Poland to be first CEE country to recover

Spanish housing stock to fall -7%

Vacancy rates an unreliable source to predict office rental values

Abu Dhabi property sales remain poor

Florida’s real estate market’s recovery is delayed

Construction firms expect profits to increase in 2010

Poland to be first CEE country to recover

Different real estate markets across Europe improved in the third quarter of 2009 but at noticeably different speeds according to t he Jones Lang LaSalle CEE City report.

It stated that improving investor sentiment is pushing activity in a specific band of prime real estate forward, but financing is still proving complicated to obtain.

John Duckworth, managing director of Jones Lang LaSalle in the CEE, said: ‘Occupier activity across all sectors has slowed compared to previous years as similar financing issues prevent or delay relocation and expansion plans.

‘Rental levels are beginning to bottom out in most of the core CEE markets and we expect stability to fully return throughout 2010 once the supply and demand levels rebalance.’

According to the report, Poland is forecasted to be one of, if not the only country in Europe, to have positive GDP growth during 2009. The Czech Republic is expected to follow in the middle of 2010 and Romania and Hungary towards then end of 2010.

Spanish housing stock to fall -7%

According to a new report from Funcas, a Savings Bank Foundation, total housing stock in Spain will fall -7% in value by the end of 2009 to €4.19 trillion, due to the poor quality of property for sale.

It is calculated that the value of Spain’s housing stock during the property boom of 1996 to 2006 rose by a factor of 3.6 as a result of prices tripling and an increase of +25% of new land being built on.

Funcas also stated that some of the property stock was too big and of poor quality which would take a while to disappear from the market and that this type of property has caused the market to become segmented into different grades of quality with the well-built selling now at reasonable prices, but the bad stock unlikely to sell at all.

There is an estimated 732,000 unsold new homes and Spain’s G-14 developers’ association has stated that now is the right time for the market to come back to life, but it will need help from the Spanish Government which has so far resisted the developers’ calls for a bailout.

Vacancy rates an unreliable source to predict office rental values

According to a report by Capital Economics, office vacancy rates across Europe have varied hugely since the start of the recession, as in Q2 2008 Warsaw had a vacancy rate of 2.1% whereas Frankfurt's was 13.2%.

You would assume those markets with the lowest vacancy rates would have seen small falls in rental values. However, the Paris market for example had a low vacancy rate but suffered the largest falls in the region, in comparison to Amsterdam which had a high vacancy rate but only experienced a small fall.

The report suggested that the level of vacancy rates in 2008 had no bearing on the prospects of rental values in the 12-18 month period to Q3 2009.

It would appear, according to Capital Economics, that rental values are more affected by rises in unemployment as France, Poland and Norway all had high increases in unemployment and steep falls in rental values. However, these three markets prior to the 'downturn' had experienced very high increases in rental value growth.

The report said: 'Given that we think unemployment will continue to rise, weak occupier demand is likely to push vacancy rates higher and, ultimately, pull rental values lower.'

Abu Dhabi property sales remain poor

Abu Dhabi property sales are expected to remain poor until the end of 2009, but will stabilise in 2010, according to a report by CB Richard Ellis (CBRE).

The second quarter of 2009 saw demand weakening across all market sectors with sales prices declining universally resulting in an abrupt end to the off-plan market. This is in sharp comparison with the same period in 2008 where the market saw rampant growth and appeared unlikely to stop.

Matthew Green, associate director of CBRE Middle East, said: ‘Low levels of investment reflected the unmatched expectations of both existing investors and potential buyers with owners of properties reluctant to succumb to lower values in anticipation of a positive cyclical spin, while buyers are wary of a continued downturn in asset values.’ Rental values in the emirate also fell with landlords having to take a more flexible approach in order to stay in the market.

The third quarter saw prices and sales at a very low level, with average sale prices for high end apartments fall by Dh2,700/sqm to Dh8,600. Apartment rents dropped -5% in comparison to the previous quarter.

Florida’s real estate market’s recovery is delayed

According to a report from the University of Florida, high unemployment is the main reason that Florida’s real estate market is suffering and is subsequently delaying a recovery.

The state’s unemployment rate is at its highest since 1975 having increased to 11% in September 2009. Combined with a high number of foreclosures, it means Florida is at the bottom out of the number of US states likely to recover from the economic downturn.

Timothy Becker, director of UF’s Bergstrom Center for Real Estate Studies, said: ‘Most economists think the recession is over, but people are afraid to spend money as unemployment keeps going up which creates problems for every sector of the real estate market. Florida was the first one into the recession, and it’s probably going to be the last one out.’

The report also stated that despite the number of new foreclosures slowing down and those ‘bargain’ ones selling well, there is still concern that more will hit the market.

Becker said: ‘There is a lot of speculation that there could be a double-dip recession, where we recover just a little bit and then go back into recession again.’

As a result of banks still being reluctant to lend and builders not wanting to build so they don’t have excess stock, Becker stated that the outlook is rather gloomy and that foreign property investors may be needed to start a recovery.

Construction firms expect profits to increase in 2010

A survey conducted by KPMG found that approximately 64% of the world’s construction industry firms expect to maintain or increase their profits by the middle of 2010.

However, Fiona McDermott, KPMG’s UK head of building and construction, believes that although the construction industry reported a relatively positive outlook, with around half of respondents reporting order books and profit at similar levels to a year ago, there may be worse in store for the industry later on.

She said: “Many companies are living off the profits of contracts secured before the recession, and whether such performance can be maintained is dependent on a number of factors, not least a general economic recovery. Although the sector appears to be in fairly good shape at the moment, we have to ask ourselves: will 2010 be the year that industry feels the pain already experienced by other sectors of the economy?”

The survey also stated that a high percentage of respondents felt that Government stimulus packages will bring a significant increase in opportunities in the next 24 months, although just 12% of worldwide respondents believe they will be of substantial help.

However, those respondents in Asia Pacific were much more optimistic than those in the rest of the world, with 82% of those in the region expecting a moderate or significant increase over the next 24 months.

The findings were as a result of KPMG’s annual global construction survey, which was compiled by interviewing senior construction professionals across 30 countries.