Czech inflations drops sharply in December

Volume of Finnish commercial property transactions reach €4bn

Euribor decreases, giving borrowers some relief

Bank of China slashes interest rates

Average mortgage rate in the US down to 5%

Abu Dhabi wants to safeguard investors interests

Czech inflations drops sharply in December

Czech inflation dropped sharply in December 2008 on the back of falling fuel prices, extending a trend likely to bring interest rates to all-time lows in the coming months, according to the Statistical Bureau.

Czech consumer prices fell in line with expectations, putting the annual rate at 3.6%, from 4.4% a month earlier, according to Statistical Bureau data. Inflation dropped to within the central bank tolerance band of 2-4% for the first time since October 2007, after a spike caused by a global pick-up in food and commodity prices and the government's fiscal reforms.

The bank has cut its main lending rate by 1.5% since August to 2.25%, below the ECB’s main rate of 2.5%. Czechs saw the lowest cost of money in April 2005 when the main rate was at 1.75%.

The central European economies have suffered from falling demand in the recession-stricken Euro-zone and a poor growth outlook has replaced inflation concerns. Poland’s central bank slashed interest rates in November and December by a total of 1%, setting the bank’s key rate at 5%. More monetary easing is expected as both inflation and growth ease in Central Europe’s largest economy.

Hungary , hit by a recession, has seen inflation falling to below 3% (the central bank’s target) from 4.2% in November and Andras Simor, Central Bank Governor, said recently that the bank wanted to cut interest rates further as fast as possible. The Czech central bank expects this year’s growth at +2.9% although it has warned of a more pessimistic scenario forecasting the economy to expand at only +0.5% may come into play.

Volume of Finnish commercial property transactions reach €4bn

The volume of commercial real estate transactions in Finland reached €4bn in 2008, about €1.9bn lower than the year before, according to preliminary statistics compiled by the Helsinki-based KTI Institute for Real Estate Economics.

KTI said the volume for the first half of 2008 came to €2.8bn, but investment activity slowed down significantly in the second half of the year, and the volume for the last six months came to €1.1bn. Foreign investors accounted for 46% of all transactions in 2008.

Euribor decreases, giving borrowers some relief

Euribor, the rate normally used to calculate mortgage payments in Spain, plunged 0.9% (a change of -21%) to 3.45% in December, bringing some relief to borrowers on annually resetting Spanish mortgages.

Euribor, which peaked at an all-time high of 5.38% as recently as September, has nosedived in response to the European Central Bank’s (ECB) steps to liquify the Euro-zone’s financial system. In just 3 months, Euribor has dropped from 5.38% to 3.45%, a percentage fall of -35.5%.

The ECB has dropped interest rates from 4.25% at the beginning of October to 2.5% now, and expectations of further cuts are helping to drive down 12-month Euribor rates. Analysts expect the ECB to lower interest rates to 1.5% or even lower in the first quarter of 2009.

The latest fall in Euribor will make life easier for borrowers with annually resetting Spanish mortgages. Monthly repayments on a typical annually-resetting mortgage (€150,000, 25-years, Euribor + 0.25%) will fall by €115 to €902 a month - a saving of €1,380 a year. This will provide some relief to hard-pressed borrowers, but still leaves mortgage repayments higher than they have been for most of the last decade.

Bank of China slashes interest rates

Average mortgage rate in the US down to 5%

A recent Freddie Mac poll showed that the average mortgage rate in the US has gone down to 5%, its lowest level in decades. This was the tenth straight week that the mortgage lending rates on 30-year fixed loans declined.

The figure indicates the Federal Reserve’s plan to encourage lenders to bring down their mortgage rates is effective. Mortgage rates peaked at 6.7% last summer. What pushed the rates down was an announcement by the Fed in late November that it would purchase back $500bn mortgage-backed securities backed by Fannie Mae, Freddie Mac and Ginnie Mae. Recently, the Fed started to buy mortgage-backed securities. As of Wednesday 7 th January, the Fed had bought $10.21bn.

Orawin Velz, vice president for economic forecasting of the Mortgage Bankers Association, said, quoted by the New York Times: “Since the Fed announced they would buy mortgage-backed securities, we have seen a pretty healthy increase in refinance applications, while purchase applications have trended up, but not as significantly.”

Abu Dhabi wants to safeguard investors interests

In a bid to safeguard interests of property investors Abu Dhabi has drafted five laws.

Most transactions in Abu Dhabi were hitherto made in a legal vacuum because there were few written regulations governing the rights and obligations of buyers and sellers. UAE capital city’s property market was opened up to foreign investors in 2006, four years after Dubai’s. The proposals are a strata law, defining the roles of property owners in multiple-occupancy developments; a trust-account law similar to Dubai’s escrow requirements; a law establishing a regulator; a mortgage law to protect financiers as well as a law to ensure that developers have acquired titles and permits before selling properties to the public.

The draft laws have been sent to the Executive Council for approval. The trust-account law would ensure that money is used on the intended projects, along the lines of the escrow system operated by Dubai's Real Estate Regulatory Authority.