Prime office French yields forecast 6%

Czech state borrows from households

Bleakest forecast yet about Bulgaria’s economy

Gulf economies could be affected by lower oil prices

Istanbul’s residential market remains buoyant

India’s inflation heads to zero

Prime office French yields forecast 6%

According to Savills, prime office yields in the French commercial property market are forecast to reach 6% by the end of the first quarter in 2009. In addition, upward pressure on yields is expected to continue gradually throughout the year across all commercial property sectors.

In terms of general investor activity the report notes that, while this has been muted over the last 12 months, particularly in the first part of 2009, there was a small revival recorded during the last quarter of 2008, which saw the total for the year increase to €13.9bn. The report predicts that investment volumes for commercial property in France for 2009 will be in the range of €10-11bn.

Lydia Brissy, from Savills European research team, said: “It is the smaller lot sizes that are currently driving the investment market for all sectors, which has mainly been dictated by difficulty in obtaining debt. However, we expect larger transactions to reappear in the French market towards the end of 2009 as a predicted increase in sale and leaseback opportunities emerges.”

Headline rents throughout all property sectors have come under pressure and this is forecast to continue during 2009.

Brissy said: “Vacancy rates across all sectors will inevitably grow throughout 2009 according to Savills, although this oversupply situation will subsequently ease rapidly in the course of 2010 as limited investment activity and restrained access to financing is rapidly shrinking the development pipeline.”

Czech state borrows from households

The Czech state could borrow up to Kč140bn from households over the next few years in order to offset the fall in budget revenues caused by the economic crisis, according to Miroslav Kalousek, finance minister.

Bonds for individuals with yield guarantees between 3-4% are to be issued this year and will be redeemable upon the owner’s demand. Households currently own roughly 1% of the total state debt of over Kč1 trillion, though the Finance Ministry does not rule out that this could rise to 15% in the future. Kalousek said nominal value of the bonds will probably be Kč10,000.

Bleakest forecast yet about Bulgaria’s economy

In one of the bleakest forecasts about the Bulgarian economy since the outbreak df the crisis, Capital Economics believes Bulgaria’s economy will shrink by -5% this year.

Capital Economics said exports and inbound investment flows will collapse, shrinking the money supply and forcing the Government to drain fiscal reserves to restore liquidity.

This move would buy the Cabinet about a year, but then the reserves will be exhausted and force the country to get help from the International Monetary Fund (IMF).

The IMF last week forecast a slowdown of 3% for the Bulgarian economy in its worst-case scenario.

Capital Economics said Eastern Europe’s gross domestic product would decline by -6% on average this year, with a record -15% expected in Latvia and Lithuania. Poland, the region’s largest economy, is seen shrinking by 3% despite the optimistic forecast of its Government.

Gulf economies could be affected by lower oil prices

Gulf economies could be affected this year due to oil price declines, but liquidity is adequate and credit still growing, according to central bankers.

Sultan Nasser Al Suweidi, the UAE central bank governor, told a regional banking conference he did not expect oil prices to average more than $40-44 per barrel this year, a far cry from near $150 in July 2008, the peak of a regional economic boom.

Saudi Arabia’s central bank governor said the world’s top oil exporter continued to support a policy of pegging its currency to the dollar and voiced confidence in the US handling of the crisis.

Al Suweidi also said the new single currency could be pegged to the US dollar. He ruled out interest rate cuts in the near future. Echoing growing concerns that low oil prices pose a challenge, Shaikh Khalifa bin Zayed Al Nahyan, UAE President, said that $70-$75 a barrel would be a fair price for oil. The oil price boom enabled the Gulf states to pour windfall revenues into projects designed to reduce their reliance on the volatile commodity.

Oman, Bahrain and Qatar said they expected growth rates to halve this year and the UAE and Kuwait said their economies could contract this year.

Istanbul’s residential market remains buoyant

Despite the global economic slowdown the residential market in Istanbul remains buoyant, according to Jones Lang LaSalle’s new report Istanbul Real Estate Overview.

The city offers considerable long term opportunities as residential demand continues to outpace supply, yearly requirements for residential units are set to remain at 250,000 until 2015 while supply is estimated to only reach 180,000 units per year according to the Real Estate Investment Trust Association

Avi Alkas, chairman of Jones Lang LaSalle Turkey, said: “The residential market in Istanbul has undergone rapid development over the last five years, and market drivers remain strong, creating further room for continued growth. The city offers huge potential with an expanding middle class and their strong investment intentions, ongoing migration into the capital, as well as the need to replace the existing earthquake-vulnerable stock. The global economic downturn may result in a slowdown of some luxury residential projects in the coming years, but demand from the middle classes is expected to remain strong.”

The shortage of available land in the centre of Istanbul has pushed up market prices, and forced residential developers to expand towards the city’s periphery. These emerging areas are being supported with planned transport links, while regeneration plans aim to move industrial production to the outskirts of the city to help the development of residential areas within the city centre.

Alan Robertson, managing director of Jones Lang LaSalle Turkey, said: “The global economic slowdown has caused a modest correction in residential prices but on the whole Istanbul’s residential sector is proving more resilient compared to other major cities around the world. The population is projected to reach 14.5 million by 2015, creating an estimated 1.18 million extra households and this potential growth means that major developers are continuing with large residential projects. The city’s combination of size, scale and location, strategic commercial position as well as strong retail market will also enhance the residential sector’s potential over the long term.”

India’s inflation heads to zero

Inflation in India edged closer to zero, according to official data, raising fears of deflation and prompting expectations of a further cut in interest rates to spur the slowing economy.

Annual inflation fell to 0.27% for the week ending 14 th March from 0.44% the previous week, according to the Wholesale Price Index, the most watched cost-of-living measure.

The central bank has slashed its key short-term lending rate to commercial banks by 4% since October to a record low of 5% as it tries to kick-start loan activity and consumer demand.

India’s inflation rate has tumbled from a 13-year high of 12.91% last August due to a slump in oil and other global commodity prices as well as the effects of the worldwide slowdown.