IPIN Live

Investors 'Can Be Optimistic' About London Offices Outlook

Fri, 03 Feb 2012 00:00:00 GMT

Despite the take-up of London offices falling by 27 per cent in 2011, investors in the sector still have reason to be upbeat about the market's future prospects. Knight Frank highlighted the significant demand for space in such properties generated by the technology sector, noting that companies operating in the IT and telecoms industries leased 1.3 million sq ft of space in 2011, a substantial increase from the 640,000 sq ft taken a year earlier. James Roberts, head of commercial research at the firm, commented: "If office demand from tech firms doubles during an economic slowdown, it will be interesting to see what happens when growth improves."

Leasing partner at Knight Frank Tim Robinson noted supply of high-quality London office developments is likely to fall during 2012 and 2013, which will mean demand will continue to outpace the amount of available space on the market. As a result, investors need not be overly concerned about the rental prospects for such commercial real estate assets. "I expect rents to be level for most of 2012, possibly growing in Q4, but certainly increasing next year," Mr Robinson asserted.

A report published last month by BNP Paribas Real Estate came to a similar conclusion, highlighting the probability of a "modest rental uplift" in the West End, which may mean it is a lucrative location for a commercial property investment. The organisation pointed to the high level of demand from the technology, media and telecommunications sector, noting that such firms accounted for 30 per cent of the office space let in the West End in the final three months of 2011. Although the supply of offices climbed by three per cent quarter-on-quarter, there was still 29 per cent less stock available in between October and December last year, compared to the same period in 2010.

Negative Sentiment Weighs on European Commercial Property

Thu, 02 Feb 2012 00:00:00 GMT

Rental and capital value growth prospects for commercial real estate in Europe are lagging behind other world regions. This is the finding of the latest Royal Institution of Chartered Surveyors (Rics) Global Commercial Property Survey, which noted confidence in the sector has been hit by challenging economic conditions. Despite a broadly negative picture in Europe, especially among countries such as Greece, Portugal and Italy, there are some nations on the continent bucking the trend, most notably Germany.

Both capital values and rents are expected to improve during the first quarter of 2012, the Rics data revealed, while property investment activity in Germany is likely to be robust over the three-month period. Meanwhile, demand among occupiers for commercial premises far outweighs the amount of available space, which is likely to help buoy Germany's market further. Director of commercial research at Savills Mat Oakley is confident there are some bright spots in Europe's commercial real estate sector. "Countries in northern Europe - Germany, France, Scandinavia - all have, I would say, reasonably solid rental growth prospects going forward given that they are facing, in most cases, fairly significant undersupplies of commercial space of all types at the prime-end of the market, and a gentle recovery in demand," he stated.

The Rics survey also highlighted several countries where there are real estate investment opportunities for those with some money to spare. China, Brazil, Russia and Canada were named as the nations where expectations of capital growth are strongest, while the same four nations also topped the table in terms of rental increases. Chief economist at the organisation Simon Rubinsohn commented: "Sentiment remains generally upbeat in many of the faster-growing economies, even if they are likely to grow a little more slowly in the coming year." He added destinations such as Canada and Germany are performing well because financial institutions in these countries "largely shunned the sub-prime credit boom".

UK House Prices 'Flat' in 2011

Wed, 01 Feb 2012 00:00:00 GMT

The value of residential properties in the UK remained largely unchanged between December and January, while prices fell by 1.6 per cent year-on-year, the latest Hometrack Monthly National Housing Survey has revealed. The figures are similar to those recorded by the Land Registry, with the organisation recording a 1.3 per cent annual fall in house prices in December last year.

Commenting on the data, chief UK and European economist at IHS Global Insight Howard Archer predicted the cost of buying a home in the UK will slide by around five per cent over the course of 2012. "We suspect that low wage growth, a markedly-weakening labour market and major concerns over the economic outlook will limit potential buyers and weigh down on house prices," he stated.

Hometrack, meanwhile, has estimated there will be no national rise in property prices for 18 months, although director of research at the firm Richard Donnell acknowledged London is likely to buck the trend thanks to the high number of overseas investors targeting properties in the capital's prime districts. He added there has been a significant decline in the number of buyers registering with agents, with the eurozone crisis and concerns over the UK's economic performance both causing demand for real estate assets to fall in the second half of 2011.

