The rental markets in the Scandinavian countries of Sweden, Finland, Norway and Denmark have all strengthened according to the latest Newsec Nordic Report (Autumn 2007).
The report states that the strong interest in these countries, from international property investors, is persisting.
Sweden accounts for nearly half of the total Nordic property market and Swedish properties remain hot on the international market. “Vacancy rates are falling and rents are moving upwards, especially in the most attractive segments and locations”, said Marie Bucht managing director of Newsec Advice.
“The picture is generally similar in the other Nordic property markets. The economies are strong and there is real force in the rental markets”, she added.
This year is also expected to be a strong year for the Finnish property market. But the total transaction volume is unlikely to be quite as high as the record turnover of €5.6bn in 2006. “In 2006 yields for central offices in Helsinki fell from just under 6% down to nearly 5%. I believe that a stabilisation at this level is taking place that will be sustained during 2008” says Bucht.
The hot Norwegian economy has forced rents to rise markedly in the first half of this year. Vacancy rates, especially for office, hotel and retail premises in Oslo, are very low and rents are reaching new record levels. Interest in Norwegian properties among international investors is rising steadily.
However, yields are now expected to turn upwards during the last part of the year as a result of the rises in interest rates. The rate has been gradually raised from its record low of 1.75% in 2004 to 4.75% currently.
After some political turbulence in Denmark at the start of 2007, the property market has now taken off once again, especially with regards to offices in Copenhagen. The transaction volume may not match last year’s record figure of €8.5bn, but several major property deals are expected to take place in Copenhagen during the second half of 2007. Vacancy rates in most property segments have now fallen to historically low levels and rents are generally moving upwards.
Sofia to expand northward
The Sofia Municipality is ambitiously planning to turn northern Sofia into a cluster of attractive districts with newly built residential areas, sport centres and entertainment facilities.
It is common knowledge that properties in Sofia’s southern parts are considered to be prestigious and prices there are some of the highest in the city. Sofia’s northern parts are attractive for investors interested in industrial and warehouse properties but are not so attractive for home buyers and residential property investors.
However, oversupply in the southern neighbourhoods has forced the issue of a new plan for the development of the so far neglected northern parts.
The new plan envisions that most of the residential developments will be concentrated near Stara Planina. The Sofia municipality will develop public beaches near the mineral springs of Chepintsi and Gnilyane. The municipality is currently negotiating with potential investors in Kubratovo, which will be turned into an eco park.
Atlas Estates investing in Gdansk
Atlas Estates, a company listed on the London AIM stock exchange, has announced the purchase of almost 48 ha of land in Gdansk, Poland, for the sum of €14m. In accordance with the local zoning plan, the company is legally entitled to build housing, offices or retail facilities comprising approx. 130,000sqm in total space. The site itself lies in the Kokoszki district, in close vicinity to the airport and the Gdansk-Warsaw express road. This is the second property that the company has bought in the city.
Quentin Spicer, Chairman of Atlas Estates reportedly said: “We are delighted to have secured this plot in Gdansk. This is in line with the company’s strategy to continue investing in non-capital cities, where we see more opportunities for value creation. Atlas Estates continues to have confidence in the Polish economy.”
German house prices keep falling
The German residential market remains in the doldrums, according to Knight Frank’s latest Global Price Index, which reported that year-on-year price growth has now declined for four consecutive quarters. The index showed property prices in Germany fell by 6.9% in the 12 months to Q2 2007.
However, the speed at which prices are falling may be increasing. A new index compiled by financial services group Hypoport this week showed that German house prices fell by 1.1% in August alone. It stated that compared with the same month a year earlier prices fell 3.5%, a steeper annual decline than July’s 2.8%.
But the report also stated that there had been strong price increases in selected prime locations and major cities were there was a shortage of homes.
Hypoport’s house price index is based on data compiled from residential sales accounting for around 10% of the German housing market.
Worldwide News
Lack of financing available for New Zealand property developments
Financing for many South Island property developments in New Zealand has been drying up as the credit crunch sees lenders pull back from the market.
