Irish house prices fall at a record pace

New property tax on private dwellings

Hungary’s new fiscal plan to revive the economy

Expansion plans in China

Rise in vacancy levels in Japanese commercial market

Canadian Government buys fixed mortgages

Irish house prices fall at a record pace

Irish house prices fell at a record pace in April, extending a two-year slump and cutting the average price to the lowest level in five years, according to Dublin-based Irish Life and Permanent Plc.

Prices fell -1.9% from March and dropped -10.7% from a year earlier. The average house price in April was €248,640 ($346,753) compared with €311,078 at their peak in February 2007.

Ireland ’s economy is mired in the worst recession in its history due to the collapse of the property market and the impact of the global financial crisis. Rising unemployment and tax increases have curbed the ability of new buyers to purchase homes even as interest rates decline to a record low.

New property tax on private dwellings

The Latvian Government plans to impose a new real-estate tax on private dwelling space next year, with the aim of raising an additional 24 million lats ( € 34.15m) annually to the state’s almost depleted coffers.

The Finance Ministry’s new real-estate tax plan proposes an annual rate from 1% to 3% depending on the size of the living area. According to the Finance Ministry, the law is designed to protect poor people living in small apartments. Therefore apartments with less than 40sqm of dwelling space will be exempt.

Though analysts say the move makes sense, some believe the Government’s decision comes three years too late. Back then, the economy was booming with average gross domestic product (GDP) growing in double digits annually. Since then Latvia’s real-estate and credit bubbles have burst and GDP growth fell -18% in Q1 2009, prompting both the central bank and the Finance Ministry to revise their forecasts this year to -16.5% and -16% respectively to -18%.

Hungary’s new fiscal plan to revive the economy

Hungary ’s Government recently presented a new fiscal plan for 2010 as part of austerity measures to revive the economy and keep the deficit in check, calling for more taxes on property and wealth.

Finance Minister Peter Oszko told a press conference: “In 2010, thanks to the new fiscal plan, the average salary will increase to 15,000 forint ( € 54) per month, but we will introduce a general property tax.”

Under the new measures, the tax on company profits will be raised to 19% from 16%, while a “solidarity tax” of 4%, introduced in 2006 to help finance austerity measures will be scrapped, Oszko noted. The Government will also eliminate small local taxes to make the fiscal system simpler and more transparent, he said.

Hungary ’s parliament recently passed a new tax bill for 2009 as a first step in a severe austerity programme planned by Premier Gordon Bajnai’s new Government including a hike in value-added tax and pension cuts. His predecessor, Ferenc Gyurcsany, resigned in March, having failed to pass his own belt-tightening plan.

Bajnai’s measures aim to reduce government spending so as to keep the public deficit under three percent of total economic output while getting the economy back on track after its worst slump since the 1930s.

In 2009, the Government forecasts the economy to shrink by -6.7%, with modest growth expected only in 2011.

Expansion plans in China

Real estate companies in China are announcing expansion plans despite a slowdown in the number of foreign investors in the property market.

They are betting on real estate becoming more affordable and citing the first green shoots of recovery in the Chinese economy as a sign that their instincts are correct.

The latest research from Colliers International showed that local investors have dominated Shanghai’s real estate investment market in the first quarter of 2009 while foreign investors continued to slow down their expansion plans.

The first quarter witnessed more local insurance companies entering the direct real estate investment market and aggressive acquisitions made by state-owned enterprises.

Colliers said the forthcoming trend is that more local investors will jump on the bandwagon in the investment market during 2009. Also sales volume of residential property in Shanghai bounced 20% in April from March, and surged 84% from a year earlier.

Rise in vacancy levels in Japanese commercial market

A serious rise in vacancy levels in the Japanese commercial property market is a result of complete lack of demand but there is hope that foreign property investors are eyeing bargains and may become active towards the end of the year, according to DTZ, and companies in bankruptcy are downgrading their offices to lower grade buildings in less prominent locations.

In Q1 2009, Vacancy for Tokyo Grade A offices fell to 6.73%, a fall of -1.54% from the previous quarter. It is the first time in 19 quarters since the second three months of 2004 that it has gone over 6% and the report describes the situation as ‘serious’.

Rentals declined further by -4.7% in the first quarter of 2009 from the last quarter of 2008. It has now dropped by -16% from the peak of rentals recorded at the end of 2007. The report said: ‘As the gap between asking rent and achievable rent is expanding, the real rent acquired by landlords should be much lower.’

Due to weakening corporate demand, The Osaka office market stayed gloomy during the first three months of 2009. With an increasing amount of new supply, it became difficult to fill the vacancies both in existing and new buildings. Vacancy for Grade A offices was 5.38%, up by +1.09% from the previous quarter, the first time that rates went beyond 5% since 2005. In Osaka, rentals declined by -0.2% in Q1 2009 compared to the previous quarter and by -1.3% compared to the same period in 2008.

The report also said that the real estate investment market remained quiet at the beginning of 2009. However, anecdotal evidence suggest that there were increased purchasing activities among corporate as well as high net worth individuals looking at small sized properties who have found the current situation attractive as the market cools down with limited number of players.

Canadian Government buys fixed mortgages

The Canadian Government bought C$1.38bn of five-year fixed mortgages from banks, less than the C$4bn it offered to purchase, as part of a program to help foster new lending, according to the Canada Mortgage and Housing Corp.

The average yield on the transaction was 2.9%. Canada Mortgage and Housing has offered to buy as much as C$125bn of the securities.