The Hometrack report also highlighted a seven per cent reduction in the level of supply on the UK's residential real estate market during the final half of 2011, adding a contraction of this extent has not been recorded since 2009. Meanwhile, Mr Donnell predicted only a "modest improvement" in demand for homes over the next few months. "The net effect will be a continued negative balance between supply and demand pointing to further downward pressure on prices in the months ahead," he concluded.

Investment in European Retail Property Increases

Tue, 31 Jan 2012 00:00:00 GMT

The level of investment in real estate assets in the European retail sector grew in the final quarter of 2011. Research published by CB Richard Ellis (CBRE) revealed the total amount ploughed into this asset class reached 9.4 billion euros (GBP 7.9 billion) in the final three months of last year, with 37.2 billion euros spent on retail properties over the course of 2011, accounting for 32 per cent of all commercial real estate investment on the continent. The German retail market has emerged as one of the strongest, attracting 48 per cent of the capital flowing into the country's commercial property sector.

Associate director of Europe, the Middle East and Africa research at CBRE Iryna Pylypchuk stated: "Off the back of stronger economic growth and occupier markets than elsewhere in Europe, Germany, the Nordics and some CEE (central and eastern European) markets have been the biggest beneficiaries of investor demand, especially when it comes to international capital looking for new retail opportunities." Meanwhile, a survey conducted by INREV, the European association for investors in non-listed real estate vehicles, found German retail assets are a top target for those with money to plough into the real estate market.

According to the organisation, 64 per cent of respondents to the 2011 study were keen to own property in this sector, compared with 36 per cent in 2010. Casper Hesp, director of research and market information at INREV, explained the findings indicate that investors are becoming increasingly risk averse. He added there is "a clear emphasis on caution" that is being driven by the continuing eurozone crisis. Head of European retail investment at CBRE John Welham pointed out the sovereign debt issues on the continent could also push investors towards some of the emerging CEE economies, particularly Russia, as these are "one step removed" from the problems surrounding members of the single currency and have the potential for development.

The Canadian Property Market in 2012 - Continued Stability or Inevitable Decline?

Mon, 30 Jan 2012 00:00:00 GMT

General expert consensus on Canadian Housing Market trends for 2012, remains cautiously optimistic about its overall stability throughout the coming months...

London Looks for Confidence as Eurozone Crisis Leads to New Low

Mon, 30 Jan 2012 00:00:00 GMT

The Lloyds Bank Commercial Property Confidence Monitor for January 2012 recently revealed the extent to which concerns over the eurozone crisis and domestic economic difficulties have had an impact on the UK's commercial real estate sector. According to the research, the index has fallen further than the historic low recorded in November 2010, with fund managers being the most pessimistic about the outlook for the country's property market.

One finding from the report that stands out is that confidence among medium to large businesses in London slid during the final quarter of 2011, bringing them more in-line with their regional counterparts. However, the financial institution pointed out firms in the capital "remain more bullish" than those based elsewhere in the UK.

Head of forecasting at Jones Lang LaSalle Andrew Burrell stressed this dip in confidence is not restricted to London and the UK, though. "It is a global, certainly nationwide [issue]. Confidence [has been] hit on the occupier side and also on the investor side," he stated, adding one of the reasons why it is more noticeable in the capital, and particularly with London offices, is because this sector is "serving an international market rather than a national one". Such assets are "very much more outward-looking and very much more connected with what is going on in the globe", Mr Burrell explained.

This links back to the eurozone crisis, which Mr Burrell claims is the main reason for the diminished optimism about commercial property investment in the UK. He pointed out the situation on the continent will change and it is the uncertainty over what may happen that is holding back the real estate industry. "People are not prepared to do things that they would in a more confident market," Mr Burrell asserted. He believes the situation will begin to improve in the second half of 2012, especially when a resolution to the sovereign debt issues in Europe is set out.

While he is keen to highlight that the situation is not as bad as it was in 2008, the real estate expert acknowledged there is little appetite to enter into large-scale deals in the present climate. "Unfortunately, it will take some kind of recognition that we are at the bottom and [then] things will pick up to get the market moving again," Mr Burrell said.