Property developers have been knocking on the doors of South Canterbury Finance (SCF) for project funding, after being refused funds elsewhere in the shrinking finance sector, according to the company’s chief executive, Lachie McLeod.
But SCF like other non-bank financiers is standing back from lending to new borrowers, he said. Nine finance companies have gone bankrupt in the last 16 months.
Developers of apartments in Queenstown are likely to be the first affected as finance companies pulled back from lending further funds in the property development sector, McLeod reportedly said. He added: “I’m seeing it right at the cliff face now. Loans come through that have been declined by a lot of other finance companies, for property developments in Queenstown, Christchurch and Auckland. And a lot of other finance companies are saying no, because they’ve got no cash.”
McLeod said Queenstown would undoubtedly be affected, with the downturn likely to show itself before Christmas. “There are 1,400 to 1,500 apartments coming on the market there”, he said.
Rental cap may be reduced in Dubai
Dubai’s 7% rental cap may be reduced later this year, as the emirate’s overheated real estate market is expected to come under planned regulation once the new Real Estate Regulatory Agency (RERA) begins to act. The news comes as a welcome relief to Dubai’s expatriate community that had feared the rental cap may be increased, allowing landlords to charge much higher rents.
“Either the current seven per cent rent cap will be relaxed or kept the same. It will not go beyond the existing level”, a source speaking on behalf of the RERA said, adding, “We can expect a decision by December.”
Some landlords had taken advantage of a lack of rental property available by hiking rents and in some cases by nearly doubling them - a trend which prompted the government to intervene through a partly successful rent cap.
RERA will have an advisory role on issues like the rent cap. The Rent Committee, which handles rental disputes, is also expected to be brought under RERA’s jurisdiction.
Property price rises in India slows mortgage market
Indian mortgage companies have put down the recent drop in new business for housing loans to the unprecedented rise in property prices and not the recent rise in interest rates. According to bankers, the demand for home loans will pick up if prices fall, (as expected) over the next few months.
Despite a rise in repossessions and unpaid personal loans, banks are still expecting strong growth in the mortgage sector later this year.
“Property prices have gone up by about 100% in the West and over 150% in the South. This has affected the affordability of 20-22% of the customers”, said Sunil Rohokale, general manager, mortgages and real estate division, at ICICI Bank.
“Though we cannot time the fall, property prices are expected to drop by 10-15% across the board, except in Mumbai, which has different characteristics”, Rohokale reportedly said at the FICCI-IBA conference on Global Banking.
In areas where speculative investments in real estate have been rampant, like Jaipur, Chandigarh, and the suburbs of Bangalore, prices have already fallen substantially.
Anil Khandelwal, chairman and managing director at the Bank of Baroda, told the Hindustan Times that the growth of home loans has fallen drastically so far this year, compared with 2005 and 2006. He said: “The growth in home loans is expected to be around 5% for the first half (of 2007), compared to 35% annual growth in the last two years.”
$6bn entertainment complex planned for Ho Chi Minh City
Kangwon Land Inc and Starmax Co Ltd are reported to be planning a $6bn investment in Vietnam’s commercial hub of Ho Chi Minh City. The money is expected to be used to develop a large entertainment complex located in the city’s Thanh Da-Binh Quoi area. It will include a 90-storey twin tower, a world-class gaming centre, golf courses and a marina for private yachts.
The Vietnamese government is believed to have given the project its full support but wants the venture to pay full attention to any land clearance issues. The project is yet another indication of Vietnam’s growing attraction, especially for South Korean property developers, and demand for office and residential space is booming.
South Korean companies are reported to be chasing further property investments of around $4bn including a $2.5bn investment in what will become the country’s biggest convention centre.
Construction started last month on Vietnam’s tallest building, the Keangnam Hanoi Landmark, which is expected to cost $1bn.
The South Korean government is also said to be advising on a $7bn project to develop prime residential properties along the banks of the Red River in the capital city of Hanoi, which would be the country’s largest property development thus far.
