Irish spend on property in 2008 is forecast to fall to €15bn, down -60% from €45bn in 2007 and a -73% decrease from the peak of €54.4bn in 2006, according to Joan Henry, head of research at Savills Ireland, which was one of the main findings of its regular commentary, Property Outlook.
Savills said it is imperative that the Government and the banks take immediate action to solve the lack of liquidity that is crippling both the residential and commercial property markets. The drop in Irish spend on property, both at home and abroad, reflected the beginning of a slowdown in the new homes market, which was being driven in turn by increasing interest rates. This year, according to Henry, spend is expected to be down an estimated -73% (or €40bn) from the peak in 2006.
Angus Potterton, managing director of Savills Ireland, said: “There are signs that something will be done to recapitalise the Irish banking sector but every day that goes by puts more companies out of business, pushes up unemployment, reduces tax revenue and brings us deeper into recession. It is imperative that the Government and the banks take immediate action, not just for the 250,000 people in the property and construction sector but for the wider economy.”
Henry stated that the evidence of the huge decline in spending is clear across all sectors of the property market and is most obvious in the new homes area. The total spend on new homes is expected to fall from an estimated €23bn in 2007 to just €6bn this year. Spend in the Irish investment market is expected to be down as much as -75% from last year’s €2bn and spend on domestic land is expected to fall by a staggering -80%. These numbers reflect both the fall in volumes of deals being done and also obviously a significant drop in the value of individual deals being done.
Developer predicts stable property prices for Malta
Pender Ville, a Maltese developer, predicts stable property prices for Malta during 2009.
Pender Ville’s forecast coincides with a European Commission report which said that although Malta’s economy will slow down in 2009, it will be less severe than most of the Euro-Zone.
Non-Maltese residents can only own multiple properties and rent them out in Special Designated Areas (SDAs). With a property in an SDA, foreign owners also avoid the hassle of applying for an Acquisition of Immovable Property (AIP) Permit from the Ministry of Finance.
Michael De Maria, Pender Ville’s marketing manager, said: “Since around 2003, Malta has enjoyed property price increases averaging around 8%. During 2008 this slowed and we expect prices to remain stable in 2009.
“The global downturn has affected demand, however Malta is in a strong position. It is a small island with a relatively large population and limited development opportunities. Overseas property owners are only allowed to buy properties to rent out in a few SDAs and because of this, Malta has not experienced a buy-to-let property building boom, leading to oversupply. Altogether, this means restricted supply ensuring long-term price growth.”
Poland cuts interest rate
Poland’s central bank recently cut its benchmark interest rate by 0.25% to 5.75%, joining a number of emerging markets that have lowered rates recently in a move to bolster economic growth.
Most analysts expected the National Bank of Poland to leave rates unchanged. This was the central bank’s first move since it raised interest rates by 0.25% in June. Following the rate cut, the Polish zloty edged up +0.4% against the euro.
Win Thin, senior currency strategist at Brown Brothers, said: “Retail sales and industrial production have slowed sharply in recent months, so the need to ease is clearly there. Indeed, the entire region will continue to cut rates as we move into 2009, especially after the surprise cuts by Hungary and Turkey earlier this month.”
Several emerging markets have cut rates in recent days, as the global financial crisis continues to take a significant toll on their economies.
Worldwide News
New York’s residential prices decrease by -30%
According to some brokers in New York, residential property prices in some parts of New York, USA, have already decreased by -30% from their high and the declines will spread to other areas by January as job losses mount and as bankers come to terms with vanishing, or at least diminishing, bonus checks because of the financial mayhem of the past year.
The latest Standard & Poor’s/Case-Shiller home price indices recently released showed that prices in the larger metropolitan New York area fell an annual -7.3% in September. That was before the worst of the stock market meltdown in October.
Prices in parts of the city have been sliding rapidly. In Harlem and East Harlem, property prices were down -20% in Q3 2008 from a year earlier to an average $440,000, according to Miller Samuel, who collects and analyses data on the residential real estate market across the New York region .
In the areas of Hamilton and Morningside Heights, which are in and just south of Harlem, the drop has been an even steeper -30.1% to $397,500 median price for co-op apartments and condominiums. Even the average price in Soho and Tribeca fell -21% to $1.9m.
China’s biggest interest rate cut in 11 years
China recently announced its biggest interest rate cut in 11 years, a -1.08% decrease, to spur private borrowing and support a multimultibillion-dollar stimulus package to boost slowing economic growth.
Interest on a one-year loan will fall to 5.58%, while interest paid on deposits will drop to 2.52%.
The 4 trillion yuan ($586bn) stimulus aims to insulate China from the global slowdown by injecting money into the economy through spending on new highways and other public facilities. But its ultimate goal is to increase consumer spending, which a rate cut is meant to encourage.
Beijing is trying to shore up consumer and investor confidence and reverse a sharp downturn in growth. China’s economy is expected to grown by at least +9% this year, down from 11.9% last year. China has avoided a big hit so far from the global financial crisis because its banks are healthy and exports strong. But conditions are expected to worsen in coming months as export demand weakens and growth in real estate and other domestic industries slows.
Recently, the World Bank cut its forecast for China’s growth next year from 9.2% to 7.5%, the lowest level since 1990. Also, the central bank cut the amount of money commercial banks must set aside as reserves, expanding the pool available for lending.
The moves are meant to ‘promote stable credit growth’, the People’s Bank of China said on its Web site.
A key issue will be whether banks are willing to lend more. They have tried to shield themselves from global turmoil and the slowing real estate industry by cutting back on lending to exporters, developers and small companies.
Australians are paying more than ever in stamp duty
According to a BankWest study, Australians are now paying more than ever in stamp duty on their property purchases, and the survey has also prompted more calls for reform of the tax which some in the industry say is simply stifling growth.
Stamp duty tax has built up the coffers of treasuries around Australia, particularly in New South Wales. For a $500,000 purchase in New South Wales the Government takes $18,000 in stamp duties. According to a study other states are catching up. A total of $53bn was earned in residential and commercial property transactions since 2003.
Ian Corfield, chief executive of BankWest retail, said: “Across the country stamp duty bills have obviously rocketed far ahead of the growth in income, but when you look across the states the contrasts are also quite stark; so in Melbourne and Sydney for instance people are paying nearly three months’ worth of salary to move house. Whereas in Queensland the proportion is a lot, lot lower and in fact the average stamp duty bill is just $5,000.
“But I guess when you look at the housing market, obviously one of the key deterrents to people moving house is some of the bills they have to pay upfront, and stamp duty’s obviously the biggest one of those.”