Although it may not be in the government's power to intervene in Europe, are there steps parliament could take to improve the picture for businesses not only in London, but also elsewhere in the UK? According to the respondents to the Lloyds Bank survey, there are several measures that may help get the market moving again. One of the most-cited suggestions was to ease credit conditions, while reducing property taxes, boosting investment in the country's infrastructure and relaxing planning restrictions were other options put forward by those questioned.

Cushman & Wakefield recently published a European Commercial Property Investment report, which pointed to continued difficulties for investors who need to raise finance to fund transactions. According to the firm, "getting hold of affordable debt will be an issue for all except the top tier of borrowers with the best asset backing", as steps to deleverage the banks are expected to move up a notch this year.

Last month, research published by CB Richard Ellis (CBRE) found insurance companies were providing the "most competitive real estate debt terms" in the UK, so commercial property investors may want to consider making use of this source of finance. Natale Giostra, head of UK and Europe, the Middle East and Africa debt advisory at the firm, commented: "So far, most of their [insurers] loans are larger in size than the market average, issued against best-quality real estate, in terms of both location and covenant strength." CBRE noted insurance organisations now make up 14 per cent of all commercial property lenders open to new business in the UK and the company went on to predict that this proportion will increase to 20 per cent in the future.

Demand for European Commercial Property 'Will Remain Strong'

Fri, 27 Jan 2012 00:00:00 GMT

Investors will continue to plough their money into European commercial property over the course of 2012, BNP Paribas Real Estate has predicted. In the firm's At a Glance Main Investment Markets in Western Europe report for the final quarter of 2011, it revealed the volume of transactions in the commercial real estate investment market climbed by seven per cent last year, in comparison with 2010. The organisation asserted demand for such assets "should remain strong", and highlighted the expectation that some institutional investors will increase their exposure to property markets during 2012.

However, BNP Paribas Real Estate pointed to a growing gap between economies in the south of the continent and those in the north. "The outlook for southern European countries looks pessimistic, whereas the UK and Germany remain confident about 2012 with volumes forecast to stabilise," the study stated. Indeed, central London topped the table with the greatest level of investment in property during 2011, followed by central Paris, Frankfurt, Munich and Berlin. There was, however, a significant discrepancy between the data recorded for London and Paris and cities elsewhere in Europe. In the UK's capital, 13.558 billion euros (GBP 11.348 billion) was invested, while in Paris the figure stood at 11.062 billion euros. In comparison, Frankfurt saw just 2.967 million euros ploughed into its commercial real estate sector.

In terms of the type of commercial property investors are likely to target, offices are the most popular, with this asset class taking a 70 per cent share of all transactions in 2011. There is a more even split between office and retail premises in certain markets, though, such as in Berlin, where 46 per cent of the total investment in the final quarter of 2011 went to offices, while retail accounted for 48 per cent. Jones Lang LaSalle recently highlighted the falling vacancy rates in European offices, noting they have now dropped below ten per cent for the first time since the third quarter of 2009. A lack of new space coming on to the market, combined with higher-than-expected leasing volumes in the three months from October to December 2011, have helped limit supply, the firm commented.

Opportunities for Investors in London Hotel Market?

Thu, 26 Jan 2012 00:00:00 GMT

There are significant opportunities for real estate investment in London's hotel market this year, one expert has claimed. Ray Withers, director of Property Frontiers, explained the Olympic Games and other sporting events like Wimbledon will help boost consumer spending in the UK's capital city this year, which will have a knock-on effect for hoteliers. He stated the hotel market in London has been forecast to experience "near double-digit growth" over the course of the next 12 months. Mr Withers added: "2012 is expected to be a record-breaking year for the capital with over 5,000 new rooms opened or reopened in response to growing demand for accommodation from the summer Olympic Games and the Queen's diamond jubilee celebrations."

Last month, Barclays Corporate predicted the recovery witnessed in London's hotel market during 2011 would continue into 2012, with the third quarter of this year set to be key for the overall performance of the sector. The firm noted strong revenue per available room (revPAR) growth has been the driving force behind the capital's hotel sector, with higher room rates contributing to the increase in revPAR. However, hospitality leader at PricewaterhouseCoopers Robert Milburn cautioned a worsening economic picture could negatively impact on hoteliers. He noted the Office for Business Responsibility has halved its estimation of gross domestic product (GDP) growth in the UK for 2012, commenting: "We expect significantly lower revPAR growth as a result."

