Pace of decline in capital values accelerates

Banks’ take-up of office space suffers in the economic downturn

Spanish authorities demolish a property built without planning permission

Foreclosures soar in South Florida

Global housing markets continue to struggle

Property values in Asia carry on sliding

Pace of decline in capital values accelerates

The pace of decline in capital values accelerated in Q1 2009 with countries in both Western Europe and Emerging Europe hit by price falls, according to the Royal Institute of Chartered Surveyors’ (RICS) Global Property Survey.

France, the Netherlands and the Republic of Ireland saw capital values drop significantly with property professionals in these countries the most pessimistic regarding the near term price outlook (ranked in the bottom quartile of over 45 countries worldwide).

Respondents expect little easing in the pace of price declines in these markets although some moderation in price falls is expected in Spain and the UK. Germany remains the outperforming market in this part of Europe, with expectations towards property values less pessimistic than elsewhere.

Agents were increasingly pessimistic towards capital values in many parts of Central and Eastern Europe (CEE) which was the worst performing emerging market region. All respondents in Ukraine, Russia, Poland and Croatia reported a fall rather than a rise in capital values with confidence towards the outlook for lettings activity falling back further across the region despite recent G20 announcements.

Rents are falling across more than 90% of the countries surveyed. Weaker tenant demand has led to faster rises in reported available space which has compounded the gloom towards the rental outlook. Rental expectations are weakest in Ireland with sentiment in countries in emerging Europe also gloomy - particularly Hungary, Romania and Ukraine. Available space has risen across every region forcing agents to offer increasingly larger incentive packages in order to secure a letting.

Banks’ take-up of office space suffers in the economic downturn

Spanish authorities demolish a property built without planning permission

Musician and record producer Michael Cretu is seeking €18m damages from the Spanish authorities after they demolished his property on the popular holiday islands of Ibiza.

The bulldozers moved in earlier this month after officials at the San Anotnio town hall confirmed that the luxury villa had been built without planning permission. The 3,000sqm Moroccan style mansion took nine years to build and includes a state of the art recording studio. The Spanish Supreme Court ruled in 2003 that it was built illegally in an area of maximum environmental protection with an illegal building licence.

Not only had it been built without prior permission but it was also bigger than the permission that was eventually granted. Judges ordered that it should be demolished but locally officials did nothing. Twice the town hall was fined for not carrying out the demolition order.

Cretu, a Rumanian-born French pop musician and producer, battled to prevent the demolition. Green activist groups who campaigned in favour of the demolition welcomed the arrival of the bulldozers. But some locals are not happy and have criticised the €350,000 cost of demolition.

Foreclosures soar in South Florida

The number of foreclosures in South Florida increased in April from the previous month, rising in both Miami-Dade and Broward counties by triple digit percentages, as high unemployment, risky loans and plunging property values continued to affect borrowers.

Foreclosure filings soared in Miami-Dade, South Florida, by 111% between March and April, according to RealtyTrac, a private foreclosure tracking firm, and Broward foreclosures increased by 124% between March and April. Compared to April 2008, foreclosures were up by around +90% in both counties.

In Florida, Miami-Dade and Broward were among the counties with the highest percentage increases in foreclosures between March and April, ranking fourth and third, respectively. Osceola County, in Central Florida near Orlando, had the highest increase with one of every 57 homes in some stage of foreclosure. Lee County, home to the foreclosure hotbed of Cape Coral/Fort Myers, ranked second, also with one of 57 homes affected. In Broward, one of every 78 homes was in foreclosure. In Miami-Dade, it was one in 86, RealtyTrac reported.

Amid rising unemployment, 342,038 properties across the nation received a default or auction notice or were repossessed in April, representing one of every 374 homes.

RealtyTrac counts initial filings, notices of foreclosure sales and homes repossessed by banks to arrive at its numbers.

Global housing markets continue to struggle

According to Knight Frank’s latest Global House Price Index, global housing markets continue to struggle against a backcloth of economic stagnation or decline and rising unemployment.

Israel was the top performer over the 12-month period ending Q1 2009 recording growth of +10.9%. The worst performers were Latvia, Dubai and Singapore who recorded falls in average prices of, respectively, 36%, 32% and 23%

On a quarterly basis, the most dramatic fall in prices were recorded by Dubai (-40%) and Singapore (-16.2%). The best performing markets were Thailand with a +2.7% uplift in values, Israel (+2.6%) and Switzerland (+2.1%). The shorter term economic outlook suggests that the world’s housing markets are likely to continue to suffer for the remainder of 2009

Nick Barnes, head of international research, Knight Frank, said: “The world’s housing markets remain under intense pressure with little real evidence of any of the hoped for ‘green shoots’ and even the improvement in performance shown in some countries in the last quarter may yet turn out to be a false dawn according to some commentators. Recent projections from the Organisation for Economic Co-Operation and Development (OECD) do little to promote a more optimistic viewpoint – gross domestic product (GDP) growth is forecast to drop by an average -4.3% in the OECD area in 2009 while by the end of 2010 unemployment rates in many countries will reach double figures for the first time since the early 1990s.

“The inescapable trend is that the worst and most widespread economic recession since the 1930s continues to batter housing markets across the globe. Rising unemployment and concern among those still in jobs, added to constrained credit conditions, means that buyer demand for housing remains suppressed and confidence is low in most markets which is inevitably having a negative impact on house prices. There is sporadic evidence of buyers snapping up relative bargains, however of those buyers in a position to move, many are still waiting for clearer signs that markets are approaching the bottom of the cycle. Moreover, in a falling market, sellers are usually forced to a greater or lesser extent which means that opportunities to buy are greatly reduced and transaction volumes correspondingly low.”

Property values in Asia carry on sliding

Property values in Asia may keep sliding this year as the global credit crisis and economic slowdown undermine investor confidence, according to investors and analysts.

Markets in Hong Kong, Shanghai and Singapore have already seen large price drops since last year after years of cheap credit lures a flood of foreign money into the region's real estate, a conference in Singapore heard.

High end residential and office markets boomed but now as credit conditions have tightened and the global appetite for risk has waned there is no more speculative money around and prices are falling.

Stuart Labrooy, chief executive at real estate investment trust Axis-REIT in Kuala Lumpur, predicts that Asian property values will probably bottom by the end of the year but may not start to rise again until the economies in the US and Europe have consistent growth.

Property investors who chased hot markets last year have absorbed big losses and new buyers now shouldn’t expect to make a quick profit, according to Blake Olafson, head of the Asia real estate group for Bahrain-based investment firm Arcapita.

Singapore has seen private residential property prices fall about -20% from their peak in the second quarter last year after jumping +31% in 2007. Each Asian market may face its own particular challenges.

In Singapore, the city-state’s growing status as a regional finance and wealth management hub left it vulnerable as banks and investment firms shed workers amid the credit crisis.