German business expectations rebound from a record low

New legislation in Cyprus is only for new purchases

Delaying long-term investment decisions due to economic climate

Australian house prices will increase by a fifth

Hong Kong’s luxury residential leasing market sees hefty rental declines

Supply and demand imbalance in Dubai

German business expectations rebound from a record low

German business expectations rebounded from a record low as the outlook for export sales stabilised, the DIHK chambers of industry and trade, citing a survey of more than 20,000 companies.

The balance of optimistic and pessimistic expectations rose to minus 27 from minus 35 in a survey published in February, led by industry and construction. Export expectations rose to minus 34 from minus 35. The survey was conducted in April and May and was finished earlier this month.

Chancellor Angela Merkel’s coalition is spending about € 82bn on stimulus measures to pull Europe’s biggest economy out of its worst recession since World War II. The DIHK survey, the country’s biggest, adds to evidence that fiscal stimulus and interest-rate reductions may halt the decline later this year.

The German economy contracted more than forecast in the first quarter, slumping the most on record. Gross domestic product (GDP) plunged a seasonally adjusted -3.8% from the fourth quarter, when it fell -2.2%, according to the Federal Statistics Office.

New legislation in Cyprus is only for new purchases

New legislation in Cyprus aimed at clearing up years of problems with title deeds will only apply to new purchases, leaving tens of thousands of property owners without legal documents.

The Cypriot Government confirmed that the new law will have no bearing on old transactions which means that buyers remain at the mercy of the developer who sold the property to them and the banks that hold their title deeds as collateral for loans.

It is a major blow for property investors on the Mediterranean island, many of them foreigners, as the Government has promised to sort out the mess which dates back decades in some cases.

It is estimated that up to 100,000 buyers may have paid fully for their properties but have no legal documentation to prove that they own it. This also means they cannot sell it. Around 30,000 of them are foreign investors most of whom are British. They believe that the Government has not only ignored their plight but has gone back on a pledge that the new law would help everyone.

Campaigners described the revelation as a ‘bitter blow’ which leaves them with no option but to seek some kind of redress through the courts system which is likely to be lengthy and expensive.

Delaying long-term investment decisions due to economic climate

According to the BBVA, the second largest bank in Spain, the slow pace of economic recovery and the scale of job losses are causing people to put off long-term investment decisions in Spain, curtailing demand for housing.

BBVA’s economic research department also found that the Spanish real estate sector, unlike most other European nations, is significantly out of balance in terms of volumes, and less so on price. The research department pointed to property price corrections of around -10% in 2009 and -12% in 2010 in nominal terms. In all, prices are expected to decline by around -30% from the peak. The rental market is key to the absorption of unsold housing developments.

According to BBVA’s research department, the measures put in place by the Spanish Government, such as the announced tax deduction in housing purchases, could prove a significant and effective counter-cyclical measure. Globally, despite the raft of measures being put in place by governments, the lack of precedents for measures of this scale makes it hard to pinpoint a potential recovery in 2010.

Lower inflation and interest rates and Government-sponsored stimulus measures are helping household finances. This together with falling housing prices, should breathe some life into demand for housing, according to BBVA’s economic research department.

Australian house prices will increase by a fifth

Australian house prices will rise by nearly +20% over the next three years, buoyed by the ‘current heat’ in the market surrounding first home buyers, according to research house BIS Shrapnel’s Residential Property Prospects report, based on data from the Real Estate Institute.

The report said average house prices in most capital cities will grow by between 11-19% over the next three years. In real terms (where prices are adjusted for inflation) the level of percentage growth is about half.

Hong Kong’s luxury residential leasing market sees hefty rental declines

The local luxury residential leasing market in Hong Kong has undergone a period of consolidation since Q3 2008, however, the rental decline of serviced apartments has shown signs of tapering off, according to Colliers International’s Serviced Apartments Overview.

Due to the global financial turmoil and economic slowdown, the luxury residential leasing market has experienced a rental decline of -24.6% between August 2008 and April 2009. The leasing demand has dropped significantly as many corporations implemented different cost-cutting measures such as staff retrenchments and the reduction of housing budgets. 

According to the report, the average rental of serviced apartment decreased by -5.4% in Q1 2009 compared to Q4 2008 and by -6.4% in Q4 2008 compared to Q3 2008. However, the pace of decline slowed to -1.7% (month-on-month) in April 2009. 

The average rental fall of serviced apartments, registering -12.9% between August 2008 and April 2009, was also less than that of -24.6% for luxury residential leasing property, suggesting that the serviced apartment sector has been relatively more resilient amid the current downturn of the residential leasing market.

Looking ahead, the challenge in the luxury residential leasing market might represent opportunity for the serviced apartment sector, which features flexible lease terms.  For example, some occupiers prefer to stay in serviced apartments for a short period of three months or less before they commit to a long lease in standard units when the economy stabilises.

Supply and demand imbalance in Dubai

A significant amount of new property supply due to enter the Dubai real estate market is making analysts from Deutsche Bank cautious about a recovery.

Property prices in the United Arab Emirates will fall another -15-20% and won’t bottom out until the end of the year and what concerns analysts from Deutsche Bank is the number of expatriate workers that have left the UAE and the amount of new units that are due to come onto the market.

Deutsche Bank estimates that Dubai prices have lost -50% of their value since peaking in August last year, while the Abu Dhabi market has come down 30% from previous highs.

The bank also said that the outlook is cautious despite signs of stabilisation because of the limited number of transactions and a continued decline in rents.

UBS’s outlook is even gloomier. Property prices in Dubai will have fallen another -40% by the end of 2010 when one in three homes will be vacant, it said in a report. Although there may be some pent up demand there is also a significant amount of new supply set to enter the market this year and there are doubts as to where the new demand is going to come from.

Analysts currently estimate a vacancy rate in Dubai of 10-20%. Adding 30,000 new units to the market by the end of 2010 would translate into another 10% of vacancies. The UBS report also mentioned a declining expatriate population. It expects a decrease of -8% this year and -2% next year