According to the FTSE NAREIT PureProperty Index Series property values across the US increased by 0.4% in February. The PureProperty Index Series was launched last year to provide a daily measure of US real estate price and total returns at the level of both property (unlevered) and equity investments.

Brad Case, NAREIT’s senior vice president for research and industry information, noted that February was marked by “a marginal increase in property values, even though we saw a marginal decline in total returns for REITs.” Case went on to comment that the reason for the disconnect between REIT returns and property values is that REITs borrow money to invest in their properties and have to make payments on that money.

The PureProperty Index Series showed that the strongest growth areas in February were seen in the South, with a month-on-month increase of around 0.75%. The Midwest and West also performed well in February.

As renting is becoming more and more popular in the US, renters are now moving out of the confines of metropolitan areas with their high rise buildings and fast pace of life and into single-family homes in the suburbs.

According to a report from New York University’s Furman Center, there were almost 22 million more people in rented accommodation in the US in 2014 than there were in 2006. The report goes on to conclude that the majority of this growth was due to an increase in suburban renters. In major cities, the number of renters increased by nine million between 2006 and 2014. By comparison, the number of renters in suburban areas increased by over 12 million over the same period.

According to analysts, lower and middle income residents are being pushed out of the increasingly expensive downtown areas and forced into the suburbs. Laura Bailey, managing vice president of community finance at Capital One commented: “The story really is that the pressure in the market is growing. It may have started in the cities, but it’s moving further out”. This is evidenced by the fact that the median rental costs in principal cities, when adjusted for inflation, grew 5% from 2006 to 2014, compared with 2% for the surrounding suburbs.

In some metro areas the difference in rental costs was even more noticeable. In Washington, D.C., the median rent in the city, adjusted for inflation, grew by 27% from 2006 to 2014, while in the suburbs it only grew by 8%. In New York, the median rent in the city grew by 15%, compared with only 4% in the suburbs.

The authors of the report say that the growth in suburban renting underscores the need to build more housing in a wide range of different areas and not just pricey downtown areas of large metros. Ingrid Gould Ellen, faculty director of the NYU Furman Center commented: “As demand for renting continues…the suburbs need to make building rental housing easier”.

Two of the most important indicators of the health of the global housing market are the Knight Frank Global House Price Index and the Economist House Price Index. With both of the latest versions reporting positive growth, the picture is looking good for the global housing market.

Watching the US

The Knight Frank index reports an increase in prices of 2.7% in the year to September 2015, with 82% of the 55 housing markets tracked reporting positive growth (up from 75% last quarter). Anton Tardif, CEO of specialist property investment company Roche, comments,

“The Knight Frank index is always a reliable indication of the health of the real estate market around the world. This quarter the focus is very much on the likely US rate hike and its impact – both on the US housing market and on those currencies pegged to the dollar. US prices have increased by 4.9% on average in the year to September 2015, with the stable market attracting investors from around the globe.”

Buy-to-let opportunities in the US, such as Circle Oaks Village, 20 minute from Charlotte in North Carolina, exemplifies why investors are so keen to be part of the US market. The fully refurbished and immediately tenanted properties are available from $88,224, with minimum 18.8% NET per annum assured for 5 years.

Economy watch

As the world’s largest economy, the performance of the US and its housing market is of huge global significance. According to CNN Money, the US economy is currently worth $18.1 trillion. The next biggest is China, at $11.2 trillion. But the CNN projections show the US streaking ahead over the coming five years, increasing to $22.5 trillion by 2020, compared to China’s projected $16.2 trillion.

Germany is also facing significant growth, according to the CNN Money data, with its economy tipped to grow from $3.4 trillion in 2015 to $4.1 trillion in 2020. The Knight Frank House Price Index also shows positive news for Germany, with house prices up 4.7% in the year to September 2015.

It is this European residential real estate market that will bear watching over the year ahead, according to Savills, with foreign investors contributing to what is predicted to be a record fourth quarter, with European turnover reaching €234bn by the end of the year.

Rents are also due to grow, according to Savills, with increases of between 2.5% and 3% over the course of 2016. The figures make investing in strong European markets such as Germany particularly attractive. At Stadtpark Steglitz in Berlin, buy-to-let apartments are available to invest from €153,670 with up to 5.6% yield and excellent capital growth expected.

The second opinion

The news from the Economist House Price Index confirms the positive tale. The data shows global prices rising at a median pace of 4.7%. Of the 26 markets tracked, prices are falling in only five of them. With so many countries experiencing positive growth, 2016 could shape up to be a bumper year for the global property market.

For more information about investing in buy-to-let properties in top global locations such as North Carolina or Berlin, contact Roche or call +44 1865 202 700.