Secure income buyers will be apparent in the UK, Spain and Ireland
Hotel investment across Europe, Middle East and Africa (EMEA) fell to €2.9bn in 2009, a drop of -63% compared to 2008, reflecting the lowest volume of transactions since the late 1990’s according to a report by Jones Lang LaSalle.
JLL predicts that investment volumes will pick up by the end of 2010 with a potential increase of +40% on 2009’s volume. Driven by improved economic conditions, increased investor confidence and more stock on the market investment volumes may reach €4.1bn in 2010.
Mark Wynne-Smith, CEO of Jones Lang LaSalle Hotels, EMEA, said: “The EMEA hotel market will continue to be difficult in 2010, albeit with some important signs of improvement. Transaction activity will be characterised by two types of investors, opportunistic buyers and secure income buyers. The former will be most apparent in the markets most severely impacted during 2009, including the UK, Spain and Ireland. The latter group will mainly constitute institutional investors, searching for properties with a solid income and sound covenants.”
Continental Europe recorded the highest level of activity of hotel investment with the strongest demand apparent for key gateway cities, such as Paris, taking the lead. Germany and Spain were third and fourth places respectively, as investment activity in the UK came to a virtual standstill pushing it into second place. However, during 2010, the UK is expected re-take top spot with regards to volume, moving back towards a 30-40% share of investment into EMEA.
During 2010 the number of distressed hotel assets on the market is expected to slightly increase, despite many owners have faced refinancing challenges in 2009, distressed hotel sales have not been widespread. Many UK financial institutions decided to work with owners to avoid selling in the current market.
It is expected that throughout 2010 investment activity will be driven by the banks and their willingness to lend, with a focus on smaller deals and risk adversity.
Bulgarian construction industry down -22%
The construction industry in Bulgaria decreased by -21.9% in November 2009 compared to November 2008, according to the Bulgarian National Statistics Institute (NSI).
The NSI clarified that construction was down -10.7% from October 2009 and of this figure, a decrease of -12.5% has been attributed to real estate construction. During the period of January-November 2009, construction fell -13.8% compared to the same period in 2008.
In December 2009 it was revealed that some real estate construction companies were conducting negotiations to buy out established road construction firms, with the reason being that there is €1bn of planned investments for the sector under regional development programmes earmarked for modernising Bulgaria’s infrastructure.
According to Dnevnik daily, the bulk of the decrease in the industry is attributed to a decline in real estate construction with a -28.3% drop, compared to engineering and infrastructure construction which only fell -8.5%.
Irish house prices to fall by -10% in 2010
Irish residential property asking prices are expected to fall by -10% in 2010, but should stabilise towards the end of the year as the economy is forecasted to exit the recession, according to property website MyHome.
Asking prices have fallen by -30.7% in Dublin and -24.77% nationally since their peak, with the average price in Dublin now at €370,137. The construction sector is forecast to build just 11,000 new private housing units in 2010 compared to 90,000 units in 2006 , with the possibility of just 6,000 new private housing starts.
Paul Murgatroyd, economic consultant to MyHome, said: “This year has the potential to be better for the residential market, relative to 2009, and asking prices are likely to fall a further -10% this year but the rate of decline will ease compared to last year and as the year progresses some sectors of the market will begin to show signs of stabilising.”
Three bedroom semi-detached homes in Dublin will be the first to show signs of stabilisation, and the apartment sector will be one of the last to do so because of an overhang of supply and weak demand. However, low interest rates and the fresh credit to be provided by Dublin's "bad bank" project, the National Asset Management Agency, should encourage buyers to re-enter the market.
Angela Keegan, managing director of MyHome, said: “Last year will be long remembered as the worst year in the Irish residential property market but things will improve in the year ahead. Already this year we have noticed a marked increase in active sales leads to estate agents via our website when compared to the autumn, and it is reassuring that potential purchasers are actively searching for property so early in the year”.
Worldwide News
Canada’s residential market looks strong for 2010
A survey by Canadian real estate company Royal LePage showed that Canada’s residential real estate market will continue to be unusually strong during the first half of 2010, as economic conditions across the country improve and the stimulus impact of low interest rates continues to stoke demand.
Average house price levels are expected to increase as confidence builds in the recovery during the first half of the year. However, the market will stabilise in the second half of the year when house price increases are expected to moderate due to the expected late-year modest increase in interest rates, together with an improvement in listings supply as confidence improves, according to the report.
Phil Soper, president and chief executive of Royal LePage Real Estate Services, said: “The Canadian real estate market enters 2010 with considerable momentum from an unusually strong finish to the previous year.
“The stimulus effect of low borrowing costs has contributed to a sharp rise in demand that has driven activity levels to new highs. This demand, coupled with a typical seasonal undersupply of homes for sale, should cause home prices to continue to appreciate significantly during the early months of the year. Improving supply as the year unfolds and easing demand as the cost of home ownership rises should moderate home price increases in the second half of 2010.
“Our forecast is built upon an expectation that interest rates will ease upward before the year’s end, which should have a dampening effect on demand, allowing it to come into balance with the supply of resale homes on the market. Further, we expect to see an increasing number of homes listed for sale as the year progresses.”
House prices appreciated towards the end of 2009, with price averages for Q4 surpassing averages for the same quarter in 2008. The average price of detached bungalows increased by +6% to $315,055, whilst the price of standard two-storey homes rose by +5.2% to $353,026 and the price of a standard condominium went up +6.4% to $205, 756.
The regions which saw the strongest declines during the recession are now showing marked gains, with Toronto and the Lower Mainland, B.C. Vancouver in particular experiencing a robust quarter, with home prices rising across all housing types surveyed.
