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Asian and Latin American Markets Outperforming Europe and US

Mon, 06 Sep 2010 00:00:00 GMT

Performance in emerging destinations and Asian real estate markets are among the best in the world.

The latest Royal Institution of Chartered Surveyors (RICS) Global Commercial Property Survey has highlighted that destinations within the two regions are comfortably outperforming more developed countries. While occupier markets picked up further during the second quarter of 2010, rents continue to fall in 30 of the 46 countries surveyed.

More countries indicated that lettings demand moved higher compared to the first quarter.

However, the rise in lettings activity is insufficient to exert notable upward pressure on rents in the majority of markets as available space continues to move higher in all but a handful of countries. Speaking on the global market conditions, Simon Rubinsohn, Rics chief economist, points out, "Strong growth in the likes of Brazil, Hong Kong and India, is continuing to boost demand for new space from occupiers as well as encouraging property investment activity."

From a regional perspective, Latin America and Asia are outperforming Western European and US markets. This is consistent with the global economic picture as emerging economies have continued to recover ahead of the more developed economies.

On the occupier side, Brazil recorded the most positive net balance with 85 per cent more surveyors indicating a rise in demand for space.

This demand for office space outside of the eurozone has been increasing on a global scale, with RICS claiming that tough fiscal measures enacted by various European governments are to blame for the stuttering recovery. According to the body, the need for certain countries to reduce national debt is having a profound impact on the appetite of businesses to take up new space.

Distressed Property

The success of the Latin American and Asian markets can be put, in part, down to the emergence of a number of distressed properties in Europe and the US. As banks seek to clear their books and raise extra capital, there has been a surge of new commercial real estate entering the market, with further sales likely to occur. Looking to the future, a number of real estate professionals are predicting that the number of distressed properties coming onto the market in the next quarter will continue to rise.

Respondents to the RICS survey in Portugal and the Republic of Ireland expect to see the fastest growth in activity followed by the US, Spain and Scandinavia. However, there is positive news from Brazil, China, Hong Kong, Canada and India where agents expect distressed sales to continue to decline.

"Growth in distressed listings eased back globally outside of Portugal, Spain and Germany in the second quarter," said Oliver Gilmartin, RICS senior economist. "That said, distressed listings are still rising albeit at a slower pace in much of the rest of Europe and the US. A clear divide appears to be opening up between these markets and the rest of the world."

India

Another region performing well according to RICS is India.

Confidence towards commercial rents in quarter three 2010 is high with India ranked sixth highest among 46 countries. The RICS Indian Commercial Property Survey for the second quarter of the year suggests the tenant demand will continue to rise at a fast pace - especially across office and retail markets. RICS imply that the driving force behind demand for office property is coming from the potential to secure improver corporate profits.

The upswing in popularity of retail property has come about because of the improved economic climate within the country, making it an attractive market for global retailers as well. In tandem with tenant demand, lettings activity and rental values are also likely to move higher across all three sectors in the third quarter.

Capital values have risen faster across all three sectors. A further increase over subsequent quarters may be witnessed, as demand for commercial property improves and excess supply is absorbed in the market

Prakash Challa, of SSPDL Limited, believes that the general market sentiment in the country has improved. "[The] residential markets have become active [with] good volumes but not much price appreciation," he said.

Investors Likely to be Drawn to Strong Economies

Fri, 03 Sep 2010 00:00:00 GMT

Economic recovery in various destinations around the world is having a positive effect on property markets.

As the world begins to exit the global economic crisis many countries housing cycles are starting to turn around and record positive growth. In many cases, this has been aided by a strengthening economic outlook. A strong economy bodes well for the housing market as it is able to generate confidence in investors as well as indicating a long-term stability.

European Union

Economic recovery in the European Union is being led by Slovakia and Germany. Figures for the second quarter reveal that the two destinations have enjoyed growth of 4.9 per cent and 3.7 per cent respectively.

However, some traditionally popular destinations for real estate investors did not fare so well. While France and Italy saw modest growth of 1.7 and 1.1 per cent respectively Spain failed to impress experiencing negative growth of 0.2 per cent for the period. The poorly-performing economies of some European countries could go some way towards explaining their recent performance in the property sectors.

Global Property Guide's mid-term report for this year highlighted the struggles that many European Union destinations have been faced with. Spain in particular struggled, with house prices falling by 2.58 per cent year-on-year in the second quarter of 2010.

Turkey Outperforming Europe

One European country which has performed consistently well throughout the global economic downturn is Turkey. The Turkish finance minister Mehmet Simsek said that the country's economy is recovering from the global crisis better than expected.

Speaking at the Second International Conference on Economics at Kyrenia, Northern Cyprus, Simsek noted that growth of Turkey's real gross domestic product for the first half of 2010 stood at approximately ten per cent. "We were expecting a strong recovery but it exceeded even our expectations," he said at the conference. "Full year estimates range from 5.5 per cent all the way to seven per cent, so we do expect some slowdown in the second half of the year, but it looks like our growth will pass the record high among European Union member states."

Asian Countries Still in Front

India's economy grew by 8.8 per cent in the three months through June, its fastest pace in over two years. Before the recession, India's growth averaged nearly nine per cent on a regular basis. Indian leaders have said they would like to push the economy's growth rate back up to the nine per cent mark and eventually to ten per cent.

However, not everyone is so sure about the prospects. "This was the quarter in which you would have seen the fastest year-on-year number for this year," said Tushar Poddar, an economist with Goldman Sachs in Mumbai. "I don't think the nine per cent is coming anytime soon."

The Indian government estimates the economy could grow as much as 8.75 percent this year, and the International Monetary Fund says growth could hit 9.4 percent. "In terms of sustainability, the growth number will settle around 8.5 percent. There will be a deceleration," said Enam Securities economist Sachchidanand Shukla. "You are already seeing a moderation in industrial production numbers."

The news could make the country more appealing to potential property investors, although there are already strict rules in place which are designed to prevent the purchase of real estate by overseas buyers. "Global uncertainty has taken a toll," Mr Shukla added. "The most important factor is not interest rates or availability of funds. It's got to do with confidence."

Meanwhile, another Asian destination which is economically strong is China.

Earlier this year, the World Bank raised its growth and inflation forecasts for China and urged it to adopt a tighter monetary policy, alongside a stronger exchange rate, to keep inflation under control and prevent property bubbles from developing. The bank today upped its projection for GDP growth this year to 9.5 per cent from 8.7 per cent in November. For next year, the bank has pencilled in growth of 8.7 per cent, matching last year's rate.

"In China the economy has held up very well during the global crisis and growth prospects for this year and next year remain quite good," said Louis Kuijs, senior economist in the bank's Beijing office.

Global Property Recovery 'Patchy'

Thu, 02 Sep 2010 00:00:00 GMT

According to the latest survey of house prices by Global Property Guide, there has been an uneven recovery in worldwide real estate markets during the first six months of 2010.

The figures show that east Asian countries have been leading the recovery and enjoying booming house prices.

Singapore, in particular, has been a star performer during 2010, with increases in property values of a staggering 34 per cent year-on-year. Hong Kong and Australia have also done well in the past six months, with year-on-year rises of 21 per cent and 15 per cent respectively. Overall, 18 countries saw house price increases over the period, while 18 others posted declines. The steepest of which occurred in Ireland, as real estate in the European destination lost on average 16 per cent of its value.

Asian Markets Perform Strongly, For Now

The news follows an announcement by property company Savills which claims that its profits for the first half of the year have been bolstered by interest in Asian markets and the emergence of Asian investors.

Profit before tax was GBP 14.4m in the first six months of the year and chief executive Jeremy Helsby was keen to point out that for the first time, revenues from overseas property made up more than half of the group's total.

Mr Helsby said Asian investors, who have "always been strong buyers of residential property in London are also now buying commercial property." However, the expert was concerned that the recovery in Hong Kong - where Savills has a leading market share - and other markets could be running out of steam. "The Chinese government's desire to contain overheating in the residential market, continued concerns over economic growth in many countries and prolonged low levels of debt availability indicate that the recovery is likely to flatten off during the coming months," he explains.

Mr Helsby's comments come just after analysts warned about the possibility of a bubble forming in China

According to Standard & Poor's (S&P), a sharp pickup in real state prices in China is a key risk to the nation’s economic growth and is leading to a classic bubble situation.

