By Evelyn Robinson, iNews special correspondent

Investors in the Cayman Islands are being tipped that Florida is the next big thing when it comes to property investment.  Foreclosures in Florida are at an all time high, and many home values – especially those in popular holiday areas – have dropped by up to 50 percent since the start of the housing crash. Prices have remained low throughout the recession and, unlike many other parts of the USA, are not showing much sign of recovery – home values are still massively depressed in many parts of the State. The state is seeing two new trends thanks to house prices and home ownership rates continuing to fall.

Foreign individual buyers

The first trend is an influx of foreign investment buyers, mainly those looking for holiday homes or buy-to-let properties. Despite its unusually low property prices, Florida remains a world class holiday destination, each year attracting hundreds of thousands of visitors to cities like Miami and Orlando, and resorts like Palm Beach and Disney World. Holiday-makers flock to the State to enjoy crystal clear waters, white sandy beaches and almost guaranteed year-round sunshine.

Holiday homes

As a result, Florida is making its way onto global investment hotspot lists, thanks to drops of up to 50 percent in property prices in many popular holiday areas. The area is seeing a growing trend for “foreclosed home tours” – trips that are especially arranged for foreign buyers to view a selection of the state’s foreclosed homes. The weakness of the Dollar against many other currencies – particularly the British Pound and the Euro – is adding to the attraction of buying a second home in Florida. Foreign individual investors purchased $41 billion worth of Florida houses and apartments between March 2010 and March 2011, according to the latest figures by the National Association of Realtors.  Nearly 55% of all U.S. residential property sales to foreign buyers were in Florida (between May and November last year).

Corporate investors

The second trend is an increased interest from large corporate investors keen to cash in on the State’s record low house prices. Investment funds and real estate trusts have seen low property prices as an opportunity and have so far bought thousands of foreclosures. These companies are hoping to manage these properties in a similar way to how large real estate hedge funds manage large apartment complexes and commercial buildings.

The Federal National Mortgage Association – otherwise known as Fannie Mae – recently announced that it had sold 699 foreclosed homes in Florida to commercial enterprises. It said that these firms were putting these properties back onto the rental market with a view to finding tenancies for at least three years.

Stabilizing the State

Fannie Mae – a government sponsored enterprise – provides funding to the housing market. In order to help stabilize the U.S property market, it is initiating a pilot programme in which it expects to sell around 2,000 foreclosed family homes. In June, the mortgage giant had a portfolio of around 109,000 foreclosed homes, which is hoping to lighten by attracting corporate and foreign investors.

One such firm that has developed an investment strategy in buying foreclosed homes is private equity real estate firm, Cogsville Group. Its chief executive, Don Cogsville, recently told the New York Times, “Increasingly we’re now going in a proactive way to private banks to talk to them about resolving their own loans so they can clean their own balance sheets and start to become healthy as an active lending bank again.”

Rising cost of living

The situation in Florida is tough. Fannie Mae and its investment companies are hoping to bring stability to the market in order to help local families to once again afford the cost of living. As a result of rising essentials, such as vehicle ownership, buying food and electricity supplies, many families in Florida have struggled. The cost of driving, for example, is at a record high in Florida thanks to rising fuel costs. The cost of getting a car on finance has increased and monthly payments are sometimes difficult to afford. Furthermore, although there is still the ability to compare car loans, getting credit in Florida is now harder; companies that would previously have offered guaranteed quick decisions on car loans are now harder to find and a growing number of people have been priced off the road, the same kind of way they’ve been priced out of their houses. It is for this reason that bringing stability to the region is key for the U.S government, Fannie Mae, and any potential corporate investor.

Opportunity

Investors in the Cayman Islands are best-placed to take advantage of this growing trend. Not only are our buyers in a strong position in terms of foreign exchange rates, but they are also ideally geographically placed – with regular flights to Florida, taking little over an hour, it’s an opportunity that simply cannot be missed.