Soper said: “As consumer confidence has improved, Canadians have shown a lingering reluctance to acquire depreciating assets such as consumer durables, but have embraced the opportunity to invest in real property. Predictably, the regions benefiting most from this renewed interest in home ownership are those with lower average house prices and strong economic confidence, such as Winnipeg and parts of Atlantic Canada.”
The first two quarters of 2009 saw significant year-over-year price declines across the housing types surveyed and the third quarter provided the first signs of a strong rebound in Canadian home values.
Could higher mortgage rates dampen the NZ market?
Despite residential property prices in New Zealand hitting an all-time high, economists are concerned that higher mortgage rates could dampen the market.
Figures from the Real Estate Institute of New Zealand reveal ed that average property prices have risen in 11 out of 12 districts during December 2009 compared to the same period in 2008, with the national median up +9.6% ($360,000) compared to 2008 and the median price for November up by $5,000.
The largest gains were Nelson/Marlborough, which rose by +14.5%, followed by Southland up +10.8%, with Hawke’s Bay increasing by +9.4%. Northland was the only district to experience a drop in median prices, down just over -2%.
Peter McDonald, REINZ president, said: ‘House prices have definitely stabilised and appear to be slightly gaining, which is a positive sign. The median house price for December 2009 was up 1.4% on the previous month so, while the median price for December 2009 was a record high for that time of the year, it’s a case of steady as it goes,’
Properties are also selling faster according to Peter McDonald, as the national median for days to sell in December 2009 was 33, that’s 12 fewer days than the corresponding period in 2008. The fastest sales were in Wellington at 28 median days and in Canterbury/Westland and Otego, where the median days to sell was just 29.
However Bernard Doyle at Goldman Sachs JBWere believes that recent fixed mortgage rate increases are contributing to an easing of housing market demand and that if the figures are seasonally adjusted a different picture emerges.
Doyle, said: ‘Seasonally adjusted house sales declined - 3.5% month-on-month in December, the third consecutive monthly fall. Sales turnover is now 17% below the levels achieved in April, 2009,’
‘The 2010 outlook is a lot more balanced than last year. We do expect house prices to post modest gains. However, with interest rates set to rise and the labour market remaining subdued, any rise is likely to be gradual. ’
Malaysian Government looking to attract more overseas property investors
The Malaysian G government is keen to attract more overseas property investors especially from the UK, Singapore and India according to the country’s Foreign Investment Committee, as they look to make it easier for foreign buyers by performing a comprehensive deregulation of investment guidelines.
Kumar Tharmalingam, member of the, board of governors at, Malaysia Property Incorporated, said: ‘The most important aspect in purchasing Malaysian real estate is the land law system that allows for transparency and enforceability of ownership. Foreigners also have no impediment to buying freehold Malaysian real estate and to sell when the need arises without restriction.’
Currently investors from the UK, Singapore, Korea and India have been the busiest purchases of property in the country, spending around $150,000 to $300,000 with Kuala Lumpur, Penang and Johor being the most popular locations.
Recent research by Malaysian Industrial Development Finance (MIDF) indicated that the real estate sector will benefit in 2010 from rising demand and an improving economic outlook, but warned that although sales demand and improving economic sentiment is positive, the fear of demand sustainability or the withdrawal of cheap credit, the absence of attractive promotions and favourable regulations could take its toll on the property sector.
The MIDF report stated: ‘Sales demand for residential properties is expected to remain buoyant as investors continue to deem it as one of the more liquid hedging asset. Speculators are also taking advantage of the current market sentiment to lock-in on gains.’
Chinese economy grows +10.7% in Q4 2009
The Chinese Government recently announced that the country’s economy grew by +10.7% in Q4 2009 compared to the same period in 2008, up from the predicted rate of 9.1% in Q3.
Chinese gross domestic product (GDP) grew by +8.7%, surpassing the 8% growth-rate benchmark which Chinese leaders had asserted would be necessary to maintain social stability.
According to experts, if China continues with that rate of growth it will replace Japan as the world’s second-largest economy before the end of 2010.
In line with earlier predictions, the National Bureau of Statistics (NBS) announced that industrial production in December 2009 increased by +18.5% and retail sales rose by +17.5%, whilst the consumer price index increased by +1.9% and producer price index by +1.7%.
The central bank also recently raised its key interest rate, the first time it had done so in nearly five months. This is as Chinese officials remain concerned about inflation, excessive bank lending and loan defaults and plus regulators are also ordering state-owned banks to set aside a larger share of their deposits as reserves against failed loans. Investors and analysts did not expect this to happen until Q2 2010.
Indian property market to be driven by affordable housing
According to the Confederation of Real Estate Developers’ Associations of India (CREDAI), affordable property is expected to become a key part of the country’s residential real estate sector in 2010, as an upturn in the economy combined with the Government’s continued efforts to push infrastructure growth forward help the sector grow.
The real estate growth expectations are based on an assessment of gross domestic product (GDP) growth by CREDAI, the global revival, domestic sentiments and on the assumption that there would be no major unforeseen fluctuations in the economy or natural calamities this year
Kumar Gera, CREDAI’s chairman, said: ‘ This year will be crucial for the housing industry given the Government’s concern over the massive housing needs of the people, especially in the urban areas. Supportive policies to encourage and aid the housing requirements of all sections are expected to propel the development in the real estate and allied sectors.
‘Affordable housing will be a key factor in driving the sector and focus on tier II and tier III cities, help widen the market and generate demand.’
The market was hit particularly hard in between August and October 2008 when sales came to a standstill, with values falling by -20-35% on average across the country since August 2008. There were however some early signs of a recovery in March 2009 as prices stabilised and sales improved significantly up until the end of the year, CREDAI stated.
Gera said: ‘By the end of 2010 we expect prices in the real estate sector to roll back to at least 90% of the level prevalent in 2007/08.’
