The European Central Bank (ECB) kept interest rates on hold at 4% this week. However, the rollover is generally considered to be a pause before a series of interest rate rises that could see rates ending up at 4.5% by the end of this year.
The economy in Europe is returning to a period of solid growth, with expectations of 2.7% GDP growth this year. Inflation, at 1.9%, is below the ECB’s target rate but only just. Until now the Bank had been following a lax monetary policy with interest rates down at 2% until the end of 2005 in an attempt to stimulate the economy.
Tony McGough, head of forecasting and the economy at Jones Lang LaSalle said: “Across the continent we have seen financial costs rising for investors since the start of the year. Whilst there has been no extreme revision to the cost of capital, the general upward pressure has led to pressure on some of the more highly geared property investors in the market. To date equity purchasers have been filling the space in competitive bidding on transactions and continue to drive pricing levels. We expect the main fundamentals for property to remain healthy in the long run.”
Sofia underground expansion
The Sofia city hall has launched a tender to pick the company that will build the first extension of the city’s only underground line.
The first extension of the line will link the Nadezhda residential district with the Lozenets neighbourhood, via the central train station and downtown Sofia, and will have seven stations.
The extension will be 6.5km long, with construction due to start next year, and completion in 2011.
European Union accession aid funds would cover the biggest chunk of the project’s costs, (85%), with the remaining money provided by the Bulgarian government from a European Investment Bank loan.
A shortlist of potential construction contractors will be compiled by the end of November and a winner picked in January.
The second extension is planned to link the Mladost residential district to the Sofia airport, with work scheduled to start in 2009.
Sofia's only underground line has eight stops between Lyulin district and the centre and is currently being expanded to Mladost district, with six more stops due for completion by end-2008.
When completed, the Sofia underground will be 56km long and will have 48 stops.
Brasov Airport in Romania to open by end-2009
The Romanian authorities have announced that Canadian company Intelcan has joined with Brasov local government in a project to build an international airport in Brasov, one of Romania’s leading cities. The airport will have a capacity of 1m passengers annually and will give a further boost to the tourism industry in Transylvania. It is reported as ‘almost certain’ that either Easy Jet or Ryanair will provide services to the new airport.
Tunnel between Tallinn and Helsinki proposed
Two political adversaries met on 29 June to discuss a dream-project of connecting Tallinn and Helsinki by tunnel. Estonian economy minister Juhan Parts and Tallinn Mayor Edgar Savisaar, who stepped down as economy minister in March, have been bitter political rivals in the past, but the two set aside differences to hash over a feasibility project for a tunnel that would connect the Finnish and Estonian capitals.
Though the prospect of it ever becoming a reality is remote, a Tallinn-Helsinki undersea tunnel would potentially replace the lucrative ferry business that currently handles cross-gulf traffic.
Bulgaria to spend €500m on road repairs in 2008
Bulgaria will spend €500m on repairs to its road network in 2008, double the amount allocated for this year, according to the regional development minister, Assen Gagauzov.
The money will be used to restore between 2,500 and 3,000km of roads. Gagauzov made the announcement when he opened a 4km road stretch linking the village of Zlatar to a neighbouring monastery, some 20km south of Shumen in western Bulgaria.
Worldwide News
Over 2,000 new flats vacant in Doha
There are over 2,000 newly-built, high-end apartments currently unoccupied in Doha, Qatar, because landlords are asking for too much rent.
However, rather than reducing the rental prices, owners are reported to be locking up the flats and leaving them empty.
An official at the Qatar Chamber of Commerce and Industry (QCCI), Nasser Al Mir, said landlords were keeping the apartments empty because they had invested huge sums of money so the returns from low rentals would not help them recover their costs.
Al Mir also said that individuals and companies in Qatar were still choosing to invest in real estate because the risk perception with the local stock market was high and bank deposit rates continued to be low. “The booming property market promises higher returns”, he said.
Among the companies investing in Qatar’s real estate market are insurance providers as they are quite wary of stocks. Al Mir said he was not optimistic that the rent situation would ease even in two years time.
“The problem is that more and more people are building expensive villa and apartment complexes”, he said.
Meanwhile, there is still a drastic shortage of property in the low to medium price bracket and Al Mir said that even if 8,000 low and medium-end apartments were constructed, the housing problem would not be resolved.
Agreeing that high rentals were the major contributor to the rising cost of living in the country, he said a large number of expatriates were sending their families back. Qatar is being turned into a male-dominated society as the number of single workers is increasing by the day. Since single workers tend to remit a large part of their savings home, this will probably have a negative impact on the national economy as well, Al Mir noted.
Investors targeting Beijing industrial property
Beijing ’s industrial property market is attracting increasing interest from foreign buyers, in part due to favourable government policies, according to DTZ.
“This (investment) contributes to Beijing’s economy so there are favourable government policies compared to restraining measures in the residential sector”, Peter Zhang, a senior manager at DTZ Beijing's industrial division, told the China Daily.
From January to May 2007, Beijing’s economy continued to improve, with fixed-asset investments in the city topping £7.2bn, up 15.3% year-on-year. The total value of industrial exports hit £4.6bn, an annual increase of 36.7%.
Large corporations are opting to purchase land and build factories in industrial zones and logistics parks, while the demand for standard industrial facilities, such as factories and warehouses, mostly comes from smaller companies, according to DTZ research.
Foreign investors have recently accelerated expansion into industrial property, given the nation’s strength as a manufacturing hub and its booming logistics industry.
Australia's largest listed industrial property firm Goodman - formerly known as Macquarie Goodman - the world’s second-largest industrial property developer, is planning to pour $2-3bn into China over the next 3-5 years, mainly in Beijing, Shanghai and Guangzhou, according to David van Aanholt, CEO of Goodman Asia-Pacific.
However, according to DTZ, the combined total of standard industrial sites in Beijing reached 1.04m sqm at the end of June, but 384,000sqm of it was vacant.
Construction boom fuelling economy in Singapore
A construction boom has pushed Singapore’s economic growth to its fastest rate in two years, according to government estimates released this week. In the three months to the end of June, Singapore's economy expanded by 8.2% per cent from a year ago as construction grew by 17.9%.
Singapore is building two casino resorts and a new financial centre on the southern edge of the city-state. Property developers are constructing new luxury apartment blocks to accommodate those attracted by the growing private banking industry.
The second quarter economic performance was the best since the third quarter of 2003 when Singapore rebounded from a downturn caused by the severe acute respiratory syndrome (SAR’s) outbreak. Analysts said that the government was likely to revise upwards its full-year forecast to 6-8% from 5-7%. The economy expanded by 7.9% last year.
Lee Kuan Yew, Singapore’s elder statesman, recently predicted that the city-state was poised for a ‘golden age’ over the next five years owing to its transformation into a private banking and gaming centre.
However, analysts warned that the impressive growth could pose economic challenges, including higher inflation. That could force the government to increase the value of the Singapore dollar and a stronger currency would affect exports.
Panama builds on economic boom
President Martín Torrijos of Panama has unveiled what could become one of the biggest investment projects in the country's history, with a value of up to £5bn.
The creation of an urban centre the size of central London on the outskirts of Panama City is the latest sign of an economic boom that has invited comparisons between Panama and bigger international business centres, such as Dubai.
The 1,800-hectare development will be situated on a former US air force base and will combine industrial, retail and residential properties and its value, including all finished infrastructure and buildings, could be worth up to £5bn. It will also include a golf course, schools and a hospital.
The site’s proximity to the Panama Canal, the Pan-American Highway and the air-base’s 3.5km runway gives it unprecedented access for individuals and companies.
Other plans include expanding the canal, which connects the Atlantic and Pacific oceans and is one of the world’s most important waterways. Panama took full control of the canal in 1999 and the investment in three new locks and physical widening will facilitate the passage of huge cargo ships, known as post-Panamax vessels.
International and local companies are pouring billions of dollars into Panamanian residential property developments, in large part to capitalise on the peak of interest shown by US and Canadian retired people and second-home buyers.
In addition, deals worth £7.25bn have been agreed recently to build two oil refineries and the US Congress is expected to approve a trade agreement soon between the two countries.
Mr Torrijos said recently that the refineries, canal expansion and trade pact are the three motors that could propel Panama towards developed country status. Panama's economy grew 8.1% in 2006, and economists believe it could grow more than 10% this year. Inflation, meanwhile, is subdued and lending rates are among the most competitive in the western hemisphere.
Panama has begun to attract significantly higher numbers of investors from less stable neighbouring countries such as Colombia and Venezuela and analysts expect that trend to continue.
