Portuguese commercial market adapts in H2 2009

Hint of stabilisation in Spanish residential property market

Developers start to repossess properties in Dubai

Canadian home sales fell -1.5% in February 2010

Latin America’s economy to expand by +4.8% in 2010

Portuguese commercial market adapts in H2 2009

Although 2009 was one of the worst ever years on record for Portugal’s commercial real estate market, by the end of the year it had started to adapt, according to Jones Lang LaSalle (JLL).

A fall of -50% in the annual take-up of office space as many companies opted to renegotiate their office space rents meant that demand levels did not match supply so there was a surplus which resulted in a vacancy rate of 9.71% (422,447sqm) of Portugal’s total office stock. The office investment market was the most active and saw volumes of €227m giving an increase of +6% compared to 2008.

There was a steep fall in the investment market with transactions of €393m, which was -44% less than in 2008, with 65% of these deals occurring in the second half of the year. The retail sector saw the largest fall in volumes in 2009 compared to previous years where it was the most dynamic sector and proved extremely attractive for foreign investors.

The outlook for 2010 has some positive signs with a slow recovery expected by JLL, as demand should continue at the same pace as the second half of 2009, with improved access to finance and the return of foreign investors to the market.

The retail sector will be boosted as retailers look to resume their expansion plans albeit at a more modest pace, however the outlook for the office sector is less optimistic as both take-up levels and rents will remain the same as in 2009.

Manuel Puig, managing director of JLL Portugal, said: “As we moved into 2009, expectations could not have been worse for the property market, with the economy in recession and the investment and occupation markets shrinking. However, by the end of 2009 the extremely pessimistic forecasts did not materialise and the market adapted itself to the new circumstances, which in turn is leading to a return of confidence.

“The real estate market is not set for a complete recovery in 2010, but the year has started with increasing positive sentiment and all the signs suggest that some sectors will put in a better performance this year compared to last year.”

Hint of stabilisation in Spanish residential property market

There is some hint of stabilisation in the Spanish residential property market as prices fell -5.5% nationally in the 12 months to February 2010 which was the same figure recorded in January 2010, according to Tinsa.

Tinsa believes that since the peak of the market in December 2007, prices have fallen nationally by -15.7% and by -22% on the Mediterranean coast and -16.8% in the Canaries and the Balearics.

Prices on the coast had improved in the four consecutive months since September 2009, however they decreased by -8.2% in the 12 months to February 2010 and by -8.9% in the Canaries and the Balearics.

Whilst prices only fell -4% in Metropolitan areas and by -3.8% in other municipalities, they decreased by -5.9% in the major cities and Capitals.

Government figures show that there were 413,112 transactions in 2009, a fall of -19% compared to 2008 and down -46% on 2007. Even the sales in Q4 were down -33% compared to the same period in 2007.

Developers start to repossess properties in Dubai

Property developers in Dubai have started to repossess properties from investors who, despite repeated reminders, have been unable to make payments, according to two developers in the Emirate, Bonyan International and Cayan Development.

Anas Atatreh, vice chairman of Bonyan International Investment Group, told Emirates Business newspaper: "We have repossessed some units from investors in our Dubai Gate 2 project in Jumeirah Lake Tower. Currently, we are holding onto these units. We are ready to help the investors, but everybody has to be reasonable."

A landmark ruling towards the end of 2009 allowed Barclays Bank to repossess properties because of mortgage defaults. It is expected to open the door to thousands of similar cases as lenders try to recover losses.

Billions of dollars in home loans were handed out by banks during Dubai’s real estate boom, as investors purchased off-plan properties, however as the bubble burst, it left buyers with mortgages worth more than their properties so they stopped paying.

Dubai’s mortgage law, requires banks to give homeowners 30 days notice before launching foreclosure proceedings, which came into force in 2008.

Canadian home sales fell -1.5% in February 2010

Home sales in Canada fell to a seasonally adjusted 42,799 units in February 2010, a -1.5% drop from January, according to The Canadian Real Estate Association (CREA).

Actual residential sales activity across the country numbered 36,275 units in February 2010, a +44% increase on February 2009, with record activity in Ontario and Quebec. The year-over-year gain in national activity was smaller than those of the previous three months. The average price of homes sold in February 2010 was $335,655, up +18.2% from a year ago.

Dale Ripplinger, CREA’s president, said: “The Olympic Winter Games may have impacted February sales activity in British Columbia, so activity for the province in March will be closely watched. Activity is expected to remain elevated in Ontario and British Columbia over the first half of the year, with buyers looking to beat the introduction of the HST and expected interest rate hikes.”

Although the national sales activity has slowed, new listings continue to rise which has resulted in a more balanced national resale housing market, this is evident as Vancouver saw the biggest decline however Toronto saw an equally large gain.

Gregory Klump, CREA’s chief economist, said: “Housing markets are becoming more balanced, there are still a number of major markets where sales negotiations favour the seller due to a shortage of inventory, but supply has begun rising. Further expected supply increases will continue to take the steam out of housing markets as the year progresses.”

Strong resale housing demand continues to reduce inventories, but the supply is shrinking at a decreasing rate due to slightly softer sales activity and an increase in new listings in recent months. There were 188,334 homes listed for sale on Boards’ MLS® Systems in Canada at the end of February 2010, this is a decline of -15.4% in comparison with February 2009. It is the smallest year-over-year decline in active listings since August 2009.

The overall economy in Latin America is expected to come out of recession in 2010 with growth of +4.8%, as foreign direct investment in the region could potentially achieve record levels, according to the Institute of International Finance (IIF).

In 2009 the economy declined -2.3% having grown by +4% in 2008, however it is predicted to continue its growth in 2011 by a further +3.7% after growth in 2010.

Charles Dallara, IIF’s managing director, said: "Many of Latin America's leading economies are displaying strong growth and are now on a steep recovery path, but formidable policy challenges are emerging on the horizon.

“As 2010 unfolds, the governments and central banks of many of the countries in the region may confront new challenges. These are likely to result from actions across the world to address formidable budget deficits and to exit highly stimulative monetary policies prompting rises in interest rates; upward pressures on some exchange rates in Latin America are likely; while we anticipate that inflation could be on the upswing in several countries in the region. Further, there are a number of important elections this year in the region that increase uncertainties about the directions of national policies.”

Brazil is predicted to be the fastest growing economy in the region with gross domestic product (GDP) likely to increase by +5.8% after flat growth in 2009. It will be closely followed by Peru and Chile with anticipated growth of +5.6% and +5.5% respectively. Peru was the only country in the region to see growth in 2009 albeit at a modest +1%, although this had fallen by -8.8% from 2008.

Mexico meanwhile is expected to see growth of +4.4% in 2010 and +3.5% in 2011 despite its economy having declined by -6.5% in 2009.

Frederick Jaspersen, IIF’s Latin America department director, said: “While the region’s economy is well underway, the pace and pattern varies widely among countries. Those that have pursued prudent macro-economic policies and pro-market reforms, and have access to global capital markets (Brazil, Chile, Colombia, Mexico and Peru) are forecast to grow an average +5.4% this year, but those that have not (Argentina, Equador and Venezuela) are see as growing by only an average of 3%. Inflation is under control in the first group of countries, but it is expected to accelerate this year to 28% in Argentina and 42% in Venezuela.”

Foreign direct investment in Latin America is expected to surge by +27% in 2010 to a "near-record" $85bn, with the region's international reserves seen increasing by almost $50bn to a record $539.5bn.