It is forecasting that prices will rise 10.3 per cent this year to an unsustainable level and they will need to come down if they are not to affect economic performance. "The property market looks darn good, it's been going up, and this is a classic bubble. Prices are rising to an unsustainable level," said David Wyss, chief economist at S&P.

What About Europe?

Global Property Guide reports that Latvia has been the best performing property market among all of the European countries so far this year.

Prices of standard apartments rose by 9.38 per cent based on prices published by Arco Real Estate, the research claims. It comes after Latvia suffered the worst house price crash during the global economic crisis. Prices fell by a massive 33.83 per cent in 2008, and further plunged 52.81 per cent in 2009. Finland, Norway and the United Kingdom also posted strong increases in Q2 2010.

However, a number of European countries are still in the process of recovery from the global economic crisis and have experienced slower house price falls.

These markets include Denmark, Netherlands, France, Slovakia, Spain, Poland, Russia, Iceland, Bulgaria and Lithuania.

Meanwhile, it would appear that confidence is reappearing in many of the "traditional" European property markets.

The latest figures from Primelocation International suggest that France, Italy, Portugal, Spain and the US are currently responsible for 91 per cent of all international property searches on the site.

Ann Wright, international development manager of Primelocation International said "The continuing high levels of interest in international property remain stable and there is a clear trend of potential buyers favouring the more established holiday destinations." The figure represents a marked upturn since 2008, where the above markets constituted 77 per cent of the total number of searches. Ms Wright added that there is currently a rebalancing process taking place and the ease of access, accessible cultures and well-known attractions had boosted demand for the "old favourites". "Some emerging countries such as Bulgaria and the UAE became popular during the boom years as a sector of the market looked to profit on property purchases," she adds.

"Whilst those countries are still seeing increases in searches, the downturn has served to move the market in favour of more traditional holiday home buyers and holiday lets instead of investors purely interested in a quick return."

Green Property Investment

Wed, 01 Sep 2010 00:00:00 GMT

As we all become more environmentally responsible and more focus is placed on climate change through the government and media, then more "green" investment ideas and products come on the market. They allow investors to make decisions not based solely on financial consideration but also take into account the ethical implications that come with their chosen investment.

What is green property investment?

Green property investment is a term that covers any property investment that is environmentally friendly or that takes into account its affects on the environment.

Types of green property investment

There have been an increasing number of private funds that are incorporating green buildings and energy efficient buildings, plus other principles of sustainability into their property selections and portfolios. Other types of environmentally friendly property investment that have increased in popularity include directly investing in properties that are eco friendly and investing in timberland.

Direct investment into green properties can include new build properties that are built under specific building assessment guidelines or renovating older properties to conform to guidelines. Guidelines such as Building Research Establishment Environmental Assessment Method (BREEAM) in the UK, Green star in Australia and Leadership in Energy and Environmental Design (LEED) in the US, take into account energy, water, ecology and land use, pollution, materials and transport during the development stage and use of the property.

Equipping existing and new properties with photovoltaic solar panels for the generation of electricity is also rapidly coming to the forefront of green investment as major governments around the world have started to offer incentive schemes such as the "feed in tariff" in the UK.

Why green investment?

Becoming "green" has become more mainstream due to political movements and government initiatives. Such as the United Nations Framework Convention on Climate Change (UNFCCC) that announced in December 2009 that an aggregate emission reduction by industrialised countries would be required by 2020 in order to stave off the worst effects of climate change, with global emissions falling at least 50% by 2050. Some green investments could help to contribute to these international targets.

A green property investment in the traditional sense may not make more profit than a non-green investment at present but it is very likely that the government may penalise investors through taxes or legislation in the future, for investing in or owning a property that is not considered to be within the guidelines.

Environmentally responsible attitudes have been prevalent among property developers for around a decade; many investors realise the importance of environmental responsibility and the possible future costs that may be imposed.

Benefits to green investment

Timber investment in particular, can benefit the environment by removing carbon dioxide from the atmosphere through what is known as carbon sequestration. Timber plantations can improve the biodiversity of the area by providing shelter, food and a home to local animals, as well as providing employment for the community in the area adding a socially responsible stance.

The benefits to these investment options are clear; there are the obvious benefits to the environment through reducing carbon emissions; there is also the feel good factor that this type of investment brings, knowing that you are not only benefiting financially but also being eco friendly in the process. With suggestions of government taxation on property owners who are not acting to help the environment, it may be cost effective in the long run.

Financial returns and risk levels need not be negatively affected when taking green issues into consideration during investment; growing academic research has suggested that Socially Responsible Investing (SRI) and Corporate Social Responsibility (CSR) programs do not result in poor financial performance when compared to conventional investment and business practices.

Some governments have put in place tax incentives for investment into rain forest land; aimed at encouraging green behaviour and can also be profitable to investors.

The down side

It is important not to focus solely on green investments, but to consider them as part of a diversified portfolio. The long term financial effects have not been realised due to the recent nature of green investments.

There is an associated premium with green investment due to the concept being less established and less mainstream, which brings the cost up.

Undoubtedly green investment is going to become a fundamental part of property investment, as the world becomes more aware of the effect of climate change and the environment, as well as the idea that government guidelines are more than likely going to be enforced.

Which Way Now for Property Investment? POLL

Mon, 30 Aug 2010 00:00:00 GMT

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Given the current economic climate, with the past 2 years or so having hit the investment property industry rather hard and the media not knowing whether the market is on the up, taking a dive, entering a double dip or stagnating, we thought it might be an idea to run a few polls and ask the property buying public in general.

Last month, we ran a unsurprisingly inconclusive poll asking if people thought UK house prices had reached the bottom yet - the general consensus of opinion was "no-idea" given the results.

37% said Yes
41% said No
22% said Don't know

In a bid to find out a little more about general sentiment within the property investment world, we are running another poll - this time focusing on IF people were liquid, what would they invest into?

These days there is more choice than ever in the form of investment vehicles within the property sector aside from the traditional hard asset of "good old bricks and mortar". Property Funds, Buy to Let, Real Estate Investment Trusts, Commercial and Industrial Property, Student Accommodation, Hotel Rooms as well as Developer Stocks and Shares enabling investors to grab a piece of the action without necessarily having to buy a house.

What would you do if you were liquid for a sensible amount of investment capital right now, given the state of the world property markets?

Multiple selection of options is possible on the poll - Results will be aggregated from this poll here and the main site poll on the right hand side of the page and published in next months IPIN member newsletter!

Debt Worries Helping to Cool Property Markets

Fri, 27 Aug 2010 00:00:00 GMT

European debt concerns, stock market worries and increased land supply are all having an effect on the private residential market in Singapore.

According to the latest report from property consultants DTZ, market activity in the country slowed during May and June as a result of a combination of global factors. DTZ claims that many developers in the country slowed the pace of new launches because of the subdued sentiment from overseas buyers.

As a result, primary sales over the whole second quarter fell by eight per cent to 4,033 units.

"This shift is due to prices having risen almost 20 per cent since the third quarter of 2009, according to the residential property price index compiled by the Urban Redevelopment Authority," the report said. The concerns over European debt and stringent government spending cuts across the region have led to a number of potential buyers giving the Asian market a wide berth.

A recent report from RightMove Overseas found that cash-strapped Brits are now losing interest in real estate in the region. Robin Wilson, head of overseas at Rightmove, explains the radical shift in market conditions. "Many of the market dynamics that used to be in place have gone, some would argue for good," he said. "You'd be hard pushed to find a casual investor looking to make a quick buck by flipping off-plan apartments in out of the way places, availability of mortgage finance is much harder and many businesses have failed to adapt to the new conditions."

Optimistic Feeling for Asian Property

However, despite this dampening of investor sentiment in Singapore overall the potential and opportunities in Asian markets look plentiful. So far this year, there have been steady improvements in investment levels compared to 2009.

CB Richard Ellis's Asia Investment Market Overview showed that direct real estate investment in the region has risen 136 per cent year-on-year to an estimated USD 30 billion. But, as has been the case in Singapore, concerns over eurozone debt meant that the total investor volume actually fell by 22 per cent in the second quarter of the year compared to the first. "The relatively steady level of activity witnessed in the first half could potentially be matched in the second half and total investment volume in Asia for 2010 could therefore reach around USD 60 billion," said Andrew Ness, executive director of CBRE Research Asia.