Meanwhile, London director of HVS Tim Smith recently stated obtaining finance would be key for those hoping to invest in the capital's hotel market. He said "now is a good time for hotel buyers to acquire assets", noting that those who are able to make purchases with cash may be able to convince sellers to take a lower offer, because buyers who need to raise debt finance may find it is not easily accessible.

Uncertainty Ahead for European Real Estate

Thu, 26 Jan 2012 00:00:00 GMT

The outlook for European real estate investment in 2012 is one of caution, with concerns over the sovereign debt crisis in the eurozone continuing to play on investors' minds. In its most recent report into commercial property investment in the continent, Cushman & Wakefield predicted transaction volumes will "hold firm" this year, although the group stressed there is still much uncertainty on the markets. Looking at the close of 2011, the firm pointed to higher-than-expected investment volumes in the last three months of the year, bringing the total amount transacted in 2011 to 126.2 billion euros (GBP 105.5 billion).

Cushman & Wakefield highlighted the role played by foreign investors in boosting the amount of money ploughed into European commercial real estate, with overseas buyers now holding a 35.8 per cent market share. Although the core markets of Germany, France and the UK took the largest amount of investment, there was significant growth in many countries in central and eastern Europe (CEE), with Bulgaria, Hungary, Russia, Estonia and Croatia among those singled out. Some of these markets are expected to remain investment targets in 2012, head of European capital markets group at Cushman & Wakefield Michael Rhydderch stated. "Good prospects, meanwhile, will be seen in areas such as the Nordics, where economic growth is above average and market risks low, or in parts of CEE where economic growth is expected to hold up, notably Poland and Russia and possibly Turkey," he asserted.

A report published recently by CB Richard Ellis (CBRE) looking at the outlook for real estate investment globally also highlighted concerns over political and economic instability. The firm predicted properties in prime locations will continue to offer a viable alternative to other asset classes, with their strong performance in 2011 expected to carry on into 2012. Chief economist for the Europe, Middle East and Africa region at CBRE Peter Damesick stressed the appeal of prime real estate in Europe is unlikely to be diminished this year, as such assets will be "supported in tougher economic conditions in 2012 by the widespread lack of new property supply".

India Gears Up for Another Property-Focussed Year

Thu, 26 Jan 2012 00:00:00 GMT

Research released this month revealed a significant jump in the amount of investment from private equity (PE) firms being ploughed into India's real estate markets. Venture Intelligence noted that USD 2.68 billion (GBP 1.72 billion) worth of property investments were made by PE organisations in India over the course of 2011, representing a 69 per cent rise over the amount transacted by such companies in 2010. With PE firms showing a marked increase in interest in the sector, could this mean more of the same for property investments in 2012?

National director of capital transactions at the Indian unit of Knight Frank Amit Goenka explained to Bloomberg that many developers in the country are seeking PE investment, because funding from banks has become harder to access. As financial institutions are expected to remain cautious in their lending over 2012, this situation appears to be one that is unlikely to change in the near future.

However, agent and media manager at Propertyshowrooms Terry Hobbs is not convinced the same level of investment experienced in 2011 will be sustained over the next 12 months. "I think we'll see investment level off in 2012, India will continue to attract equity firms because of its rapid growth and its potential, but I think the slowdown in exits will worry some investors and could help cool the market," he stated. Mr Hobbs went on to note there is still the potential for some large property deals to take place this year, though.

According to the real estate expert, Prestige Constructions is in talks with global private equity majors over plans to buy out a special economic zone - the Cessna Business Park, which spans 4.5 million sq ft. The deal is thought to be worth around Rs 1,800 crore (GBP 231.34 million). However, a spokesman from Prestige told Business Standard earlier this month that the firm has not yet decided whether it will sell the property.

Investors seeking the best returns from property in India may want to turn their attention to residential developments, rather than commercial schemes, Knight Frank India noted last year. Samantak Das, national head of research and advisory services at the company's Indian base, explained investors are likely to see a stronger performance from housing than from offices or retail assets. "Residential properties definitely give higher returns as, in some of the projects, bookings start even before the groundbreaking happens, which is not the case in the commercial space," he asserted.

