Unemployment in Euro-zone reaches its highest level in a decade

Czechs see a steep fall in commercial transactions

Sweden’s interest rate hits record low

“Infrastructure is inhibiting growth in the South African economy”

US mortgage applications drop

Green shoots for Dubai in 2010

Unemployment in Euro-zone reaches its highest level in a decade

Unemployment in the 16-member Euro-zone jumped more than forecast in May to reach its highest level in more than a decade, according to the European Union’s (EU) statistics office, Eurostat.

The May increase pushed seasonally adjusted unemployment up by 273,000 to 9.5% compared with a 9.3% in April, according to Eurostat, amid concerns that the lay-offs will surge by the end of the year in the wake of the global recession. In May 2008, Euro-zone unemployment stood at 7.4%.

Eurostat said May’s unemployment rate in the broader 27-member EU edged up to 8.9% from 8.7% in April. That was in particular as a result of unemployment in Central Europe as well as in Spain. The recent data showed the May jobless rate in Spain hit 18.7%, 16.3% in Latvia and 15.6% in Estonia.

Czechs see a steep fall in commercial transactions

The Czech market witnessed a continued steep fall in commercial transaction volumes in Q2 2009, making it the weakest quarter in six years, according to DTZ in its latest Investment Market Update for the country.

At the same time, DTZ registered a tangible increase in the level of interest from a small number of institutional investors and open-ended funds, which are actively placing bids on properties in good locations. According to DTZ, there has also been an increase in the number of domestic-based opportunistic investors attempting to acquire well located properties at discounted prices.

Total investment volume in Q2 2009 amounted to around € 18m, a -96% drop on the year-earlier period and a -61% decline compared with Q1 2009 and only two investment transactions were recorded in Q2 2009.

Prime yields currently stand at around 7% for offices and retail and +9.5% for industrial/logistics. The majority of international investors have shifted their primary focus to Prague, according to the adviser. Assets in non-established locations with low specification will suffer most during the coming 12 months, DTZ predicted.

Sweden’s interest rate hits record low

Sweden ’s Central Bank cut its interest rate to a record low of 0.25%, citing “the weak development of the economy” as Sweden has been hit hard by the global economic downturn and exports have fallen, according to the Central Bank.

The bank expects the low rate to remain until autumn 2010, and said it was hard to predict when the economy would recover. In addition, the bank cited that the labour market was continuing to deteriorate rapidly. The rate cut is aimed to boost demand and consumption.

Sweden is a member of the European Union but is not in the single- currency Euro-zone.

“Infrastructure is inhibiting growth in the South African economy”

In South Africa, infrastructure projects worth hundreds of billions of rands over the next five years are on the drawing board, but funding them has become a problem, according to Ernst & Young.

John Wetton, a director and construction leader at Ernst & Young, recently said in a presentation on key construction costs and strategies for weathering the storm that there were still great opportunities for the construction sector because of infrastructure, housing and the demands of backlogs.

Wetton saw the Government’s infrastructure expenditure initiative “progressing for some time” because the current programme was to catch up on past underinvestment.

Population growth and urbanisation would continue to drive investment in infrastructure, he said. “Money will be an issue, but there will be a way around this. I think there will be more public-private partnerships to fund these projects.”

Rob Stretch, the director of business tax advisory at Ernst & Young, said it was an absolute necessity for the Government to source funding for its infrastructure programme.

“We can’t continue as we are, as infrastructure is inhibiting growth in the economy. We have to fund the infrastructure programme or the economy will never get beyond 3% growth again,” he said.

US mortgage applications drop

According to the Mortgage Bankers Association’s (MBA) index, US mortgage applications fell in the week ending 26 th June by the most since February.

Applications to purchase a home or refinance a loan dropped -19% to 444.8 in that week and ended 548.2 in the prior week. The group’s refinancing gauge declined -30% to the lowest in seven months, while the index of purchases fell -4.5%.

Unemployment, which touched a 26-year high in May, and rising borrowing costs discouraged homeowners from refinancing, while a growing number of foreclosures sidelined potential buyers waiting for house prices to stop tumbling. Pending home sales showing contracts signed in May rose +0.1%, compared with a gain of +6.7% in April, according to the National Realtors Association.

Green shoots for Dubai in 2010

During a recent Cityscape Connect forum, a panel covering the industry spectrum from investors to real estate agents agreed that Dubai’s property market would start to see green shoots sometime between January and June 2010.

Mohammed Nimer, CEO, MAG Group Properties, said: “The recovery will be gradual and sustainable. The fundamentals are sound, property is becoming more affordable through basic supply and demand, which in turn cuts business costs whether its commercial rent or employee housing allowance.”

According to Nimer, the key economic indicators are still positive and improving as we move into the second half of the year. The IMF is forecasting UAE economic growth of around +3%. The gap between loans and deposits at UAE banks narrowed in May to Dh31bn, a decrease of nearly Dh5bin since April. The figure had stood at Dh90bn at the start of 2009.