Mr Ness went on to point out that the high level of outstanding corporate and government debt in the region remains a cause for concern and continues to be viewed as a potential downside risk to investing in the area. But, one sector of the market which is performing strongly across the region is sales of prime property.

Prime Property

However, the luxury section of the market showed no signs of abating, highlighting the strength of prime property in the current global market conditions. Transactions on units worth at least USD 3 million climbed by one per cent over the period.

More buyers are paying more than USD 1 million each for their new properties, the report also reveals. A total of 43 per cent of investors purchased real estate worth USD 1 million or more in the quarter compared with 36 per cent in the first three months of the year.Globally, a shortage of prime property is squeezing prices sharply higher at the moment and with the potential to gain an impressive return on investment the sector is expected to continue to thrive.

Chinese Buyers Look to Dominate Market

Malaysian property investors continued to be the major overseas investors to the country, accounting for 22 per cent of the total transactions, they were closely followed by Indonesians, at 18 per cent of the total transactions.

Meanwhile, there has also been an increase in the number of Chinese investors in Singapore - with them likely to eventually become the main overseas buyers in the country - currently making up 17 per cent of transactions. The news that Chinese investors are becoming a more dominant force in the property marketplace is unlikely to come as much of a surprise to many.

Earlier this year, we reported that the current strength of the renminbi had prompted potential Chinese buyers to look outside of their own country for investment opportunities. At the time a Reuters report suggested that new developments in Singapore, the US and the UK had all caught the attention of buyers.

"I think you will start to see more strength in that currency and that will give further impetus to look elsewhere for investments," James Moss, managing director of real estate services company Curzon Investment Property, told the news provider. "The whole economic situation (in China) is prone to change and so people are looking for a safe haven for their money."

London Hotel Investment Appraisal

Fri, 27 Aug 2010 00:00:00 GMT

IPIN advisor Wesly Jay presents an overview of the London hotel market, considering factors such as occupancy rates, regional performance and future demand. Hotel development has long been a popular investment option and with the calling for additional hotel rooms within the 2004 London Plan ongoing demand in this capital city is expected to be significant.

US Commercial Property Prices 'Near Bottom'

Thu, 26 Aug 2010 00:00:00 GMT

Globally commercial real estate appears to be performing strongly. Interest in the area remains strong and in many markets transaction levels are heading back to the level previously seen during its 2007 peak. Much of the focus appears to be surrounded around Europe and emerging destinations, such as Brazil, while prices in the once-booming US market seem to have stalled.

According to the latest index from Moody's, commercial real estate values in the destination are down to nearly half the levels seen at the height of the property boom. The statistics show that nationally prices are 9.1 per cent lower in June when compared to the same time last year. Rates declined by 0.9 per cent during the first half of 2010 and while prices remain 4.2 per cent above the current recession low of October, they are down 41.4 per cent off the peak of October 2007.

However, the Moody's index does show that transaction levels have risen.

Something that the company's managing director, Nick Levidy, believes could indicate that prices have now fallen enough to meet demand.

Prices Close to Bottom

If transactions continue to proliferate, it may be a sign that buyers and sellers are reaching an agreement on market pricing.

"If this is in fact occurring, we would expect transaction volumes to continue a steady rise and price volatility to start to ebb in the months to come," Moody's researchers wrote in the report. "Several more months of data is needed before we can draw any firm conclusions on this point."

The firm says that it expects prices to remain "choppy" for some time as the market and broader economy begins to recover from the recession. With the US still faced with sovereign debt problems, high unemployment and concern still lingering about the possibility of a double-dip recession. "The increase in dollar volume in each of the past two months, taken together with this month's 43 per cent increase in the number of repeat sale transactions, may be an early indication that buyers and sellers are starting to agree on market-clearing prices," Mr Levidy added.

"If this is in fact occurring, we would expect transaction volumes to rise steadily and price volatility to ebb in the months to come."

What about the future for commercial real estate on a global scale?

Distressed Commercial Property Rising?

In a trend which is expected to be repeated across the world's markets, the Daily Telegraph reported that some GBP 50 billion of distressed commercial property was about to hit the market in the UK alone. The proliferation of distressed real estate comes as banks looked to offload bad debt from their books.

It comes as changes to international regulations are implemented, with many likely to raise the cost for banks of holding commercial property. For large scale property investors the news could be welcomed. Those with continued access to finance will be provided with ample buying opportunity. Eventually, demand should catch up with limited supply and those in a position to invest through the downturn will be sitting pretty.

Distressed Commercial Property Easing?

However, a recent report by the Royal Institution of Chartered Surveyors (RICS) would suggest that the number of distressed commercial properties entering the global markets is in fact calming.

It claims that the situation is easing in 85 per cent of the countries it surveys. According to RICS, in the second quarter of the year some 13 out of the 25 countries surveyed reported an increase in distressed sales, which is an improvement on the 17 countries reporting rises three months previously.

In fact, eight countries reported a decline in the number of distressed properties coming to market compared to three months earlier. The pace of decline was greatest in Brazil, Russia, India and Hong Kong, while surveyors in Japan indicated a modest turnaround. Other countries showing marginal declines were Canada, Australia and China.

"Growth in distressed listings eased back globally outside of Portugal, Spain and Germany in the second quarter," said Oliver Gilmartin, RICS senior economist. "That said, distressed listings are still rising albeit at a slower pace in much of the rest of Europe and the US. A clear divide appears to be opening up between these markets and the rest of the world."

Investors Wary of Australasian Property

Wed, 25 Aug 2010 00:00:00 GMT

There has been a huge fall in investor confidence in New Zealand, new figures would suggest. According to the annual Nielsen Real Estate Market Report, the number of investors based in the country looking to pour money into real estate has fallen for the first time in years.

During 2009 the report claimed that one in four people said that they intended to buy property as a future investment, but this year's study shows that this number has fallen to one in seven. The news represents the lowest level of interest in property since the survey began four years ago and shows that investor sentiment in the country is changing, with more people looking to hold onto their existing portfolios rather than sell.

It follows the recent residential price index for the country from state-owned valuer QV which said that property values in New Zealand are still rising, but at a slower rate with some experts predicting that they will fall around four per cent in the next 12 months. There is now a very clear intention among investors who own property to hold rather than sell, which is a clear indicator of why the property market in general has slowed significantly.

Alistair Helm, chief executive officer of Realestate.co.nz, explained that the survey was representative of the caution which surrounds the property market. "There is likelihood that those investors still looking to find value will target private sellers who they perceive to offer better deals in this type of 'buyer's market'." Statistics show that there has been a 24 per cent increase of intention by property investors to seek out private sellers.

The challenging market conditions and general uncertainty are factors that have been circling the industry for a while

Tony Boyte, research director for the Nielsen Company's Online Division says: "The property boom made it easier for people to predict the market trends. Recent events seem to have muddied the waters over how much, up or down, price has moved."

Oz Hot Property

Meanwhile, it is not just in New Zealand where there is an air of caution surrounding the market. The Australasian market as a whole has been experiencing a tough time of late, with fears of a property bubble in Australia also voiced recently. With the Australian Bureau of Statistics claiming that prices in major cities have soared by almost 20 per cent within the past 12 months the concerns can be justified.

In Melbourne house prices increased more than 24 per cent in the last year while in Sydney they rose 21 percent, according to the figures. Canberra saw a 19.6 per cent price increase, Darwin 14.6 per cent, Perth 13 per cent, Adelaide 11.l6 per cent, Hobart 10.8 per cent and Brisbane 8.5 per cent.

Rob Henderson, head of Australian economics at National Australia Bank said that the Reserve Bank of Australia needed to get more aggressive and acknowledge the need for a restrictive policy stance. "This is a shocker. The RBA needs to up their rhetoric and acknowledge that the economy is now growing at above average rates, requiring above average interest rates," he added.

It comes as analysts warn that Australia is facing a housing crisis and that the national shortfall of 190,000 dwellings will widen to 466,000 by 2020, amid expectations of a rapidly growing population.