Meanwhile, Jones Lang LaSalle recently conducted a survey among US-based banks, the results of which indicate an increasing appetite for Indian property investments among corporate real estate (CRE) executives in the financial services industry. According to the firm's findings, assets in south Asia - primarily India - and those in the north of the continent, namely China, will "present the banking sector with the most attractive growth opportunities by 2020". This may see some of the major financial players adjusting their investment strategies accordingly. Iain Mackenzie, head of Jones Lang LaSalle's banking industry group in the Asia Pacific, commented: "A geographic rebalancing is taking place. Banking and finance companies are simultaneously controlling costs, especially in mature markets, and expanding in developing countries with bright growth prospects and intensifying competition."

The company's recent Global CRE Survey 2011 found a drive among such professionals to deliver "direct cost savings" from real estate portfolios, with 39 per cent of those questioned anticipating growth from these bundles of property assets over the next three years. North Asia was highlighted as one of the regions where the performance of real estate assets is likely to improve significantly. In addition, 78 per cent of respondents stated growth will be the "biggest influencer of CRE strategy in Asia" between 2012 and 2015.

UK House Prices Down in January

Wed, 25 Jan 2012 00:00:00 GMT

Household sentiment about the value of properties in the UK slipped in January compared to December, a new survey has revealed. The Knight Frank/Markit January House Price Sentiment Index (HPSI) found that around 19 per cent of those questioned believed their home was worth less in January in comparison with the previous month. This led the HPSI figure to drop to 43.2 from 43.3 in this period. Knight Frank explained any reading under 50 indicates that, overall, the value of residential real estate in the UK is falling.

Looking at the year ahead, the study found homeowners in three out of the 11 regions surveyed anticipate a price rise by the end of 2012. Those with a property investment in London, the south-east and Scotland are confident the value of their homes will increase. Meanwhile, homeowners living in Wales and the north-east are expecting the biggest declines in real estate prices. Tim Moore, senior economist at Markit, commented: "Forecasts of roughly stagnant house prices are symptomatic of the caution prevailing about local job market conditions and the gloomy economic news spreading from the euro area."

Head of UK residential research at Knight Frank Grainne Gilmore highlighted the north-south divide that has emerged in the HPSI figures. She noted, with the exception of Scotland, only homeowners in London and the south-east are positive about the value of their properties rising during 2012. Data released recently by Knight Frank looking at the state of the country house market revealed prime central London and the surrounding areas are benefiting from the influx of foreign investors, while many domestic buyers are now looking elsewhere due to record-high prices in and around the capital.

Rupert Sweeting, head of the country department at the firm, explained one of the biggest problems over the past year has been the withdrawal rate of buyers ahead of the exchange of contracts. "Issues securing mortgage finance and increasing nervousness about the economic outlook have been the main reasons that buyers have walked away from deals at the final stages," he asserted.

European Commercial Property Markets "Stable"

Wed, 25 Jan 2012 00:00:00 GMT

Commercial property markets across Europe were described as "broadly stable" during the final quarter of 2011 in terms of rents and yields, CB Richard Ellis (CBRE) stated. The firm's report revealed prime yields and rents among the continent's commercial real estate sectors were largely unchanged throughout 2011. Director of Europe, Middle East and Africa (EMEA) research at CBRE Richard Holberton commented: "The overwhelming picture is one of stability, with movements in value both small and sporadic."

He noted prime assets are exhibiting resistance to the wider economic difficulties in Europe, but added "nervousness" among both occupiers and investors is preventing significant upward movement across all commercial sectors. Both the office and industrial markets experienced a marginal increase in yields during the final quarter of 2011, CBRE found, while retail properties saw yields fall slightly. The picture for rents was similar, with the cost of leasing industrial buildings or offices flat, while retail premises witnessed a small uptick in rents. Manchester and Berlin were the two cities where the biggest rental increases occurred, rising by 4.35 per cent and four per cent respectively.

Savills recently reported Germany's major office markets - Berlin, Dusseldorf, Frankfurt, