European commercial property markets to achieve positive returns in 2010
Capital Economics has forecasted in a report that all European commercial property markets will achieve positive total returns in 2010-11.
Russia, Turkey and Poland are expected to provide the highest returns outside the Euro-zone as they currently have high levels of rental yield, with Norway also looking comparatively good. Hungary and Romania meanwhile are the weakest, with yields likely to merely stabilise.
The report did state however that although Russia should see strong returns, it is somewhat an opaque market and does not offer a good risk/reward trade off.
The best performing Euro-zone markets will be France and Germany according to the report, with Germany receiving higher returns in the retail and industrial sectors whilst France achieves better returns in the office market. It predicts that the Netherlands and Belgium will also do quite well, but as the Irish, Spanish and Greek economies will continue to be weak the total returns will be poor. Also, Swiss yields have little scope to decrease as they have not changed since their 2007 low.
It stated: ‘ We are more optimistic about the outlook for property returns in non-Euro-zone European markets than in our previous forecasts. Taking a five-year view, we think it plausible that total returns could average between 4-10% per annum in most cases.’
Yields are expected to drop by -0.5-0.6% in the UK and Norway, but they should still offer the highest total returns. Yields are expected to fall by -0.2-0.4% across the rest of the non-Euro-zone, with Denmark and Sweden looking particularly unattractive to investors because of poor valuations.
Spanish property prices starting to recover
Spanish property prices are starting to rise in some areas of the country, according to from savings bank Caixa Catalunya.
The locations which are seeing a recovery are Cantabria, the Basque region, Asturias and La Rioja, as these are areas in which there isn’t an over abundance of property on the market.
Eduard Mendiluce, head of Caixa Catalunya’s property division Procam, said: ‘House and land prices have touched bottom in some cases. The adjustment is almost over, if not already.’
There are between 660,000-1,040,000 homes on the market in the southern coastal region, the report stated, with many being new-build as well as holiday homes which are not selling. These represent between 2.6% and 4.1% of the country’s housing.
The report estimates that there will be 220,000 homes required between now and 2015, almost half the 300,000 to 450,000 that has been estimated by developers. This means it could take five years for the market to digest the current stock.
French market saw only a 5% decline in prices in 2009
Research from the French property company FNAIM has revealed that the French property market faces a tough year in 2010 as real estate experts are not expecting a recovery, despite property prices beginning to stabilise.
Although the global economic downturn has made the last 18 months hard for the property industry, France has benefited from not having an overpriced market and a lending system that is more cautious. People in France, according to the report, do not believe that now is a good time to buy or sell as the economic climate has dented confidence. This is despite average property prices in France only declining by -5% in 2009 which compared to 2008 makes it very much a buyers’ market.
The Alps has been particularly badly hit, with property prices falling by -10-20%, as houses had been overpriced because of high demand, however, lack of supply has now prevented them from dropping any further.
Worldwide News
China’s economy to grow +9.5% in 2010
According to the State Council Development Research Centre (SCDRC), China’s economy is expected to grow by +9.5% in 2010 as real estate investment buoys growth and inflation remains mild.
The report, which was published in the Chinese-language China Economic Times, stated that the external (economic) environment would remain quite grim in 2010, but that it’s unlikely to deteriorate any further and the CPI inflation index was likely to stay below 3%.
The report stated: ‘Against a backdrop of ample production and supplies, we forecast that in 2010 there will not be marked inflation.’
The report supports Chinese officials and many experts’ beliefs that the country's economy can maintain its momentum into 2010, overcoming worries about inflation, investment policy and a heady housing market. Especially after the country's 4 trillion yuan stimulus package, complemented by a record surge in bank lending, propelled the economy to 8.9% year-on-year growth in Q3 2009.
Recently, Premier Wen Jiabao gave a cautious outlook for the nation's economy in 2010, saying it was too early to wind down Government stimulus spending but that officials needed to be vigilant about surging property prices and incipient inflation.
Is Hong Kong’s property market cooling down?
The Hong Kong property market appears to be cooling down after two prime residential sites, in a northern area of the city called Tai Po, sold for only $1.34bn at auction, having been expected to achieve significantly more.
The sale of the two adjacent sites, the first major auction of Government land in two years, was expected by market observers to draw fierce competition from land hungry developers.
The result has been welcomed by analysts as it points towards a more stable market in 2010, after prices had soared by +27% in 2009 creating one of the world’s hottest property markets after a buying frenzy.
The analysts also believe that developers are being more cautious about price as they are concerned the Government might implement measures to avert a property bubble, possibly leading to a drop in property prices as Donald Tsang, Hong Kong’s Chief Executive, stated in October 2009 that the Government was watching real estate prices and would fine tune land policies if necessary.
Investors in Abu Dhabi delay property purchases
Real estate investors in Abu Dhabi are delaying property purchases until new developments have been completed, despite property prices in the capital remaining stable, according to Landmark Advisory.
October and November had been two of the most active sales months in 2009, as demand was focused on close-to-completion developments such as Marina Square, Al Reef Villas, Sky Tower and Al Bandar. However, buyers continued to look for distressed sales as prices had not noticeably increased.
Jesse Downs, director of research and advisory services at Landmark Advisory, said: “Despite an increase in sales activity in the third quarter, demand levels since mid-November have waned, leading to limited sales volumes in December.
“By reducing the price, Al Bandar is likely to start attracting more buyers that were until now focused on less expensive developments in Marina Square, which are currently transacting in the secondary market at AED 1,250-1,300sq/ft.”
The company’s latest sales guide revealed that transaction prices had remained stable throughout Q4 2009 but are unlikely to increase until the properties are handed over in 2010.
Downs continued: “Our findings show that while buyers through Q309 were still primarily end-users, this demand segment is now waiting for clear signals of progress within these nearly completed developments before engaging in any activity. Only a small number of investors are currently active in the market. The postponement of delivery dates, most notably for Al Bandar (originally scheduled in Q409) and Marina Square (originally scheduled in Q409) may be further restricting demand.”
