A few miles north of Houston in Texas, builders, cranes and real estate masterminds are busy laying the foundations for some of the most ambitious property developments in the country.
A 385-acre plot of land just a 20-minute drive from Houston international airport will soon be the new corporate campus for ExxonMobil, one of the world’s largest publicly traded oil and gas companies. When it is finished next year the site will house 10,000 workers – and residential hubs such as The Woodlands and Springwoods Village are set to benefit from thousands of new homes. Houston has long been the energy capital of the world but, it seems, the city’s property developers have only recently tried to keep pace.
In The Woodlands, which was established in 1974 by the oil magnate George Mitchell and is home to the headquarters of Anadarko Petroleum Corporation, prices have risen 15 per cent in the past year, according to the Houston Association of Realtors.
Sotheby’s International Realty is selling 18 Netherfield Way, a 10,575 sq ft Mediterranean-style property in a golf-course community with five bedrooms, a games room, gym and outdoor pool for $6.25m. Construction has recently begun on 250 high-end apartments in Springwood Village. And at Woodforest, 12 miles north, Gracepoint Homes will soon begin construction on The Forest, a development of 350 homes.
The recent upsurge in property activity in and around Houston reflects the stable growth the city has enjoyed in the oil and real estate markets over the past five years – and the shortage of decent housing. “Houston did not experience the crash that some markets around the US did following the economic downturn in 2008,” says Chaille Ralph, chairwoman of the Houston Association of Realtors. Prices dipped slightly and subsequent growth was slow for a few years, but in recent years growth has begun to accelerate.
During the past 12 months, prices in the Houston metropolitan area have risen 11 per cent – and are up 29 per cent on what they were in 2006, before the US housing crisis and global downturn began, according to Savills. The average US house is still 10 per cent down on its price in 2006.
The Greater Houston Partnership, a business advocacy organisation, says Houston did not experience a housing bubble or crash in the 2000s because the authorities tightened lending, curtailed house construction and avoided the levels of overbuilding that led prices to plummet elsewhere. In Miami, house prices dropped 40 per cent in the crash; in Houston, they fell just 2 per cent.
The GHP cites the expansion of the energy sector as key to the recent boom. “The oil sector really started to take off in the middle of 2010,” says Patrick Jankowski, an economist and vice-president of research at the GHP. The price of Brent crude oil has risen 177 per cent over the past five years, amid concerns over the Arab uprisings and the gradual recovery of European and US economies. “In June of 2011, there was actually a temporary glut of housing in Houston,” says Jankowski, “We had the equivalent to a 7.9-month supply. In other words, at the monthly sales pace it would take 7.9 months to sell all the homes in inventory.”
However, because the oversupply was small compared with elsewhere in the US, Jankowski says it did not take as much time to recover. “We reached a balanced market, defined as a six-month supply, in the fall of 2011. But today we have a 2.6-month supply of housing, which makes it a seller’s market. And none of this would be occurring without the strong demand for housing from workers in the energy industry.” Houston was the first of the 20 largest US cities to recapture all the jobs it lost during the recession, according to the US Bureau of Labor Statistics.
Homebuilders are responding. In the first six months of last year, the Houston metropolitan area logged 25,050 homebuilding permits, more than any other US metropolitan area.
The Energy Corridor is a popular commercial and residential area west of the city centre which is home to the headquarters of several energy companies including BP, ConocoPhillips and Shell. In this area 4.5m sq ft of office space is under construction, as are complexes with hundreds of new apartments. At Cross Creek Ranch, a 3,200-acre development on the city’s western fringe, 5,500 new homes are planned, priced between $250,000 and $900,000. About one-third of the buyers are newcomers with jobs in Houston’s energy, healthcare and other growing industries, according to the project developer Johnson Development Corp.
Family homes are more in demand than any other property type, says Tom Anderson, of Martha Turner Sotheby’s International Realty.
He adds that the high rate of employment – due to the need for specific technical skills in the energy sector – has given Houston a cosmopolitan feel. “Our sales people talk regularly to interested parties from China, Europe and South America, particularly wealthy Mexicans. They want to live here and know they can make a bit of money,” he says.
Does this mean Houston is headed for a housing bubble? A report by the real estate website trulia.com recently listed the city as one of 19 US metros where home prices are overvalued. However, the key to Houston’s success so far, says Jankowski, is high income levels. “The energy sector is important because it’s one of the best-paying industries in the city. In the third quarter of 2013, the average weekly wage in oil and gas extraction was $3,414. The average weekly wage in oilfield services $2,056. At those wage levels, there are thousands of houses that energy workers can afford,” he says.
● Houston is the fourth-largest city in the US, with 6m people living in Greater Houston
● Houstonians pay no state or local income tax, giving them one of the smallest tax burdens in the US
● The city has a humid subtropical climate. In the summer temperatures can reach more than 40C
What you can get for …
$250,000 A three-bedroom house in Cross Creek Ranch
$600,000 A four-bedroom family home with a pool in Memorial, near the Energy Corridor
$2m A five-bedroom house in The Woodlands, with golf course access