Credit crunch affects European shopping centre development

Investors are suffering from currency fluctuations

Ile-de-France’s office market feels the burn

Obama believes USA’s slumping economy shows “glimmers of hope”

China’s economy shows “positive changes”

India plans to allow HFCs to restructure struggling borrowers’ loans

Credit crunch affects European shopping centre development

Thanks to the credit crunch, up to 7m sqm of planned shopping centre development in Europe has been put on hold or cancelled, according to Cushman and Wakefield’s European Shopping Centre Development report.

Investors are suffering from currency fluctuations

According to CB Richard Ellis’s Central and Eastern Europe’s (CEE) Currency Fluctuations ViewPoint report, falling currencies in the CEE are impacting property investors, developers and occupiers across the region, with some countries more affected than others.

The key impacts of currency fluctuations on the CEE property market are that local currencies in the CEE have fallen in value over the last nine months; many CEE businesses and consumers took out loans or issued bonds in foreign currencies in recent years, when their currencies were much stronger; most countries in the CEE region are not part of the Euro-zone and recent devaluations have a material impact, particularly combined with the wider economic slowdown and homeowners face the prospects of falling house prices and also rising mortgage costs on mortgages taken in FX -denominated currencies (in local currency terms) has the potential to sharply reduce their disposable income.

In the CEE commercial property markets, it is property occupiers who are most affected in the short term. Whilst their earnings will generally be in local currency, rents will typically be denominated in euros. A fall in the local currency therefore represents an equivalent increase in rent. Over time, this will feed through into market rents, and thus investors are only partially shielded from the effects of currency changes.

Ile-de-France’s office market feels the burn

While prime rents are still holding up, rental values for secondary office properties in the Ile-de-France region of France have fallen by up to -10% over the past 12 months, according to new research by DTZ.

In the first quarter of 2009, investment volumes for the Ile-de-France region came in at under €400m comprising a total of 20 transactions. The drop in transactional activity was mostly due to the lack of financing, according to DTZ, with just two deals exceeding the €50m threshold during the first three months of the year.

Jean-Luc Chalard, managing director and responsible for marketing and transactions at DTZ, said: “The slowing down in the Ile-de-France office market is consistent with the one in the French economy. The numerous landlords (in the region) are renegotiating their current leases in order to retain their tenants and are reviewing office rents downward to keep them in line with the market.”

Obama believes USA’s slumping economy shows “glimmers of hope”

Barack Obama, President of the USA, recently announced that the slumping economy has begun to show “glimmers of hope”, but cautioned that it remains severely stressed and will require lots more work to turn it around.

The President highlighted signs of thawing in the credit markets, particularly for small businesses seeking loans, along with tax cuts he said workers will soon see in their paychecks and a jump in mortgage refinancings due to historically low interest rates.

Obama said those positive moves as well as infrastructure work and other spending underwritten by his $787bn stimulus program all point to welcome signs of long-anticipated economic improvement.

Obama said in a White House meeting: “We’re starting to see progress. And if we stick with it, if we don’t flinch in the face of some difficulties, then I feel absolutely convinced that we are going to get this economy back on track.

“Now, we have always been very cautious about prognosticating and that's not going to change just because it's Easter. The economy is still under severe stress.”

China’s economy shows “positive changes”

Wen Jiabao, China’s number three leader and economic official, recently said at an Asian summit in Thailand that China’s economy is showing “positive changes” but called for more efforts to combat the impact of the global financial crisis.

The Chinese economy showed “better than expected positive changes in the first quarter” due to Beijing’s huge stimulus. Citing improved investment, consumption and trade figures, Jiabao said some segments of the economy “are in a process of gradual recovery”.

China’s economy is forecast to grow by at least +5% this year - the fastest rate of any major country, though down from last year’s +9% and 2007’s +13%. Chinese banks have avoided the turmoil that is battering Western financial systems.

According to China Radio International’s website, Jiabao was asked whether Beijing would launch additional stimulus efforts and he said Beijing would step up efforts to carry out the current plan.

India plans to allow HFCs to restructure struggling borrowers’ loans

India’s National Housing Bank (NHB) which regulates housing finance institutions in India plans to let housing finance companies (HFCs) restructure loans for borrowers affected by the current economic climate, according to Raj Vikas Verma, NHB’s executive director.

At present, HFC customers are allowed to renegotiate the rate of interest, but they cannot change a loan’s terms and tenure, and if a borrower has defaulted on the repayment schedule, then the borrower has to pay the missed payments for the loan to continue.