Bulgarian commercial sector hit by flagging demand

Spanish property market contracts by -48%

Commercial trading volumes have decreased by three quarters

A rebound in China’s residential market is set to continue

“Dubai is one of the riskiest property markets for investors”

Canadian property starts experience a sharp decline

Bulgarian commercial sector hit by flagging demand

According to a survey by Foros Real Estate Agency, the Bulgarian commercial sector, particularly the office segment, has been badly affected by ample supply and flagging demand in the first half of 2009.

Around 20-30% of offices across the country are lying empty. Rental and sale prices have decreased by -12.27% and -7.26% respectively since January.

Analysts from Foros are predicting sporadic investment activity in the second half of the year. Development projects will be delayed and a recovery is not expected until the economy improves. However, some analysts see the green shoots of recovery in consumers’ revived interest and restored confidence, as well as in decelerated price downtrends.

The residential property market is also suffering. Jones Lang LaSalle has estimated that property prices have declined by -12% in Sofia in the last year while real estate agency Address puts it at 16-38% in the last six months alone.

Spanish property market contracts by -48%

The Spanish property market contracted by -48% in April, compared to April 2008, according to the National Institute of Statistics (INE).

The figures showed April had its worst property sales figure on record, with just 26,251 property transactions (excluding social housing). This figure was -16% less than in March and -39% below the first four months of 2008. The greatest fall in sales was recorded in the re-sale market, down -52% to 13,535, whilst new builds had fallen -43% to 15,682.

The largest decreases in property sales were recorded in the Castellon province (-63%), followed by the Balearics (-59%), Las Palmas province (-58%), and the Valencian Community (-56%). The fall in sales was less drastic in Málaga (-38%), Cantabria and Galicia (-33%).

Commercial trading volumes have decreased by three quarters

According to Cushman and Wakefield’s (C&W) European Commercial Real Estate Update, trading volumes fell to €11.4bn in Q1, -74% down on the same period of 2008.

In addition prime yields increased by 0.28% to 7.5%, their highest level for nearly five years and +1.39% up since 2007. Occupier markets are increasingly negative, with rents down in 24 of the 32 countries examined and by -14.5% overall, led by falls in the East. The combination of these factors left capital values across Europe down -18.5% over the year.

However, C&W believes there are early signs that some investors are now ready to act, led by interest in the UK. Whilst domestic buying is down significantly on early 2008 levels, a  number of markets are reporting renewed interest from some domestic high net worth individuals and families, as well as local institutions. These are often investors who have been out of the market for a number of years due to competition from foreign and debt backed buyers, but who now see attractive opportunities to invest, often for assets which may rarely come to the market, albeit often in smaller lot sizes.

A rebound in China’s residential market is set to continue

According to a Reuters’ poll, a rebound in China’s residential property market is set to continue but economic uncertainty means sentiment will be cautious and prices nationwide will rise a modest +10% between now and the end of 2010.

Property prices in bigger cities, where wealth levels and spending propensity are higher, will outperform second-tier cities with apartment prices in Shanghai, Shenzhen and Guangzhou set to rise by at least +10% in the next 18 months, according to Reuters.

The poll coincided with a Reuters’ global real estate summit. Home sales in first and second-tier cities have jumped more than +20% in the past three months, according to analysts, after correcting in the second half of last year.

The market has been boosted by interest rate cuts and Government measures such as stamp duty cuts and reduced mortgage down payment requirements, which are part of a broader economic stimulus plan.

“Dubai is one of the riskiest property markets for investors”

According to Saud Masud, an analyst at Swiss Investment UBS, over-supply and population decline makes Dubai one of the riskiest property markets for investors.

Masud believes that when recently unemployed expats prepare to leave the emirate when the school terms end, the reality of the impact of the global recession will be felt.

He said: ‘In my view Dubai’s property risk profile appears to be one of the highest in the post war era and while one may debate the potential support factor from Abu Dhabi the fundamental oversupply and population dynamics risks are very much there.’

Masud described the scale of Dubai’s real estate collapse as being on a par with Hong Kong’s housing crash at the start of the decade and boom and bust cycles in other markets such as Singapore and Ireland.

Canadian property starts experience a sharp decline

New property starts in Canada are experiencing a steep decline in 2009 due to economic uncertainty but are expected to increase again in 2010, according to a new report from the Canada Mortgage and Housing Corporation.

The market is moderating due to three key factors. First, strong house price growth between 2002 and 2007 has tempered home ownership demand particularly in Western Canada; second, the record high levels of new listings have increased the competition from the existing home market and reduced spill over demand, and, finally, uncertainty about the economic outlook is a contributing factor restraining demand for home ownership.

Overall in 2009, property starts will decline in all areas of Canada and more so in Western Canada and Ontario. By 2010, however, all provinces will see increases in property starts.

Analysts point out that strong sellers’ market conditions in recent years were reflected in strong upward pressure on the average price of residential properties, which increased in the +9-11% range between 2002 and 2007. The first half of 2008 saw an easing of sales and higher levels of new listings. This brought the Canadian resale market back into buyers’ market territory by the end of 2008.

The report said that in 2009, prices are expected to decrease by -6.8% to $283,100 and remain at that average in 2010.