Detroit ranked in USA’s top turnaround towns

Photo: Bernt Rostad

Detroit made headlines this year when it became the largest US city ever to file for bankruptcy, but while economic doom and gloom appeared to be in the air, the housing market has been making steady improvement.

Indeed, house prices in Detroit have been steadily increasing since February 2011, explains estate agent OVG Invest. Then, the median asking price for a single family home in the Metro Detroit area was $84,925, according to figures from the department of numbers. Today, that has increased to $145,650 – a leap of 71.5 per cent.

With reports widely circling about the number of vacant properties in the city - 78,000 to be exact - house hunters may be surprised by Realtor.com’s high ranking of Detroit, but agents have been enjoying a recovery for some time.

“To be honest, I’m not surprised to see Detroit listed in the top 10 of the Turnaround Towns Report,” Rebecca Smith, Investment Director for OVG Invest, exclusively tells TheMoveChannel.com.

“During the past 5 years more than $10 billion has been invested in Detroit by private business,” she comments. “Many of downtown Detroit’s disused and derelict buildings have been turned into high end hotels and first class apartment buildings.”

Over $1 billion has been spent on re-developing Detroit’s riverfront alone, she continues, while major infrastructure developments are in the pipeline, including the M1 Rail link in downtown Detroit.

The investment prospects are positive for landlords too.

 “Demand for rental property in Detroit is the highest it‘s been in years,” she adds. “In the last 6 months rents have increased by 16.78% and landlords expect them to rise by 34.2% by the end of 2013.”

Indeed, despite the city’s rising property prices, houses are still 23% undervalued, according to Fitch Ratings, opening up the opportunity for investors to capitalise on low prices and high yields.

Demand from investors has helped the number of properties on the market fall 27.1%, from 19,371 in July 2012 to 14,131, last month, according to Realcomp II.

Photo: Sagittariuss

“It's all being driven by the large number of new jobs being created,” says Rebecca. “We’re now seeing people moving back into the city. Affluent professionals and graduates are relocating from other states.”

Population growth? Rising house prices? Falling inventory? With the motor industry reporting positive improvement too, Motor City may be bankrupt but its housing market appears to firing on all cylinders - and driving firmly along the road to recovery.

“Make no mistake, there is a good opportunity for investors in Detroit to take advantage of low house prices and high rental yields,” Rebecca concludes.

But as is always the case, she notes, it’s important for investors to do their due diligence and use a broker or agent with a good track record.

She advises those looking to buy in the city: “Before they take the plunge investors should insist on talking to some of an agent’s genuine clients who have bought and owned property in Detroit for at least a year. Ask them if they are getting paid the rental yield they were promised, if the property was fully renovated and if they’ve had any significant problems.”

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