Overseas Property Investment

Further to this, calls have been made for the government in the country to impose a limit on the amount of property which can be sold to overseas buyers. Foreign real estate investors bought $14.9 billion worth of houses and land in Australia last year.

They show that the government issued 4827 real estate approvals to foreign investors last year for commercial and residential properties. About half the approvals were for temporary residents wanting to buy a house as their principal residence. A further 988 approvals were granted to investors to buy vacant land for residential subdivision or to build a houses, with Victoria the most popular state for purchasers.

The Australian government has now announced it will adopt a more stringent approval process so that fewer foreigners will be able to buy and acknowledging that they had pushed up residential real estate prices. According to the new rules, foreign buyers will have to sell when they leave the country and those who ignore the new rules face hefty fines.

"In one sense, little has changed. Foreign residents can still purchase Australian properties and, in particular, people in Australia on temporary residence visas can still purchase existing dwellings," explained Immigration-law specialist David Stratton. In 2007/08, the main foreign buyers were from the US, Britain and the United Arab Emirates. The following year, Singapore investors topped the list, followed by the US and UK.

House Builders Look to Defy the Age of Austerity

Wed, 25 Aug 2010 00:00:00 GMT

Stringent government spending cuts and economic uncertainty have had an effect on property markets around the world. This new age of austerity which many European countries have entered in an attempt to tackle growing national debt has come at a price to developers and the construction industry.

Cuts to public sector budgets from various governments have had a knock-on effect on the number of public housing and other public works developments taking shape. However, earlier this week, the Spanish government announced that it would be increasing its spend of public infrastructure to help "facilitate economic recovery and job creation". Capital spending on infrastructure would rise by at least EUR 500 million, financed by spending cuts in other areas, finance minister Elena Salgado revealed.

The statement follows recent figures which show that there has been a shock increase in Spanish property construction - amid a general recovery in the eurozone building industry. Construction in the nation, which was one of the worst affected by the market collapse, grew 7.2 per cent during June in comparison to the previous month. It marks the start of a slight resurgence in interest from the building industry in the region after the European Union's (EU) statistics office revealed that overall activity in the eurozone has increased by 2.7 per cent since May.

This was mainly driven by a 15.8 per cent surge in German construction.

Optimism in the Constuction Industry

EU figures would suggest that construction and real estate businesses throughout the region may be more optimistic about the future.

According to a report from financial and business advisors Grant Thornton, many UK-based businesses are predicting that turnover and profits are likely to rise in the coming months. However, many still remain cautious believing that the growth will be constrained by a shortage in demand. Some 13 per cent are optimistic on the outlook of the UK's economy over the next 12 months compared to -20 per cent in 2009, the report shows.

Expectations of turnover/revenue and profits have also improved this year, with 37 per cent anticipating an increase in profits compared to 32 per cent in 2009. In addition 43 per cent expect turnover/revenue to increase in 2010 compared to 34 per cent last year. "Optimism in the sector has seen a slight increase from 2009 as construction and real estate PHBs show signs of recovering from the very difficult conditions seen last year," said Kathryn Hiddleston, head of construction at Grant Thornton.

"However, recovery in the sector will be very dependent on access to finance becoming more available and there is a lot of pressure on the banks to ensure this is the case." Despite this renewed sense of optimism, there are still concerns that further government announcements may have a detrimental effect on the recovery of the house-building sector in the UK. "What also might be worrying for the industry are signs of a decline in property prices which won't be helped by a lowered economic growth forecast in the UK and inflation staying higher than previously forecast," Ms Hiddleston added.

Property Investment Rises

Key to the recovery of the house-building and construction sector is the return of property investors to major European markets. Earlier this year, the latest data from CB Richard Ellis showed that commercial real estate investment turnover in the region reached EUR 23.5 billion in the second quarter of 2010. This was a 15 per cent increase on the EUR 20.3 billion transacted in the first three months of the year and points towards a gradual market recovery.

The report noted that turnover had managed to rise in spite of factors emerging in the broader capital markets, such as the sovereign debt crisis and the introduction of austerity measures by many European governments. Over the three-month period, investment activity remained concentrated in the UK, Germany and France, with the markets together accounting for 62 per cent of the European investment activity.

"With a growing number of larger transactions in Europe, we are also starting to see an increase in cross border activity," Michael Haddock, director of EMEA Capital Markets Research at CB Richard Ellis, said. "Middle Eastern and overseas investors have been particularly prominent this year, concluding a number of large deals."

Sweeping a Toxic Dump Under the Carpet

Tue, 24 Aug 2010 00:00:00 GMT

The phrase "toxic debt" has recently been added to the Oxford Dictionary of English, as the term has increased in popularity within the English language and the financial world. We aim to explain what it is and the impact of it, not just on the property markets at the public level, but right up to how the banks deal with debts and assets that have turned against them in the current poorly performing markets.

What is toxic debt?

Basically debt that has a high risk of default. It is toxic to the person or institution that is supposed to receive payments. It can be generated by individuals and institutions. The term originated in the US and was used to describe a class of assets, namely property, that have been financed and are not likely to be repaid.

Individual toxic debt:

A person takes out a mortgage for more than they can comfortably afford to repay monthly. They are unlikely to be able to keep up with repayments, particularly if interest rates increase substantially. Mortgages in the past have been easier to acquire in times of prosperity, with banks offering high loan to value (LTV) mortgages, and lending far beyond the means of the individual.

Institutional toxic debt:

A lending institution (bank) relies on leveraged funds in order to supply cash or loans to customers, they are in the same situation as the individual, and they are unlikely to be able to pay money out in times of crisis.

For example: In 2008 UK bank Northern Rock customers heard that the bank itself was in financial trouble and queued to withdraw their funds en masse. This resulted in the UK government having to intervene to the tune of 24 billion GBP and the bank becoming nationalised as a result. (The bail out was down to the toxic assets the bank had accumulated, rather than everyone withdrawing cash in a panic)

What impact has toxic debt had?

Banks now have a lack of liquidity caused by toxic debt; there is a feeling of wariness amongst the majority of banks and lending institutions around the world. This has meant tighter lending restrictions within the market (at an institutional level) and a lack of available loans for individuals (the public).

Three years ago, an individual could pop along to their bank and apply for a mortgage. If the client appeared to be a little bit on the high risk side for the bank, (a NINJA for example) the bank could just phone around and find someone that would lend. Now though, it is a very different story, hence it being so difficult for first time buyers and fledgling buy to let entrepreneurs to get a mortgage, and the buy to let mortgage market being less competitive on its rates and tighter with the lending criteria.

How toxic debt has been formed in relation to property?

Mortgage loans were given by banks to homeowners (sub-prime mortgages) with lower credit ratings and higher LTV (loan to value). This was a high risk strategy performed by banks and lending institutions. The increase in house prices meant that if homeowners defaulted on their loans the banks could repossess the property and recoup the money by selling it, however, as more and more individuals began to default, a huge supply of property came on the market lowering house prices, meaning both the banks and property owners made severe losses

So with the banks being bailed out, and toxic debt everywhere, how do banks miraculously now show profits?

As the title of this post would suggest, in layman terms it is pretty much just swept under the carpet, only to fester and later return again. What happens is the banks will neatly "re-package" toxic assets, and sell them on to other lenders at a reduced rate (whilst rather ironically laughing all the way back to their own bank, no-doubt). What this does is conveniently reduce the loss to the bank and theoretically regain some liquidity to the banks' balance sheet by basically "dumping" the debt elsewhere.

However, this is just the start of the process. The idea works well when the economy is doing OK, it's a bit like a supermarket ordering too many pallets of baked beans. As the sell-by date approaches and the retailer realises they have a baked bean time bomb on their hands, they have two choices: Keep selling the beans at the same price, and hope they get sold and run the risk of having to throw some away or, sell the last few pallets at a ridiculously low price, knowing that they will sell them, but their average profit per can will take a small hit.

The main problem arises though when ALL the supermarkets have ordered too many cans of baked beans and there just isn't enough toast to put them on. The banks at present are about to hit exactly this situation.

With all the toxic assets neatly packaged up and moved along, or at minimum reclassified as assets instead of mortgage defaults, the banking worlds' bank balances look miraculously rosy once again (Northern Rock for example, having been lent 24 billion GBP in September 2007, is now less than three years later showing a profit of just a shade under 350 million GBP ) Rocket scientist I am not, but I think we can all understand that something has been going on to create figures like that.

