Scandinavia’s commercial market begins to bottom out

“Newer German properties represent good investments”

Europe’s retail property market is bleak

Dubai house prices could fall by another –33%

Singapore’s MoF clarifies proposed changes in income tax laws

BBVA confirms sale-and-lease-back plans

Scandinavia’s commercial market begins to bottom out

According to Newsec’s Property Report 2009 on the Northern European real estate market, the commercial property market in Scandinavia is beginning to bottom out although real estate prices in some Nordic countries will continue falling.

Prices in Norway and Denmark have begun to stabilise, although the bottom has not yet been reached in Sweden, Finland and the Baltic countries, according to the report. The rental market throughout the region has weakened significantly in the past year, but the trend varies between the countries, with Helsinki and Copenhagen generally showing smaller rent reductions than the other capital cities.

Norway is leading the recovery and in Denmark a stable trend in rents in the capital city Copenhagen for good-quality properties in good locations means that prices are not expected to sink much further.

In Sweden and Finland, falling rent levels mean that prices are continuing downwards in spite of the low interest rates, although at a slower pace than before, according to the report. In the Baltic countries prices have fallen dramatically in the past year.

However, prices are expected to stabilise in coming years, although this is more to do with generally lower interest rates than an upturn in the market.

In the first half of 2009, transaction volume on the Nordic and Baltic property markets declined by -80% to a record low, and in Finland and Norway they fell by -75% and -60% respectively. Foreign investors have also reduced their activity in the region.

“Newer German properties represent good investments”

Jones Lang LaSalle (JLL) believes that newer property in top German locations such as Hamburg, Munich or Frankfurt represents a good real estate investment.

Although there is some turmoil and instability in the market in terms of transactions and prices and banks are still reluctant to lend, overall Germany has an exceptionally attractive chance-risk profile, according to JLL’s report.

The report points out that low levels of liquidity in the real estate market and transaction levels are down and there is often a lack of clarity as to pricing levels, but certain property will always do well.

The report said: ‘Strong demand will still be observable for properties built in 1995 or later in top locations such as Hamburg, Munich or Frankfurt. In this market segment, regardless of the economic environment, only few or no price changes can be noted.’

However there is less demand for non-modernised property that dates from the 1950s and 1960s, located in structurally-weak regions and with a considerable maintenance backlog.

‘These properties will not become more attractive to investors in the future,’ it adds.

The report explains that between 2004 and 2007 demand for real estate was generated by the financing culture at the time which led to an extreme rise in property prices.

The report said: ‘Compared to competing investments (fixed-interest securities, stocks or commodities), residential property in Germany represents an opportunity with an exceptionally attractive chance-risk profile.’

Europe’s retail property market is bleak

According to Cushman and Wakefield’s (C&W) European Shopping Centre Development report, the outlook for the retail property market in Europe for the next two years is bleak with the amount of new space opening likely to be down considerably on previous years.

C&W believe in 2010 there is likely to be only 7m sqm of new space open while 2011 could see as little as 5m sqm open across Europe, the lowest figures since 2003. With 2009 expecting to have around 8.7m sqm of new shopping centre space open, a decline of -5% on 2008, the trend is definitely downwards. The research also predicts that completion levels will not pick up significantly for two to three years.
 
The largest amount of new shopping centre space opened in Russia, where approximately 580,000sqm was added in the first six months of 2009, of which around 45% was built in Moscow. In Western Europe, Italy recorded the highest amount of new space, with 18 new centres adding just over 370,000sqm to the market. Germany and the Netherlands also recorded relatively strong activity in the first half of 2009.

Bulgaria recorded the largest percentage increase in shopping centre provision at 33% but the largest centre to open in 2009 in Europe was the 122,000sqm Dolce Vita Tejo shopping centre in Amadora, Portugal.

Although investment activity in Eastern Europe has come to a standstill, there is some activity in more established markets such as the UK, Germany, France and Spain; according to the report.

Dubai house prices could fall by another –33%

According to UBS, Dubai house prices will fall another -33% from current levels, despite posting a yearly drop of -47%.

Prices in the emirate will drop another 33 percent to about AED600 sq ft, analyst Saud Masud told Bloomberg.

Dubai landlords have managed to stall a slide in residential rents by keeping supply off the market, according to Landmark Advisory, but this will only provide investors with ‘a temporary respite’.

Dubai-based research house Proleads believes the UAE’s real estate and construction sectors have been the hardest hit in the region by the global downturn, with a total of 566 projects currently on hold or cancelled.

Singapore’s MoF clarifies proposed changes in income tax laws

Singapore’s Government has moved to clarify proposed changes in income tax laws which many believed could be harmful to the country’s property industry

A change due to take effect in January next year was widely regarded as a move to combat speculation in the real estate sector as it was thought it would load more taxes on those who owned more than one property and sold them within four years for a profit. However, the Ministry of Finance (MoF) has said in a statement that there will be no tax on the gains from an individual who sells a property after 1 January if they have not sold any other property in the previous four years.

Prior to the MoF’s clarification, there were fears that investors might pull out of the property market due to the rumours and confusion on the new ruling. In 1996, the Government imposed tax on the gains of individuals made from selling properties within three years of purchase. This continued until 2001 when it was abolished.

BBVA confirms sale-and-lease-back plans

The Spanish bank, Banco Bilbao Vizcaya Argentaria (BBVA), has confirmed plans to sell and lease back some of its branches as part of an effort to raise capital.

It said in a statement to the Spanish financial market watchdog CNMV that it is holding negotiations to sell the properties but no final agreement has yet been reached.

Although the lender did not disclose the buyer, market rumours have grown over the past 10 months that the bank is about to reach an agreement with RREEF, Deutsche Bank’s real estate arm, for the acquisition of a network of 1,350 branches.

According to an article in the Spanish newspaper Expansión, BBVA is expected to close the sale of 80% of the network by the end of September. The disposal of the remaining 20% should be completed two-to-three weeks later, and will see the German investor team up with US private equity group Area Property Partners, Expansión said. The two deals are said to involve a total of €1.6bn, resulting in a capital gain for BBVA of €1.2bn.