Why it makes good business sense to invest in property in Atlanta
When the YDL Property Investments team initially investigated investment opportunities in the United States, we had a number of criteria that the perfect location would need to meet. We made several visits to America, and consulted with many experts in the property arena, from real estate agents, to builders, architects, and property lawyers to ensure we had a comprehensive understanding of potential cities on which to focus.
Just a few of the questions we asked included:
- What are the economic drivers and growth rate forecasts for the region and the city?
- What are the property market supply and demand drivers?
- Is it a buyer or seller’s market?
- What are the median house prices and the projected house price growth rates?
- What have the historical property market trends revealed about available inventory in the area?
- What is the current inventory like? What are the new housing construction statistics?
- What is the expected household income growth?
- What is the affordability of home ownership in the area?
- What are the average rental rates in the area, and what are the expected rental growth rates, and yields?
- What are the interest rate expectations in the mortgage market?
- What are the future development plans for the area – do we see growth or stagnation?
- What is the ease of doing business in the area?
- Is there a strong business community, with a number of US corporate head offices in the area?
- Are more businesses expected to relocate to the city?
- What is the availability of well-qualified, talented employees?
- Is the job market growing?
- Is the population growing at a steady rate?
- What is the cost of living, and how does it compare with other cities?
- Is the area safe?
- What amenities are available for residents and what is the public transport system like?
- Are there good schools in the area?
- Is there a leading university in the area?
Atlanta, the Georgia state capital, stood out as city that offered the best opportunity for real estate investment.
An Overview of the Atlanta Metropolitan Statistical Area (MSA)
The Atlanta Metropolitan Statistical Area (MSA) is one of the fastest growing metros in the U.S. and has the 10th largest metro economy in the U.S. as measured by Gross Metro Product (GMP). It covers approximately 22,592 square kilometres and is divided into 29 counties. It is the business capital of the south-eastern United States, and is home to 5.9 million people, and more than 150,000 businesses, including the head offices of 15 Fortune 500 companies, 26 Fortune 1000 companies, and 220 of the nation’s fastest-growing private companies. These include the headquarters of major US companies like Coca-Cola, Delta Air Lines, SunTrust Bank, CNN, AT&T, Home Depot and Sony.
The area continues to attract business professionals and families, who are drawn to the business-friendly environment and low cost of doing business, and living. The area’s exceptional quality of life offers residents access to an abundance of arts, culture, sports and nightlife. Atlanta’s growing population benefits from great neighbourhoods, school systems, and universities, good infrastructure, and solid appreciation of their real estate investments. According to the US Census Bureau, Atlanta is projected to be the 6th most populated metro area with a projected 7.3 Million strong population by 2020.
|Metropolitan Median Prices for Atlanta – Sandy Springs – Marietta, GA||National US Median Prices for existing single-family homes|
|Period: Q4 2018
Median Home Price: $216,100
Percentage Change: ↑ 8.60% from the fourth quarter of 2017
Period: Q4 2018
|Source: NATIONAL ASSOCIATION OF REALTORS®.|
Median Sales Price of Existing Single-Family Homes for Metropolitan Areas
|Source: NATIONAL ASSOCIATION OF REALTORS®.
|2016||2017||2018 p||2017.IV||2018.I||2018.II||2018.III r||2018.IV p||Q4-Q4 %Chya|
|(Not Seasonally Adjusted, 000s)|
|Atlanta-Sandy Springs-Marieta, GA||184.5||198.5||219.9||198.9||204.5||228.8||224.1||216.1||8.6%|
An Overview of the Atlanta Property Market
Atlanta remains one of the healthier real estate markets in the United States. In 2019, PwC’s Emerging Trends in Real Estate® United States and Canada report ranked Atlanta 11th out of the top 20 markets for real estate investing. Its attractiveness is buoyed by its strong ability to attract new residents; a labour force participation rate that is well above the comparable U.S. rate; projected 2019 employment growth rates that are expected to be well above the national growth rate; the need for more affordable housing to meet demand; and a higher percentage of the metro’s population falling under the age of 44.
Home prices in Atlanta have risen steadily over the past six years, with a post-recession price-surge of roughly 25 percent over the past three years. The Atlanta Realtors December 2018 Market Brief revealed that the median price of a home in metro Atlanta had risen 7.6 percent to $234,900.
Demand for housing in the metropole is not keeping pace. The area is steadily attracting more millennials, who either can’t afford to buy, or who simply favour renting homes instead. This imbalance between supply and demand results in home prices rising more slowly. As there is an increasing demand for affordable rentals, buying a rental property in the Atlanta housing market will make for a smart investment in 2019.
In addition to prices rising more slowly, more inventory has become available in more cities, which has resulted in the market moving closer to “neutral” territory, which means buyers do have the chance to make great deals. The Federal Reserve Bank of Atlanta noted that the area’s housing inventory totalled 13,315 units in December 2018, an increase of 12.7% from December, 2017. Its new listings totalled 3,015, up 18.7% from December, 2017 and down 25.8% from the previous month. The month’s supply over a 12-month period decreased to 2.7 months.
The U.S. Department of Housing and Urban Development August 2018 report entitled ‘Atlanta Metropolitan Area Series – Focus On: Fulton and DeKalb Counties, Georgia’ confirms that the metropole’s sales is currently balanced, with reduced levels of home construction and increased net in-migration contributing to the absorption of excess inventory since the early 2010s. It revealed that as of August 1, 2018, the overall sales vacancy rate was estimated at 2.1 percent, down from 4.6 percent in April 2010. It estimates that there is demand for an additional 14,100 new homes, accounting for 19 percent of total demand in the Atlanta MSA, and that the 3,475 homes currently under construction will satisfy some of the forecast demand.
The focus report also looked at the rental housing market in the metropole and revealed an estimated vacancy rate of 6.0 percent, down from 13.4 percent in April 2010. Strong growth in renter households has generally outpaced construction of rental units and the conversion of sales units to rental use since 2010. There is an expected demand for 19,450 new market-rate rental units over the next three years, representing 64 percent of demand in the Atlanta MSA. The 13,150 rental units currently under construction and the 4,025 additional units expected to be completed during the next 2 years will satisfy most of the demand.
For more useful historical insights into the Atlanta real estate market read previous Atlanta REALTORS® Market Briefs.
Image: New home construction
New home construction relative to number of newly employed workers
|ratio: 3-year change in employment to total permits||3-year change: total non-farm employment||3-year average annual employment growth||3-year change: total permits||ratio: 3-year change in employment to single family permits||3-year change: single family permits|
|Source: National Association of REALTORS®.|
Why Atlanta is appealing to South African property investors
Atlanta’s suburbs and metro area have seen constant growth over the past decade, and are bolstered by continued job growth and a strong local economy. For those considering foreign property investment, Atlanta offers prices that are more affordable to South Africans, who are purchasing in Rands, compared to many other large cities in the USA. This is true for both speculative (buy-renovate-sell) and buy-to-let opportunities.
Future development plans in the area include the building of Facebook’s sprawling new data centre in Walton County about 40 miles east of Atlanta which will bring an influx of new residents and offer more job opportunities to Atlanta locals, as happened when Interface and NCR moved their operations to the area.
There are also at least seven significant projects that are either completed, or in final stages, around metro Atlanta, including two sports complexes, Avalon in Alpharetta, and Pinewood Studios in South Fulton County which adds to the area’s growing movie industry.
Metro Atlanta is in a strong seller’s market for properties below $500,000. Inventory is low, and demand is high. The 2018 ULI Real Estate Economic Forecast (a survey among economists and analysts) predicts Atlanta home prices are expected to rise by an average of 5.3% in 2018, and 4.3% in 2019.
What is the Atlanta BeltLine?
The Atlanta BeltLine is a former railway corridor around the core of Atlanta, Georgia, under development in stages as a multi-use trail. It is a sustainable redevelopment project that is transforming the city.
It will ultimately connect 45 intown neighbourhoods via a 22-mile loop of multi-use trails, modern streetcar, and parks – all based on railroad corridors that formerly encircled Atlanta. When completed, it will provide first and last mile connectivity for regional transportation initiatives and put Atlanta on a path to 21st century economic growth and sustainability.
The Atlanta BeltLine will offer a chance for Atlanta to redefine what it is to be a neighbour, to be a community, to be a region, and to share all that it has to offer.