So what happens next for the banks?

Banks the world over will continue on this merry-go-round for as long as they can. Some will be bailed out using another new financial word in the dictionary "quantitative easing" which, simply put, is a licence issued by the government, to the government, to print money.

Quantitative easing, whilst seeming like a good idea at the time, can come at a price. A countrys' currency has to be based on something. Printing cash willy-nilly with nothing to support it except toxic debts/assets will only hold the financial status of the country for a short period of time. A prime example of the final fall for a country in modern day economics is Greece. How the Greek financial situation pans out over the next few years remains to be seen after its hefty bail out by the IMF……

European Commercial Property Transactions Rise

Fri, 20 Aug 2010 00:00:00 GMT

Commercial real estate is hot property. At least the latest research suggests that an increasing number of property investors are turning to the area looking for reasonable returns.

European real estate in particular appears to be at the forefront of many buyers' minds, with total turnover in the area for the first six months of 2010 totalling EUR 45.1 billion. Breaking the figure down further still, it was retail investments which accounted for 35 per cent of this figure, research from CB Richard Ellis (CBRE) shows.

In contrast to the region's beleaguered residential market, which has been subjected to a tough time of late, retail property has seen activity increase by 15 per cent when compared to the second half of 2009. The growth was driven mainly by major Western European markets such as the UK and Germany, which dominated activity over the period. Together the two countries accounted for a massive 60 per cent of the total retail investment market.

Germany, in particular, saw retail investment activity double to EUR 4.1 billion, compared to the EUR 2.1 billion transacted in the last six months of 2009.

CBRE claims that this is in part due to the increase in the number of large shopping centre transactions carried out by investors. John Welham, head of European retail investment at CBRE, said that the research was reminiscent of the trend seen across the broader commercial real estate market. "Larger deal liquidity has improved this year, particularly in the European retail investment sector," he confirms. "This has been largely driven by international capital, with the majority of the EUR 100 million-plus deals completed so far this year being purchased by cross-border buyers."

International investors in Germany accounted for 52 per cent of retail investment activity - compared to 22 per cent in 2009 as a whole. He continues: "Investor demand has remained predominantly focussed on the core end of the market with large high-quality shopping centres remaining a primary target for investors. "However, we are beginning to see some investors looking towards core-plus and value-add opportunities, therefore taking occupational and development risks in order to achieve target returns."

Global Outlook Positive

Additional research by the world's largest real estate consultancy paints a bright picture for the global prospects of commercial real estate, with a rise in activity around the globe. CBRE reports that, despite experiencing a slump for a two-year period following market highs in 2007, most countries are now able to report a stabilisation in activity.

Speaking to the Financial Times, Brett White, chief executive of CBRE, said that investment in the area is growing. "Virtually all global economies are in early stages of recovery and others such as China are in full-blown expansion phase, and [so] the majority of property markets are either flat or slightly improved," he explains. In 48 out of the 55 markets which CBRE tracks, rents are rising and yields are beginning to narrow. This rebound in fortunes has help to boost the organisation's second quarter results, Mr White said. Property sales rose globally by 61 per cent year-on-year.

One such sector where there has been activity is in the distressed side of the market.

Distressed Property

A Royal Institution of Chartered Surveyors (RICS) survey, which took into account the views of its members, predicts that there will be an increase in the number of distressed sales in the next 12 months.

The body claims that changes to international regulations are likely to raise the cost for banks of holding commercial property. RICS defines distressed properties as those with foreclosure orders or which are advertised for sale by their mortgagee, and which tend to fetch lower prices than their market value.

"Despite the "supposedly successful" European bank stress tests, worries over the health of the European banking system will continue to linger, propelling banks to manage down their problem loan books," RICS senior economist Oliver Gilmartin said in the report. "Indeed, changing international regulations are likely to start raising the cost of capital of holding commercial property on bank's balance sheets, which could be the trigger for increased listings in the coming year."

Investors will see the biggest rises in distressed commercial property assets in Portugal and Ireland, followed by the US, RICS said. Meanwhile, eight countries said there was a decline in the number of distressed properties coming to market during the second quarter compared to three months earlier, with the decline greatest in Brazil, Russia and India.

What Makes a Property Suitable for a Commercial Mortgage?

Fri, 20 Aug 2010 00:00:00 GMT

Why would you consider taking a commercial mortgage? Well, the idea of purchasing a commercial property is that it must be well suited to the needs of your business. This can be determined by several factors that are taken into consideration before giving you a commercial mortgage. The commercial mortgage lender will look at your business, what it does and how it may relate to the commercial property taken by you. Before taking out a mortgage loan for your commercial property, you should calculate your affordability with the help of a mortgage calculator

If your company makes a particular type of product, the lender will ask you how long you have been making that product. They will also enquire about the market growth that you see annually. They will also consider the property and check whether or not it will meet the needs for making the particular product during the term of the loan. Have a look the various points you need to consider before searching for a property that you intend to finance using a commercial mortgage.

Adequate space: If you seek a property for commercial usage then you need to make sure that there is adequate space for the business to grow. The property needs to be big enough but not so big that it becomes difficult to arrange the maintenance costs from the revenue generated by your company. If you have the potential to rent out sections, then you can choose a bigger space. Thus a spacious property is good for a commercial mortgage.

The location: Your lender will also check the location of the property and see whether it is fit for your business. If you want a property to establish a pub, then you need to choose a road side location with maximum visibility. You should also make sure that the location will ensure maximum profitability for your business.

Space for employees: This factor is also taken into consideration by the lenders; they will determine the total seating capacity in the property that you have selected. They will also check whether or not the kitchen is sufficient to suit the needs of your employees, what the maximum seating capacity of the property and how much the average customer spend needs to be to make the mortgage payments.

In a nutshell, the kind of business does not make any difference but the business needs are what matters. Can the commercial property meet those needs? Determine your mortgage affordability with a mortgage calculator and take into account the above mentioned points when selecting a property suitable for a commercial mortgage. A good commercial property will always meet your current and long-term plans.

Asia Continues to Lead the Way

Thu, 19 Aug 2010 00:00:00 GMT

Steady improvements have been made in the Asian real estate investment market during the first half of 2010, a new report shows.

Direct real estate investment in the first six months of the year grew by 136 per cent year-on-year to an estimated USD 30 billion.

This is according to the CB Richard Ellis's (CBRE) Asia Investment MarketView report, which also noted that despite investment levels rising in most Asian markets, investment volume fell by 22 per cent quarter-on-quarter. The report noted that this decline in activity in the second three months of the year was likely to be a result of investors turning more cautious following the implementation of various government cooling measures.

Furthermore, concerns about the fragility of the global economic recovery and the eurozone sovereign debt crisis also negatively impacted investor sentiment in the second quarter. Many markets turned to state controls earlier in the year in an attempt to curb speculative activity.

Government Measures Leading to Falling Sales

The report comes just as a leading Chinese real estate association called for the government to end property cooling measures after sales began to fall. According to Zhu Zhongyi, vice chairman of the China Real Estate Association, the real estate market tightening measures should be postponed in order to stabilise the market. His call comes as the latest official figures show that property prices in China rose at the slowest pace in six months in July and the value of sales fell 19.3 per cent from a year earlier.

Zhu fears that the crackdown on real estate speculation is likely to have a negative effect on the health of the market. He claims that property companies are concerned that cooling sales may prompt developers to slow land purchases and new projects and harm the industry's growth over the next two years. It may be wise to heed his call, with his association representing in excess of 2,000 real estate developers and intermediaries across the nation.

Uneven Recovery

Looking back at the CBRE report, Japan was the most active market in the region accounting for 29 per cent of all sales and posting a 62 per cent year-on-year rise.

Also performing strongly were Hong Kong, South Korea and Taiwan which all posted quarter-on-quarter increases in transactions, rising by 33 per cent, 81 per cent and 79 per cent respectively. However, it was not all good news for the region as the aforementioned China reported a sizeable decline in transactions compared to the first quarter. "The region is experiencing an uneven recovery and the persisting mismatch between sellers' expectations and buyers' risk tolerance will continue to restrict market activity in the second half of 2010," said Andrew Ness, executive director of CBRE Research Asia. "However, the relatively steady level of activity witnessed in the first half could potentially be matched in the second half and total investment volume in Asia for 2010 could therefore reach around USD 60 billion."

