Global Property Weekly Overview (26.01 – 01.02. 2009)

Global financial-economic crisis does not slow down and continues to affect property markets all over the world. The last week did not differ much from the preceding ones. A decline was registered on some markets. It may bring profit to several market actors; others will be supported by the government.

Law against crisis

New legislation, which will soon come in force in Dubai, is supposed to grant extra protection to off-plan property buyers. In compliance with the first law, developers will be obliged to own the building land and complete at least 20% of construction works before they are allowed to sell off-plan.
The second law says that the payment plan must be linked to construction stages, and down payment for property cannot exceed 20% of the overall purchase price.

Similar measures are going to be introduced in Cambodia. According to a new law, local developers will be obliged to pay 2% of the project cost to the National Bank of Cambodia. This money will be spent on compensations for the buyers in case a project will not be realized. Besides that, developers must open a housing development account to enable buyers make payments through the bank.

The present measures are, first of all, aimed on protecting the property buyers. Meanwhile, in Israel regulations, focused on fighting against the crisis in the property and construction sectors of the national economy, were approved.

Particularly, Israeli government will guarantee 10% of the credit needed for contractors to build housing projects and ease bureaucratic procedures (for receiving building permits) in order to boost construction and avert apartment shortage. Besides that, in some cases local authorities would suspend land-use fees and the value-added tax on rental properties, which may save contractors millions of shekels.


Unambiguous rent

According to a research, conducted by the large Spanish property-dedicated portal Fotocasa.es in cooperation with the IESE business-school of Navarra University, the average rental price in Spain fell by 7% in 2008, year on year. The average monthly rent is 8.98 euro per a square meter, nationwide. The type of rental property most in demand is a flat of 60 square meters, the payment for which amounts to 539 euro a month.

Rental prices are growing in Germany, where they are considered to be among the lowest in Europe.  According to IVD vice president Jürgen Michael Schick, a sharp increase of maintenance fees, however, has resulted in rental cost growth. National heating and water fees have increased by 38% and 20% respectively.

The highest national rental price – 9.70 euro per a square meter of a 70-meter post-war apartment, was registered in Munich. The city is followed by Stuttgart, where the present figure worked out 8.70 euro per a square meter. Meanwhile Berlin continues to be the cheapest first-tier German city to rent a flat. The rental price here amounts to 5.90 euro per a square meter.


Hard fate of commercial property

According to a new report from Irish commercial property consultants HWBC, a dramatic slowdown was registered in the Dublin office market in 2008.  Average rents fell from 646 euro per a square meter in 2007 to 592 per square meter in Q4 2008. James Mulhall, head of office agency at CB Richard Ellis. Mulhall expects rental prices to fall by 20% more in 2009.


According to CBRE, the world financial crisis resulted in a large number of projects being suspended and a commercial vacancy rate growth in Hungary. Construction of more than 300 thousand meters of office space are put on hold, vacancy rate in logistic complexes had reached 16.3% in the end of the last year and is expected to increase in 2009. The main reason for that is a decline of foreign (especially west-European) investment volume.

According to Jones Lang LaSalle experts, sales volume of U.S. commercial properties has declined by 70% in 2008, year on year, and has worked out $125 billion. Analytics expect the present figure to fall by 20-25% more in 2009. The experts think that investors will continue to abstain from buying, and the sales will not increase until favorable market conditions are established.  


Market seesaw
 
According to National Bank of Kuwait, the total volume of property transactions fell nationwide by 33% in 2008, year on year. The decline has most significantly affected the residential property market segment, where the sales volume and the number of deals in 2008 have fallen by 42% and 41% respectively. The overall number of property deals in 2008 worked out 1.9 billion Kuwaiti dinars ($6.58 billion).

According to preliminary data published by Statistical Bureau of Finland, the rate of price decline on both first and second homes markets has grown in Q4 2008. Housing prices, in comparison to the preceding quarter, have decreased by 3.8% nationwide, by 3.5% in Big Helsinki region and by 4% in other regions of the country. In year on year comparisons, the number of property deals declined by 40% nationwide and by 50% in the Helsinki metropolitan area.

The worsening of global economical conditions has impacted Bosnia I Herzegovina property market, which had been experiencing a two-year-long price increase. The overall number of property deals, concluded in Q4 2008, fell by 50%, year on year, while prices have decreased by 20-40% in different parts of the country. In Sarajevo suburbs, one may find apartments priced 600 euro per square meter.

However, the last week has brought positive news and forecasts for some of the property markets.

According to data presented by the United Nations Conference on Trade and Development, direct foreign investment into Brazilian property market has increased by 20.6% in 2008, amounting to $41.7 million, up from $36.6m in 2007. Brazil is getting prepared to host the 2014 football World Cup and makes claims to hold the 2016 Olympic Games, which has a positive impact on the construction industry. Brazilian market has a good potential and is considered to be quite favorable for long-term investment, the experts claim.

Residential property prices in Libyan capital, Tripoli, showed an average increase of approximately 60-70% in 2007-2008, reaching 150% in certain areas. It is explained by growing demand, which is accounted for an increase of citizens’ income and increment of their purchasing ability. Besides that more and more national properties are being bought by foreigners.

Some experts urge investors to purchase property on Asian markets, because they show a stable price and are capable to recover from the negative impact of the financial crisis quickly. Robert Lie, Hong Kong-based Asia head for Dutch property investment firm Redevco, claims that Hong Kong and China are the most profitable markets to invest in. Tim Murphy, founder of Hong Kong-based IP Global also believes in good perspectives of the abovementioned markets. Relatively high rental rates may grant a yield of 4-6% if you buy a property for $2-5 million Hong Kong dollar ($250-650 thousand). Other experts highlight more volatile, faster correcting markets such as Singapore, Japan and Indonesia.