Italian commercial capital growth falls into negative territory
Italian commercial property capital growth finally fell into negative territory, by -2.5%, in the six months to the end of December 2008, according to the IPD Italian Biannual Property Index.
The IPD said that after posting flat growth for the first half of last year, the delayed effects of the credit crunch had, at last, started to show through. The index revealed total returns managed to stay in positive territory by the smallest of margins, returning 0.1%. This, for the second-successive half-yearly period, is entirely attributable to resilient income returns.
Over the six-month period under review, the most substantial falls in capital growth were in the retail sector, at -4.3%. In the two years of the bi-annual indices, growth slowed in the sector for each successive half-yearly period, posting negative capital returns in both halves of 2008. By comparison offices and industrial, which maintained positive growth in the first half of last year, both fell by -1.6% in the second half of 2008.
Switzerland bucks the trend
Switzerland has become Europe’s first real estate market to produce positive capital growth for 2008, at +1.2%, according to the IPD Switzerland Annual Property Index.
Switzerland has also produced the Continent’s highest nominal total returns for 2008, at 6.1%, a full percentage point down on 2007 but surpassing the 5.9% return recorded in 2006.
While other European countries have recorded resilient total returns, including Germany’s 3.5% and the Netherland’s 3.3%, the reasons for Switzerland’s property markets insulation from the credit crunch are different, according to Nassos Manginas, director of IPD Global. He said: “ Switzerland has a limited supply and with pension and insurances funds investing considerably in domestic property over the long-term there is, therefore, genuine market stability. However, early indicators over the year to date point to a mounting pressure on commercial property prices in 2009.”
The index revealed the retail sector, for the third consecutive year, produced the top sector returns, with 6.5%. However, despite this growth the return signifies a notable drop from 2007’s 10%, which could be the first sign of a slowdown in the sector. Residential total returns followed, with 6.1%, while offices returned 5.8% and industrial sector 6%.
Capital growth was recorded among all but one of the four main sectors, the industrial sector, which recorded -0.8% for 2008. This was, however, counterbalanced by the market’s strongest income return, at 6.8%. Capital growth for retail, residential and offices were 1.5%, 1.2% and 0.9%, respectively. All-property income was 4.9%.
Euribor fell to a record low
The three-month Euribor rate, the main gauge for interbank euro lending and a mix of interest rate expectations and banks’ appetite for lending, fell to a record low on 7th April to 1.453% from the previous day’s low of 1.466%.
The six-month Euribor rate fell to 1.632% from 1.644%, and the shorter term one-week rate dropped to 0.898% from 0.923%, both also record lows.
In addition, the European Central Bank (ECB) cut rates by 0.25% recently, taking the main policy rate to 1.25% and the overnight deposit rate to 0.25%.
Worldwide News
Singapore auctioneers seeing more repossessions
According to Colliers International, auctioneers in Singapore have witnessed an increase in repossessed properties at auction as the number of repossessions put up for sale by banks and financial institutions rose +18% from 45 in Q4 2008 to 53 in Q1 2009.
Colliers International believes this number is just the tip of the iceberg and is expected to go up further through 2009 and 2010.
Of the 53 properties repossessed, 41 of them were residential, 27 were apartments/condominiums and the remaining 14 were landed homes, ranging from terrace units to detached houses. Landed homes witnessed an increase of 100% from the seven registered in Q4 2008.
Foreign investment shrinks in China
Foreign investment in China shrunk from 56.9% in 2007 to 26.3% in 2008, according to DTZ, particularly investors from the United States.
Real estate investments in China dropped by -46% year-on-year with 508 major transactions worth US$34.87bn recorded in 2008. Some 85% or 432 of these were land transactions for property development while 15% or 76 of them accounted for strata-title (a form of ownership devised for multi-level apartment blocks).
In addition, the number of deals in the office sector also increased from 19 in 2007 to 22 in 2008 with total transaction value nearly doubled from US$2.074bn to US$3.959bn. Meanwhile, other sectors like retail and industrial saw a drop in the number of transactions.
Beijing was the best performer throughout 2008 in the strata-title and en-bloc buildings transactions, with an investment of US$3.3bn in 15 deals. This was followed by Tianjin and Wuhan which witnessed positive growths of 87.5% and 31.1% year-on-year respectively in terms of number of deals and total considerations.
Abu Dhabi wants to boost mortgage financing for buyers
To try to boost buyers’ confidence in Abu Dhabi, the Tourism Development and Investment Company (TDIC) announced agreements with four banks and a finance company to provide mortgage financing for buyers.
The offerings are more generous than those being offered by most banks. Lending to property buyers has been cut back dramatically as a result of the slowdown in the property sector.
Abu Dhabi Finance, a joint venture between several Abu Dhabi developers and Mubadala Development, the Government investment company, is offering mortgages with loan-to-value (LTV) ratios of 85% for period of three to 30 years.
The banks that signed agreements with TDIC are Standard Chartered Bank, Abu Dhabi Commercial Bank, Mashreq Bank and National Bank of Abu Dhabi.