Growing Importance in Commerce

Many investors may be drawn to the Asian markets as a result of their growing importance in terms of commerce. The recently published list of top 50 cities from across the world, by the Foreign Policy magazine, found that momentum is shifting towards the east. The list encompasses a combination of rising and upcoming cities and the "continuing dominance of the great capitals of old-school commerce".

Although topped by New York and London, four of the world's top ten most global cities are in Asia, with Tokyo, Hong Kong, Singapore and Seoul all named. "There's no question which way the momentum is headed: Just as more people will continue to migrate from farms to cities, more global clout will move from west to east," the magazine said in its analysis. The list, which is compiled in collaboration with AT Kearney and The Chicago Council on Global Affairs, takes into account "how much sway a city has over what happens beyond its own borders - its influence on and integration with global markets, culture, and innovation".

Government Debt

However, Mr Ness highlighted the high level of corporate and government debt currently outstanding in Asia as a potential stumbling block for real estate recovery. He pointed out that this continues to be viewed within the region as a potential risk; although overall the Asian real estate investment market remains generally buoyant but is expanding at a slower pace than originally forecast.

European Markets Offer Investors 'Lots of Potential'

Wed, 18 Aug 2010 00:00:00 GMT

Property markets around Europe currently offer real estate investors "lots of potential", it has been suggested.

According to housing portal Property Abroad, prospective purchasers have plenty of options when it comes to choosing a destination in which to buy property. "I think it really depends on what level of exposure you want to receive and there is lots of investment potential available throughout Europe - it is the hand cherry-picking them that is difficult to pin point," said Les Calvert, director of the firm.

Confidence in Property

Indeed, the real estate expert's comments follow the recent publication from the Worldwide Property Group which suggests that confidence among buyers is high.

The organisation found that, out of its members, 80 per cent are currently considering buying a property abroad, with 90 per cent of the opinion that the current market also offers excellent opportunity overseas. Kevin Wilkes, managing director of the Worldwide Property Group, said that the confidence was reflective of the increasing affordability of property.

"Confidence in property as an investment continues to ride high as it offers great stability when compared to other investment categories and can provide much greater returns and safety in the long term," he added.

Changing Face of Property Markets

Rightmove Overseas reported that the foreign property market had become radically different since the recession.

The average change in search activity per location between July 2008 and July 2010 was minus 37 per cent, although some European destinations have posted marked year-on-year improvements.

Germany saw a 31.72 per cent increase and the Netherlands saw activity rise by 36.99 per cent.
Robin Wilson, head of overseas at Rightmove, said: "Two years on from when the credit crunch first started to really bite, it's clear that the overseas property market is radically different.

"Many of the market dynamics that used to be in place have gone, some would argue for good. For example, you'd be hard pushed to find a casual investor looking to make a quick buck by flipping off-plan apartments in out of the way places, availability of mortgage finance is much harder and many businesses have failed to adapt to the new conditions."

Commercial Investment Opportunities in Europe

Many real estate tracker surveys would suggest that European commercial real estate is performing strongly at the moment. Commercial property investors have been advised to choose countries in Europe for their next investment venture.

Property economist at Capital Economics Ed Stansfield believes that France and Nordic countries offer good potential as they "stand out in terms of the economic prospects". Mr Stansfield added that the country with the biggest investment opportunity is Germany as it is "going to be one of the best performing economies in Europe over the next couple of years".

The recent Global Investment Perspective Report released by HSBC earlier this week revealed that the picture for European property investment potential was "mixed".

It noted that there were "wide variations" between the countries with the opportunities in France and the Nordics looking attractive, while suggesting that investors be more wary of putting money into eastern European properties.

Increase in Speculators

Added to this, the latest data from CB Richard Ellis suggests that during the second quarter of 2010 the commercial sector has seen a rise in interest from commercial property speculators. Total turnover in the commercial market reached EUR 23.5 billion during the time period, which represents a 15 per cent increase compared to the EUR 20.3 billion traded in the first three months of the year, the report said.

Again, prime office properties located in the Germany and France proved to be popular, which when added to UK transactions accounted for 62 per cent of all European market activity. "With a growing number of larger transactions in Europe, we are also starting to see an increase in cross border activity," Jonathan Hull, executive director of EMEA capital markets at CB Richard Ellis, confirmed. "This is already evident in Germany, where cross border investment grew to 44 per cent of the market in the first half of 2010 compared to only about ten per cent in the second half of 2009."

The same can be said about the UK market, with a large percentage of prime property purchasers coming from overseas. "Middle Eastern and overseas investors have been particularly prominent this year, concluding a number of large deals," Mr Hull added.

Government Measures Will Cool Asian Property Markets

Tue, 17 Aug 2010 00:00:00 GMT

Property markets in major Asian destinations are preparing themselves for a slower second half to 2010.

An expected increase in housing supply, policy risks and numerous government cooling measures in the markets are expected to be behind the slowdown, which will be in contrast to the first six months of the year. Fears surrounding the formation of asset bubbles in many countries have led to the introduction of various restrictions designed to put off property speculators.

"Every market will be a little different in the coming six months," said Nicole Wong, regional head of property research at CLSA. "Some markets might have policy risks - like Singapore and Hong Kong. And there will be some markets where policy risks have peaked in our view, like China."

New Government Measures

It has been announced that new rules surrounding mortgage lending in Hong Kong are to be implemented in an attempt to control rocketing prices in major cities. As part of the measures it is expected that deposits for apartments costing HK $12 million or more will increase by ten per cent to 40 per cent and the government will increase land sales next year, said Hong Kong Monetary Authority chief executive Normand Chan. In addition, down payments for investment properties will also rise to 40 per cent and Hong Kong banks will be required to apply stress tests on mortgage rates rising two per cent.

According to Mr Chan, when the interest rate increases by 200 basis points, mortgage borrowers' debt-to-income ratio should not be higher than 60 per cent. The cooling measures have been implemented because of an alarming 40 per cent increase in real estate prices since the beginning of 2009 as low interest rates and the buying power of mainland Chinese investors has caused demand for property to soar.

Leading analysts have warned that prices in Hong Kong are set to rise by a further ten to 15 per cent by the end of the year. "We want to remind all potential homebuyers that the interest rate right now is at a very abnormal level and it is impossible for this to be sustained," Mr Chan said. Since the early 1990s, Buyers in Hong Kong have been restricted to taking out 70 per cent of the purchase price of a home from banks as a means of reducing the chance of a market crash.

Successful Property Market Control?

It was China who first began a clampdown on housing speculation following the sudden growth in its property market. Predictions have been released which suggest that residential property prices in China's major cities will fall later this year as a result of the measures and a coming surge in housing supply.

According to Wang Shi, chairman of Vanke, the country's top listed developer, the government will not end its clampdown on housing speculation even as the economy begins to slow. As such Mr Wang claims that developers who try to resist lowering prices are being unrealistic. "Property prices in some cities have risen to levels unacceptable to the middle class. Many developers who do not cut prices now are making a bet on policy," said Mr Wang.

No Fear of a Bubble

However, not everyone subscribes to the view that the Asian markets, and China in particular, are in danger. City Wire reports that the Veritas' private client team is maintaining exposure to Chinese property. The team has experience in the Chinese property market and remains confident about the potential for future growth. "We do not subscribe to the view that China is in a property bubble. There are pockets where property prices have become very inflated, including Beijing and Shanghai," Meg Woods, director of private clients at Veritas, told the news provider.

"If you strip out tier one cities and look at tier two and tier three cities, house prices are not up by nearly as much. If you factor in that everyone in China pays a deposit of at least 20 per cent and more than half pay cash in full, you can appreciate the property market is very different to that of the US, UK, Spain and Ireland."

Thai Market Looking Strong

Meanwhile, the property market and outlooks for other Asian destinations, such as Thailand, remains positive. The Thai government has been helping support the property industry as internal political strife impacted its economy.

Thai Land and Houses, the country's leading home builder, is confident that its revenue will grow by about 15 per cent this year and Ayala Land Inc, the Philippines' largest property company, recently reported that its second-quarter net income was up by more than a third.

