Commercial investment volumes in Europe fell -74% in the first three months of 2009 year-on-year to € 11.4bn, according to Cushman & Wakefield’s latest European commercial real estate investment report.
The report said that no market was unscathed, adding that rents are under pressure in most areas as the decline of the occupational sector accelerates further. With prime yields rising further, capital values across Europe were down -18.5% over the year.
Trends within the market were similar to late 2008, with foreign investors pulling back faster than domestic buyers, taking just a 29% market share in the quarter, down from 43% last year. Virtually all countries saw a similar pattern, with major markets such as Sweden, the Netherlands and Russia seeing no significant foreign buying at all.
The only exceptions were Italy, which saw an increase in foreign buying after a very weak fourth quarter, and the UK, where a steep fall in pricing and sterling, as well as the increased availability of property as companies and institutions have needed to make sales, have combined to make the market a key focus for many of the international buyers who are in the market.
While domestic buying in the UK dropped by 41% - in line with wider European trends - foreign buying increased 147% on the final quarter of 2008. Nonetheless, activity in the opening quarter by foreign players was still down on the same period last year, by -54%.
Estonian economy contracts -15.1%
The Estonian economy contracted -15.1% year-on-year in Q1 2009, with low domestic and foreign demand depressing overall output in the Baltic state, according to the statistics office.
Estonia , like its neighbours Latvia and Lithuania, has been hit by its worst post-Soviet recession because of the global credit crunch and the collapse of a real estate price boom.
Their plight has hurt Nordic banks, many of which had expanded their loan portfolios and helped inflate prices and overheat the small open economies.
Estonia’s statistics office said the output drop in the first quarter, slightly less than a 15.6% flash estimate released in May, reflected a drop in activity in manufacturing, construction, retail and wholesale trade and transport, storage and communications.
It said: ‘Domestic demand decreased by 21.4% compared to the first quarter of the previous year above all due to the substantial decrease in household final consumption expenditures, gross fixed capital formation and change in inventories.’
The Estonian central bank’s spring forecast said that in a worst-case scenario, the economy would contract -15.3% over 2009 as a whole.
Construction of new-build decreases by half
According to the National Statistics Institute (NSI), construction of new residential property in Q1 2009 decreased by -42.8% compared to the previous quarter, and was -12.9% lower than Q1 2008.
A total of 3897 new flats in 547 new buildings were developed in Q1 of 2009, the majority of which in Varna and Bourgas, followed by Plovdiv and Sofia. Not a single building was completed in Kyustendil or Stara Zagora, according to the NSI.
NSI statistics also showed that the average new construction flat has been reduced in size from 78.3sqm down to 75.5sqm.
Worldwide News
Biggest fall in house prices in 23 years
According to Absa’s House Price Index, residential property prices in South Africa showed the biggest year-on-year fall in 23 years in May 2009.
The report said: ‘Nominal house prices in the middle segment of the market declined by -3.6% year-on-year in May, which was the biggest price drop since late 1986’.
On a month-on-month basis, nominal house prices were -0.5% lower in May compared with April.
Jacques du Toit, sectoral analyst of secured lending for Absa Retail Bank, predicts that house prices are set to decline by a nominal 3%-4% in 2009. According to Absa’s figures, property in South Africa have reached early 2007 prices, with the average house priced at about R930 000.
Du Toit said: ‘Nominal year-on-year house price deflation, which commenced in December 2008, continued in May this year, while in real terms prices are declining on a year-on-year basis since January 2008.’
Du Toit said middle-segment house prices were down by a real -10.7% y/y in April, after declining by a revised -10.2% y/y in March, which was the biggest price decline since September 1992.
Canadian residential property prices down -8.5% from 2008’s peak
According to the Teranet-National Bank National Composite House Price Index, house prices in Canada fell by -5.8% in March compared to March 2008 which is a faster pace of decline than in February (-4,1%).
The index, which measures the rate of change of prices for single family homes in six metropolitan areas, also showed prices were down -8.5% nationally from their peak in August last year.
Western Canadian home prices were hardest hit, with Vancouver leading with a -9.6% decline in March from a year earlier, while Calgary had an -8.4% drop, Toronto a -6.9% slide and Halifax the smallest fall at -0.8%. Montreal and Ottawa bucked the trend in March, rising +2.9% and +1%, respectively.
While the economy remains a huge concern, lower prices and interest rates are spurring first time buyers into the market place, according to a report by Royal LePage Real Estate Services. The report showed that 86% of Canadians say lower interest rates make them more likely to buy a home and 81% say lower prices are another motivating factor. But the economy remains a stumbling block, with 76% citing job security and 64% saying a stable economy are important factors in their buying decisions.
However, first time buyers are returning, helped by homebuyer’s tax credit and a home renovation tax credit for 2009. And so far Canadian developers have avoided a disastrous spring, with new home sales down by -26% in April compared with last year, less than was expected.
Buyers need to start entering the market
According to the May NZ Property Report, the number of new property listings have declined for the third month in a row, with listings in May dropping a further -5% in April.
Listings are now down by -29% since the same time last year. Asking prices are also down in May, 1% below those in April and 6% down on the market’s peak in October 2007.
But according to Alistair Helm, NZPR’s chief executive, prices are softening rather than collapsing and 2008 was a dormant period with many properties just sitting on the market.
However, in Australia first time buyers are boosting the property market helped by low interest rates and Government grants. According to Yvonne Chan, head of research at Australian Property Monitors, monthly auction figures for the year showed clearance rates were back to the levels they were in 2007. But there is concern that buyers, other than those seeking their first home, need to start entering the market if there is to be a recovery.
