Czech Republic appears to have the strongest economy in Eastern Europe
According to the Royal Institute of Chartered Surveyors’ (RICS) commercial property survey, the strongest recovery appears to be in the Czech Republic as surveyors were particularly positive on the prospects for capital values.
The survey indicated that the recovery of commercial property investment in Eastern Europe however is lagging behind Western Europe, with the exception of Italy as surveyors reported a fall whereas everywhere else they stated there was an increase in Q4 2009.
The Czech Republic, Poland and Russia reported a rise in activity whilst Hungary, Romania and Turkey saw a fall in investment activity.
Felix Hicks, economist at Capital Economics, stated: ’ Investors attempting to re-deploy capital are focusing on the best assets in the most liquid markets. In this context, much of Emerging Europe might seem too risky for the time being.’
However those surveyed by RICS stated that the Czech Republic would most likely see rental values fall as oppose to rise in Q1 2010, whilst over the whole year Capital Economics believes that all property values will decline by -4% in local currency terms.
Hicks stated: ‘ Although a supportive monetary policy stance should allow the Czech economy to grow by +1.5% in 2010, that will be too weak to prevent further falls in rental values.’
Romanian interest rate cut to 7%
Romania’s interest rate is now at its lowest since 2007, at 7%, as the Romanian central bank reduced its main interest rate by -0.5% in the first week of February 2010 in an attempt to revive the country's ailing economy.
This is the second time it has cut its rates in 2010 having reduced them from 8 to 7.5% in January.
Chairman of the Romanian Banks Association, Radu Ghetea, told Realitatea TV that he expected private banks would decrease their interest rates as a result.
The Romania economy contracted by -7% in 2009 after three years of +8% growth and has been mired in a deep recession.
Spanish economy contracted -3.6% in 2009
The Bank of Spain estimates that the country’s economy contracted by -3.6% in 2009, which would be in line with Government forecasts.
The rate of decline in gross domestic product (GDP) eased in Q4 2009 to -0.1%, compared to a decline of -0.3% in Q3.
A spokesperson for the Bank, said. "GDP declined -3.6% during 2009, the biggest fall in recent decades and in line with the severe contractionary tendencies affecting the world economy in recent quarters, although in Spain's case the imbalances accumulated during the preceding expansive phase also contributed to the decline in activity."
Records provided by the Government's Institute of Statistics, which only go back until 1971, showed the previous worse contraction as -1.1% in 1993. In 2008, the economy had grown by +0.9%.
Spain, it appears, is now paying the price for years of running inflation higher than the Euro-zone average and accumulating high levels of private sector debt. With unemployment closing in on 20%, some investors are beginning to fear the country will struggle to cut a budget deficit which reached 11.4% of GDP in 2009.
The Bank of Spain stated that it is vital the Government reforms the pension system and the labour market, whilst Spanish inflation needs to remain lower than the Euro-zone average in order for the country to regain competitiveness.
Worldwide News
Some 16% of Australians failed to pay mortgage payments on time
The Australian property market has appeared to have weathered the world economic downturn, but there are concerns that increased property prices could result in owners failing to meet their mortgage payments as 16% of property owners struggled to pay loans in November 2009, up from 11.7% in May 2009, according to the Mortgage Finance Association of Australia (MFAA).
Interest rate increases, a lack of supply and high land prices have also added to the problem.
Phil Naylor, MFAA ’s chief executive officer, said: ‘Recent interest rate increases are negatively impacting households. Confidence in the housing market is not only at pre-global financial crisis, it’s back to where it was during the height of the housing boom.’
The MFAA also reported that 73% of Australians expect property prices to rise, compared to 23% of respondents in May 2009, which is the highest proportion in over three years.
House and apartment construction remained slow between February 2008 and July 2009, and property starts declined in late 2099 as banks curtailed lending and the global financial crisis kept development in check. New home construction rose +9.4% in the Q3 compared to the previous quarter, the first increase in 12 months, according to the Australian Bureau of Statistics (ABS).
Median house prices in Australia’s eight state and territory capitals climbed by +4.8% in Q4 2009 to AU$525,524 and were +12% higher than a year ago, according to Australian Property Monitors (APM).
Recession hits Japanese real estate construction hard
In 2009 Japanese real estate construction fell to its lowest level since the nation celebrated its post-war recovery by hosting the Olympics in 1964, as builders were hit by dwindling household incomes and sustained deflation, according to figures from the Land Ministry.
Construction companies broke ground on 788,410 homes in 2009, that’s -27.9% less than in 2008, however the fall decreased in December 2009 to only -15.7% compared to December 2008.
The report highlighted the inability of the Government to halt the decline of property prices with their stimulus programmes and, as a result, has meant Japan has lost its place as the world’s second-largest economy to China.
Richard Jerram, chief economist at Macquarie Securities, said: ‘It’s been a very miserable year. There certainly is an improvement underway, but it’s been slow to materialise, and it’s starting from very low levels.’
Since an asset bubble burst two decades ago, Japan has been blighted by price declines and sluggish economic growth. An index of residential land prices has slid more than -40% from its 1991 peak, with the average price of condominiums falling -5% in 2009 in the metropolitan areas of Tokyo, Kanagawa, Saitama and Chiba, according to figures from the Japan Real Estate Institute.
US prime jumbo RMBS delinquencies approach 10% Serious delinquencies increased for the 32nd consecutive month as the US prime jumbo (a prime mortgage that is too large to qualify for favourable treatment by a government agency) mortgage performance continued to weaken during January 2010, according to Fitch Ratings.
Prime jumbo loan delinquencies started to rise in Q2 2007, however they accelerated in 2009 and almost tripled over the course of the year. Florida saw the biggest monthly jump of the five states with the highest volume of jumbo loans outstanding.
Vincent Barberio, managing director of Fitch, said: "The new year has brought no relief from declining jumbo loan performance. The trend line for delinquencies indicates the 10% level could be reached as early as next month."
The five states with the highest volume of prime jumbo loans outstanding comprise approximately two-thirds of the loans in question. Prime jumbo RMBS 60+ days delinquencies for these states at January 2010 compared to December 2009, and their approximate share of the $381bn market, are as follows: California, 11.3%, up from 10.8% (44% share of the market); New York, 6.1%, up from 5.8% (7% share); Florida, 16.6%, up from 16% (6% share); Virginia, 5.6%, up from 5.4% (5% share) and lastly New Jersey, 7.4%, up from 7.1% (4% share).
Prime jumbo borrowers that were up-to-date on their mortgage for the previous month but missed a payment the following month (the roll rate) fell slightly to 1.2% for January from the seasonal high of 1.3% in December 2009, but remained above the 1% monthly average for 2009.