Asia Pacific Millionaires Fuelling Real Estate Recovery

Mon, 16 Aug 2010 00:00:00 GMT

Not for the first time this year, a recent residential property report suggests that the global real estate recovery is being led by real estate in the Asia Pacific region.

Meanwhile, tough and testing economic conditions in European and US markets mean that the regions are likely to be faced with a slower rate of recovery.

According to the second quarter International Residential Review from estate agents Chesterton Humberts, prime property is at the forefront of any recovery. The report suggests that this could be a direct result of an increase in the number of millionaires emerging from the Asia Pacific region, with many looking to property investment as a vehicle to continue building their wealth.

The number of high net worth individuals located in the Far East has rocketed recently, with 35 per cent, 33 per cent and 31 per cent rises in Singapore, Malaysia and China respectively. It would appear that prime property is once again fulfilling its role during times of economic uncertainty and unpredictable markets as a refuge for investors.

Added to the strengthening of a number of currency markets over the course of the year, many investors have been able to secure bargain real estate.

Asian Markets Lead the Way

The report states that a number of Asian markets have been leading the way in terms of price recovery - making up most of the ground lost between 2008 and 2009 - although concerns have been raised about the formation of a bubble.

However, when looking at the prime markets the situation changes.

Whereas buyers at the lower end of the market are typically more constrained financially and are consequently unable or unwilling to commit to a second home overseas, any hesitation on the part of the prime buyer is usually more to do with timing or a shortage of available quality stock in preferred locations. "This latter factor has partially explained some of the strong price recovery in many international prime locations," the report explains. "The desire for lifestyle purchases is as strong as ever and for those with sufficient spare capital to invest or with good access to credit the attraction of a second home is undiminished. Indeed, several wealth surveys undertaken over the past year point to increased appetite for residential property among the global high net worth individual community."

Recent statistics released by PrimeLocation are able to confirm this increase in interest for prime real estate, with searches for high-end property on their website growing by 109 per cent between May 2009 and May 2010.

"Appetite for prime residential property both for lifestyle and investment reasons remains firm although buyers are generally taking longer to commit to purchase decisions than in the pre-recession market," Andrew Hawkins, head of international at Chesterton Humberts, says.

Value for Money

However, despite the relative strength of property markets in the Asia Pacific region, questions have been asked about the value for money which they offer.

Analysis by Fidelity Real Estate Investment Management suggests that investors would be better placed to look at property in Europe if they want to realise a long-term return on investment, with the potential for significant growth better.

The organisation claims that more opportunities can now be found in parts of Europe including the north and west of the region. Stating that, while the long term case for investment in Asia Pacific is undeniable, there are likely to be more entry points in European markets down the line. "The western inspired credit crunch has accelerated a move to Asian Pacific property markets as investors have continued to search for double digit returns," Matthew Richardson, head of research at the firm, said.

"As a result of this weight of money flowing into Asian property, the short-to-medium-term outlook is challenging as lower initial yields now discount very aggressive rental growth assumptions."

Diversified Portfolio

"From an investment perspective it makes sense to have a diversified portfolio which includes property as equities will always be volatile, savings accounts will remain unexciting in a low interest rate environment, while pension prospects continue to diminish with the passage of time. There are still discounts available in many markets, Chesterton Humberts concludes in its report.

Regulation Needed to Tempt Investors to Eastern Europe

Fri, 13 Aug 2010 00:00:00 GMT

A lack of information about market prices is one of the major problems faced by international real estate investors looking at property in Eastern Europe today, it has been suggested.

This is the view of Fotis Mouzakis, lecturer in real estate finance and investments at the Cass Business School, who believes that regulation would help the markets develop at a faster pace.

Speaking to Overseas Property Professional (OPP) and following news that a new set of property indices are to be introduced to the Romanian residential market, the academic is hoping that other emerging eastern European countries will follow Romania's lead. He argues that the measures will help independent financial advisors, agents and developers work out the risks and benefits of investing in the market.

Mr Mouzakis explains to the news provider that "even when indices based on a sound methodology are available, their usefulness is compromised [because they are] based on limited geographical coverage, inevitably leaving an information gap between assets and wider market trends". Indeed, too many of the facts and figures surrounding eastern European markets are obscure and unreliable and when "effective measurements are not available, investors have to rely on professional services, expert views and anecdotal information".

Interest in Eastern European Property Down

The lack of regulation in the markets may go some way towards explaining the latest report from foreign exchange company Moneycorp and the Rightmove property company. Interest and demand for eastern European properties has suffered since the recession, with Montenegro and Romania searches down more than 75 per cent and Bulgaria and Poland also far less in demand.

The lack of information surrounding these markets means that many property investors are viewing them with an air of caution and consider them to be a high risk purchase.

Robin Wilson, head of overseas at Rightmove, said: "Two years on from when the recession first started to really bite, it's clear that the overseas property market is radically different. "Dubai has been hit very hard, struggling to regain the peaks it saw. Eastern Europe has also taken a battering with previously hot destinations for investment returns falling out of favour."

Realistic Database

In Romania, mortgage lenders are sure to welcome the new price index - which has been made possible thanks to the large rise in the number of individuals buying property in the region.

In fact, this data is being used as a starting point by Mr Mouzakis who, alongside the property arm of EFG Eurobank Ergasias and Bankpost, will be helping to create the nationwide residential price index for the country. The methodology used, included dividing the national map into eight property regions, 11 main cities, two segments of the capital and a number of overall aggregates. Eurobank EFG Property Services chief executive Dimitrios Andritsos told OPP that the new indices will "assist us greatly in gaining a better insight into the current situation in the property market and in monitoring value fluctuations".

The plan is to produce the Romanian indices quarterly, starting this autumn, and then to move on to the other Balkan markets.

Regulation in Overseas Markets

Regulation and transparency is often linked with increased confidence in foreign markets.

Union Investment's Investment Climate Index, which tracks attitudes and expectations among European real estate professionals at six-month intervals, recently moved up to 67.5 points. As well as feeding off an increased optimism on the part of investors this upward trend is representative of an increasing confidence in major European markets, with much research pointing to a recovery in the property sectors.

However, while confidence appears to be returning in the major European markets, further afield investors appear more hesitant.

A new survey, conducted by Arabian Business, has found that a significant number of international buyers in the Gulf region are keen to see more regulation introduced to the markets. In excess of 70 per cent of those questioned revealed that additional protection measures would contribute towards inspiring more confidence in the sector, which has been hit hard in recent times.

Government Measures Look to Cool Property Markets

Thu, 12 Aug 2010 00:00:00 GMT

While fears of a property bubble forming in China are beginning to recede thanks to a number of government calming measures, many analysts are now turning their attention to the growing Hong Kong market.

Real estate experts are warning that prices in the region are too high and need to come down if a property bubble is to be avoided. A 42 per cent growth in prices since the beginning of 2009 and predictions that they could rise another ten per cent this year is causing anxiety. "Property prices are at a fairly high level right now. If it continues it may form a bubble," said Peter Wong, HSBC's chief executive officer for the Asia Pacific region. With interest rates at a two-decade low and a growing local economy it is expected that prices will continue to move upwards.

According to Nicole Wong, regional head of property research at CLSA, prices will rise another 15 per cent in the next 12 months as limited supply forces buyers to pay more for real estate that is already expensive. She said that the city's promising job market and growing wealth will help drive demand for real estate while supply does not increase much. However, the suggestion may be that as well as the news highlighting the strength of the Hong Kong market in recent years, it is also reflective of the direction in which real estate in Asia is heading.

Asian Property

In recent times it has become accepted that the property markets in the Asia Pacific region have outperformed their western counterparts, with many able to recover better and faster following the global economic crisis. Many of the markets have enjoyed rapid growth and investors who bought early have enjoyed massive return on investment. However, many industry commentators are unsure how long the increases can be sustained and concerns have been raised about the formation of bubbles in certain areas.

These fears even prompted the Chinese government to intervene and introduce a number of cooling measures designed to prevent speculative buying from occurring and ultimately slowing the growth. The government in the country has raised mortgage rates and down payments for second and third homes, restricted lending and begun building affordable housing - all of which is likely to dampen sentiment in the sector. In fact, the harsh policies announced in mid-April appear to be working, with transaction volumes in some cities plummeting.

