabilitation process.

Exit Strategy

With investment comes risk. The key is to mitigate that risk. Working with a knowledgeable team with specific experience in the specific area of your investment means that you have peace of mind knowing your investment is in good hands. Since investment in the Atlanta property market is our niche, we can confidently offer you that security.

Further, because of the high demand and relaxed lending criteria, turning a property around is a relatively short process, so the risk is measurably reduced. Shortened turnaround times offer increased flexibility, allowing us to adapt easily to market fluctuations.

Niche expertise at work for you

At YDL we continue to leverage the experience we’ve built up over a number of years in this market, deepen our market knowledge, and strengthen our presence in Atlanta, in particular by building further capacity through local operating partners.

We are confident that a 20% preferred return on your investment is achievable. Call us today on 011 465 7356 to find out why that’s true, and how we structure your investment to work for you.

Warm regards,