Croatia opens up property market to foreign buyers
From February 2009, foreign buyers will be able to purchase property on the same terms as local Croats, although forests and agricultural land are excluded from the agreement. Previously, it was difficult for foreigners to secure permission to buy a property.
Over the last nine years, authorities have only granted just over 3,500 applications from potential foreign buyers. Since over 8,000 applications were received in the last two years alone, it is clear that the success rate in purchasing a property in Croatia was not high. In addition to the need to secure permission from the authorities, it was required that Croatian citizens have the reciprocal right to purchase property in the would-be buyers home country.
This right included the US, UK and most of Europe - buyers from elsewhere could only purchase property by forming a company, with its attendant bureaucratic requirements, an option which was also open to those from countries offering reciprocal rights to Croatians.
Chintan Mahida, global property analyst at Nubricks.com, said: “The move to make buying Croatian property easier for foreign purchasers is bound to have repercussions for the national property market, and bring greater foreign interest especially with expectation that Croatia to become a member of the European Union at some point in 2011.”
The Celtic Tiger is nationalised
The Irish Government has seized control of Anglo Irish Bank, and so shares have been suspended since 16th January.
The decision is likely to leave the bank’s long-suffering shareholders with little, if any, cash, analysts said, and it is unclear if debt-holders will be fully compensated. Ireland’s move is the latest instance of a European bank being taken over in the wake of the financial crisis. The British government now controls Royal Bank of Scotland (RBS) and Northern Rock, Iceland seized its three biggest lenders and Germany bought a quarter of Commerzbank.
Anglo Irish’s crisis was precipitated by a fall in investor confidence after a personal loan scandal that led to the resignations of its two top executives in December. Over the past year, the bank’s shares have tumbled 98%.
The bank had specialised in lending to big Irish real estate developers, which often used the financing to purchase huge tracts of land, especially in the Dublin Docklands redevelopment. By last year, the bank’s loan book had swollen to €72bn.
But faster than it soared in the 1990s, Irish real estate plummeted in the past year, leaving many of Anglo Irish’s clients facing huge write-downs on the value of their commercial properties.
A shareholder’s meeting last week was initially intended to approve a €1.5bn Government bailout that would have given the Government 75% of the voting shares, but the Government realised that the bailout was insufficient amid a slow run on deposits and that nationalisation would be needed to stabilize Anglo Irish, analysts said.
Property investment activity in France falls by over half
French property investment activity fell -54% to EUR € 13bn in 2008, from € 28.5bn a year before, according to research published by Cushman & Wakefield (C&W).
The 2008 figure is well below the average amount invested each year since 1998 (€ 14.4bn) and comes after four years of sustained growth in the market, the broker pointed out. The retail investment market was the hardest hit by the financial crisis, with investment activity dropping by as much as -77% in 2008. C&W said the financial crisis has struck a blow to large transactions, with just 35% of the total investment volume coming from deals of over € 100m, compared to 58% in 2007.
The Ile-de-France market still accounts for the highest share of total investments in the country, taking 73% of total activity in 2008. After a promising start to the year, investment markets in the provinces were progressively affected towards the end of 2008. Their performance (€ 3.5bn) was however sustained by the particular dynamism of several major cities such as Lyons and Toulouse.
Foreign investors, including the US, have withdrawn massively from the French market, with the exception of German open-ended funds. Market conditions have been favourable for equity buyers and French institutional investors especially.
Worldwide News
Rents in Dubai capped
Landlords appear to have been given the right to bring low rents in line with ones recommended by Dubai’s property regulator. A decree issued by Sheikh Mohammed bin Rashid, vice president of the UAE and Ruler of Dubai, said that rents set in 2008 could not be increased this year, a policy that is consistent with rent cap laws issued over the past four years.
Crucially, however, the new decree appears to hand greater power to landlords who have long complained that, in certain cases, the 5% rent cap has kept the rents they can charge well below normal market levels.
The decree, the first of this year, said that rents for both residential and commercial units set last year are frozen – unless they are more than 25% below the guideline figure recommended in Dubai’s new rental index.
Last week, Dubai’s Real Estate Regulatory Agency (Rera) published an index of rates for commercial units for 2009, but has yet to release a comprehensive database of recommended prices for residential units.
It is understood that under the decree, the rate of rental increase for a property in 2009 will be proportional to how far the rate fell below the rental index guideline last year. Dubai’s rent caps were initially put in place to prevent landlords from taking advantage of the emirate’s previous housing shortage and setting sky high prices.
But some landlords have complained that in situations where a tenant stays in a property for a long time and the rent is restricted each year by a cap, the price eventually falls far below what could be secured with a new tenant. Rents on newly leased properties are not restricted.
Luxury apartment prices fall 35% in Singapore
In a recent report by CB Richard Ellis, the company estimated that 55% of the 2,200 luxury units built in the city-state between 2006 and 2008 remained unsold as of November while, in another review, the Swiss bank UBS pointed out that units in two high-profile developments recently sold at 20% less than their launching prices.
Also, there has been talk of the first default on a house in the upscale waterfront development of Sentosa Cove, which, if true, would underscore the financial pressures facing even wealthy investors.
Signs that the local property bubble was bursting started to appear in late 2007, especially in the over-heated high-end market, and last year the number of transactions slowed considerably, with fewer than 4,400 new private homes changing hands, compared with a record 14,811 in 2007.
Official preliminary estimates by the state’s Urban Redevelopment Authority point to an overall price decline of 4.3% in 2008, a relatively minor correction when compared with the 31.2% increase in 2007 but the fourth quarter decline alone was 5.7% on an annual basis, the largest drop in a decade.
Property analysts point out that the market’s fall has not been uniform, with the luxury end registering much sharper losses in value, as much as -35% in prime districts.
During the Asian financial crisis of 1997, a Deferred Payment Scheme was introduced that allowed buyers to make down payments of 10-20% and defer the remaining balance until the property was completed, typically two or three years later. Approximately 10,450 homes bought on deferred payments are to be completed this year and in 2010, stoking fears that cash-strapped buyers could start dumping them before the balances are due.
Turkey has $70bn of financial obligations so 2009 will be tough
Turkey will face a tough year in 2009 due to its some $70bn of financial obligations, according to Deloitte Turkey in its Economic Outlook 2008, adding that four main steps were needed to overcome the crisis.
Turkey needs to create nearly $70bn in financial resources to cover an expected $20bn current account deficit and the repayment of $50bn of matured debt, of which, $10bn is public debt, with the remainder $40bn belonging to private corporations, according to the report.
An agreement with the International Monetary Fund (IMF) will be crucial to help creating these funds. Deloitte Turkey also said in the report that four initial steps were needed to be taken by Turkey in a bid to overcome the crisis. Turkey should at first restore confidence, form a healthy external financing structure, protect fiscal discipline and implement comprehensive structural reforms, the report said.
The Turkish currency lira, which lost 30% against the US dollar in 2008, is also expected to fall slightly in 2009, according to Deloitte, adding that inflation rates would also decline, however it would be difficult to see it fall below 8-8.5%.