The government also plans to roll out more affordable housing as increasingly more Chinese buyers are complaining that they have been priced out of the market.

Slower Second Half of 2010

Meanwhile, according to an article by Reuters, a number of major real estate markets in Asia are likely to face a slower second half of 2010 because of increased policy risks and an expected increase in housing and office supply.

Furthermore, the report notes that the Hong Kong and Singapore governments are also wary of asset bubbles forming, although government moves to combat this have been tame in comparison with China. In Hong Kong the stamp duty on purchases of luxury apartments has been raised, while in Singapore a new stamp duty on homes sold within a year of purchase has been introduced as well as a cap on loans. "Every market is a little different in the coming six months," said Ms Wong. "Some markets might have policy risks and that would be for Singapore and a little bit from Hong Kong. And there will be some markets where policy risks have peaked in our view, like China."

Eric Wong, UBS head of Asia real estate research, believes that these policy risks are likely to lead to a number of reductions in property prices later in the year. "The main uncertainties are policy risks that are starting to unfold in China, and especially as inventory starts to build up, you should see price cuts emerge in September, October," the expert told Reuters.

Currently, the bright spots in the Asian property markets would appear to be in a number of emerging markets, such as Thailand, where the government has been helping to support the markets as internal political strife impacted its economy.

A recent report by JPMogan analysts predicted that Thailand's economy will expand 8.5 per cent this year, while Indonesia may report growth of six per cent and economies in Malaysia and the Philippines may expand 7.2 per cent and 6.8 per cent respectively.

Distressed Commercial Property Markets Easing Globally

Wed, 11 Aug 2010 00:00:00 GMT

The majority of global property markets are experiencing an easing in growth of distressed commercial real estate.

Following a report of the worldwide market by the Royal Institution of Chartered Surveyors (RICS) it has been claimed that the situation is calming in 85 per cent of the countries surveyed. In addition, it would appear that a number of emerging markets around the globe are now seeing much less strain than their established counterparts.

According to RICS, in the second quarter of the year some 13 out of the 25 countries surveyed reported an increase in distressed sales, which is an improvement on the 17 countries reporting rises three months previously. Among the markets where the biggest rises in distressed sales were seen were Portugal, the US and the Republic of Ireland.

However, the pace of this growth was moderate across the majority of markets with only three countries, Portugal, Spain and Germany, reporting that distress in the market is increasing at a faster pace than last quarter. Meanwhile, eight countries did report a decline in the number of distressed properties coming to market compared to three months earlier.

The pace of decline was greatest in Brazil, Russia, India and Hong Kong, while surveyors in Japan indicated a modest turnaround.

Other countries showing marginal declines were Canada, Australia and China.

Looking to the future, a number of real estate professionals are confident that the amount of distressed property coming onto the market in the next quarter will continue to rise.

Respondents in Portugal and the Republic of Ireland expect to see the fastest growth in activity followed by the US, Spain and Scandinavia. However, there is positive news from Brazil, China, Hong Kong, Canada and India where agents expect distressed sales to continue to decline.

Increased Listings Predicted

"Growth in distressed listings eased back globally outside of Portugal, Spain and Germany in the second quarter," said Oliver Gilmartin, RICS senior economist. "That said, distressed listings are still rising albeit at a slower pace in much of the rest of Europe and the US. A clear divide appears to be opening up between these markets and the rest of the world."

Looking ahead he believes that despite the "supposedly successful" European bank stress tests and worries over the health of the European banking system will continue to linger, propelling banks to manage down their problem loan books. "Indeed, changing international regulations are likely to start raising the cost of capital of holding commercial property on bank's balance sheets, which could be the trigger for increased listings in the coming year," Mr Gilmartin added.

Improving Market Conditions

Elsewhere, leading commercial property agent CB Richard Ellis (CBRE) has claimed that the global commercial property recovery is showing strong growth. Speaking to the Financial Times, the firm's chief executive Brett White said that almost all the global property markets are experiencing growth. Mr White was talking in the wake of news that CBRE has seen the strongest growth in revenue and earnings since 2007.

"We are a good proxy for the global property market," he explained. "Virtually all global economies are in early stages of recovery and others such as China are in full-blown expansion phase, and [so] the majority of property markets are either flat or slightly improved."

The real estate expert added that many occupiers were now more optimistic on the mid-to-long-term horizon, with a more normal market for lease terms.

He pointed to the fact that rents were rising in 48 of the 55 markets tracked by CBRE in Europe, while yields on property transactions had begun to narrow again.

Emerging Economies

However, it may not necessarily be Europe which is leading the way in terms of generating a good return on investment.

It has been suggested that commercial real estate in emerging economies is outperforming that of more established markets.

The latest RICS Global Commercial Property Survey for the second quarter of 2010 has found that countries located in South American, Asia and Eastern Europe are outperforming eurozone destinations.

Demand for office space outside of the UK and eurozone has been increasing on a global scale, with RICS claiming that tough fiscal measures enacted by various European governments are to blame for the stuttering recovery.

According to the body, the need for certain countries to reduce national debt is having a profound impact on the appetite of businesses to take up new space.

Sporting Boost for Property Investors

Mon, 09 Aug 2010 00:00:00 GMT

In recent months there has been a significant shift from lifestyle buyers to serious property investors in Brazil.

Real estate specialist for the region uv10 claims that the country is now being seen by potential buyers as an area where substantial growth can be realised. Citing the forthcoming football World Cup in 2014 and the Olympics in 2016, the group reveals that Brazil now tops the list of destinations for investors looking to cash in on the boom. "Initially our client base was rather lifestyle heavy, but we're now handling more and more pure investors," Samantha Gore, sales manager for the company explains. "They can envision the impact of the 2014 FIFA World Cup and the 2016 Rio Olympics, not to mention the burgeoning middle classes and the recent introduction of mortgages for Brazilians."

The news follows a recent Jones Lang LaSalle report which indicates that the country is the global leader when it comes to commercial real estate growth. Total volumes in the first quarter have reached record levels, with the total investment now standing at US$1.6 billion.

Government Measures

Indeed, the Brazilian government has also begun to realise the economic benefits which can be gained from having a burgeoning real estate market, with it trying to tempt investors to the region. ADIT, the Association for inward investment in real estate and tourism, has announced that it is widening its influence to cover the 27 states of the whole of Brazil and not just the nine states of the Northeast region. The organisation will also strengthen its presence in the environmental sector, with the aim of creating legal security to advance real estate and tourism developments across the country.

Does Sport Matter?

However, the main draw for investors seems to be the promise of rising home values and prospective rental income as a result of forthcoming sporting events.

"The Brazilian Association of Real Estate Management has reported a greater impact on rising real estate values in areas where the Olympics will be taking place," Guilherme Caldeira, of Brazil Sotheby's International Realty, told Real Estate Web earlier this year.

"Investment in real estate has been rising in Brazil since 2008 and there have been significant increases in land speculation, which have increased residential property prices by ten to 20 per cent."

But what are the long-term prospects likely to be for the market?

Figures relating to the South African property market following the recent World Cup would suggest that the event has left a positive legacy.

According to Vered Estates, one of Johannesburg's biggest estate agencies, activity in the residential property market in Johannesburg remained buoyant throughout June.

Jonny Novick, managing director of the company believes that the World Cup has helped to instil a sense of confidence in the country's property sector.

"This bodes extremely well for the property market over the next few years," he told Overseas Property Professional.

Indeed, the global coverage afforded to such events is likely to draw investors to the markets, with the hope of generating interest in the destinations from potential visitors.

Improvements to Infrastructure

Added to this, it is worth bearing in mind that the legacy of the events - in terms of major infrastructure improvements - is also likely to increase the long-term success of a region.

Improvements to transport links, leisure facilities and existing attractions are sure to be a boost to the real estate market and could represent a profitable real estate investment opportunity.

In addition, rental accommodation is popular among visitors to events, especially tourists wanting to combine spectating with a holiday.

As an example of the effect that a major sporting event can have on house prices, the managing director of estate agent magazine SOLD, Saul Geffen, revealed that the previous Olympic host cities of Athens, Sydney, Atlanta and Barcelona enjoyed 19 per cent higher property prices in the run up to the Games.