Inflation rate in Germany drops to lowest level in two years

Spanish house prices fall -3%

Croation bank backtracks on raising interest rates on loans

US commercial real estate sales fell -66%

“Malaysia will weather global downturn”

Singapore’s economy shrinks in third consecutive quarter

Inflation rate in Germany drops to lowest level in two years

The inflation rate in Germany, Europe’s largest economy, dropped to the lowest level in more than two years in December after the cost of oil plunged.

The inflation rate declined to -1.1% from 1.4% in November, according to the Federal Statistics Office (FSO), which was the lowest level since October 2006. Economists expected German inflation to slow to 1.2% using a harmonised European Union method, according to the median of 19 forecasts in a Bloomberg News survey. From a month earlier, prices rose +0.4%.

The cost of crude oil has dropped more than -70% from a July peak of $147 a barrel, alleviating price pressure and making it easier for the European Central Bank (ECB) to cut interest rates. The Frankfurt-based bank has lowered its benchmark by 1.75% to 2.5% since early October after the global financial crisis pushed up lending costs and the euro area fell into its first recession in 15 years.

In Germany, companies have scaled back output as slower growth erodes demand for goods made in Europe’s largest economy. Business sentiment dropped to the lowest level in more than 25 years in December.

German manufacturing orders slumped 6.1% in October from the previous month as European demand for plant and machinery collapsed and industrial production of the world’s biggest exporter dropped 2.1%.

Spanish house prices fall -3%

In the third quarter of 2008, Spanish house prices fell -3% year-on-year, compared with a -0.3% fall between April and June, after a sharp decline in the value of existing homes, according to Government data.

In the third quarter, house prices fell -1.7% on a quarter-on-quarter basis compared with a -0.3 percent fall in the second quarter, according to the National Statistics Institute (INE).

The growth in the value of new homes in Spain slowed to 3.7% year-on-year in the third quarter from 5.3% in the second, while existing house prices fell 8.6%, according to the INE.

Croation bank backtracks on raising interest rates on loans

The biggest Croatian bank, Zagrebacka Banka, recently said it would not, after consultations with the Government, raise interest rates on its loans to the public as announced at the end of 2008.

Zagrebacka Banka, a unit of Italy’s UniCredit, announced it would raise interest rates on its loans between 0.5% and 1.7%. The bank, however, backtracked and said it had decided to postpone the increase of interest rates on loans to citizens in consultations with the Government, according to state news agency Hina.

Hina said: “Zagrebacka Banka will carefully monitor developments on the local and international financial markets and will appropriately adjust its interest rates in the future.”

The local banks, 90% of which are owned by foreign parent banks, earlier said they might be forced to raise interest rates amid the global financial crisis. It prompted fear among Croat citizens and businessmen that it would jeopardise already relatively low living standards and slow economic activity.

US commercial real estate sales fell -66%

Manhattan commercial real estate sales fell -66% to $17.09bn in 2008, the lowest in four years, as the worldwide credit freeze sidelined buyers, according to Real Capital Analytics Inc, a New York-based real estate data service.

Only 20 property sales worth +$5m or more closed in the fourth quarter and there were 250 such deals in the year, according to Real Capital Analytics. Fourth-quarter Manhattan transactions totaled $961m, down -90% from the same period a year ago. Sales are declining as prices continue an 18-month slide.

The lack of transactions helped drive the Bloomberg Office Real Estate Investment Trust Index down 42% last year, the worst performance for the measure since it started in 1994. SL Green Realty Corp, New York’s biggest office landlord, fell -72% as about 75% of the company’s 31.6m sq ft are in 30 New York office buildings.

The most expensive commercial transaction in the fourth quarter for both Manhattan and the US was the sale of 1372 Broadway, a 20-story pre-World War I office building in the Garment District. Wachovia Corp sold the property for $274m to New York investor Lloyd Goldman and partners in October, the same month Wells Fargo & Co, agreed to buy Wachovia for $15.1bn. The price was $61m less than Wachovia and partner SL Green Realty Corp paid for the building in 2007.

Goldman’s purchase was one of only 13 real estate transactions in the entire country in the fourth quarter to exceed $100m, according to Real Capital. The last time there were so few deals of that size was in the third quarter of 2001, after the 11 th September terrorist attacks.

“Malaysia will weather global downturn”

The Malaysian residential property market, compared to its competitors is expected to weather the global turndown over 2009, according to Asset Property Brokers.

John Scott, finance director at the Bristol-based company, said: “ Malaysia, unlike many other markets, has only had large increases in values over the last couple of years. This is in contrast to at least a decade of debt-fuelled property boom in markets such as Spain, the UK and US. Usually, the longer the market boom the further the fall.

“Competitors, such as Hong Kong and Singapore, even before the credit crunch, were suffering from relatively high prices, giving lower yields.”

Hotel property specialist, Jones Lang LaSalle Hotels, has identified Malaysia, with its relative shortage of hotel accommodation and increasing tourism, as a key hotel growth market in South East Asia.

Scott added: “Hotel investments in popular locations in Malaysia should also provide good yields.”

Singapore’s economy shrinks in third consecutive quarter

Singapore’s economy contracted for a third consecutive quarter in the October-December period as a global slump hurt demand for the city-state’s exports.

Gross domestic product (GDP) shrank a seasonally adjusted 12.5% in the fourth quarter from the previous quarter, the Trade and Industry Ministry said in a recent statement. The economy fell -2.6% in the fourth quarter from the same period a year ago, the ministry said.

The ministry also lowered its GDP forecast for 2009, now expecting a range between a 2% contraction and a 1% expansion, down from a range of a 1% contraction and 2% expansion.

The ministry reiterated the economy grew +1.5% last year after expanding +7.7% in 2007.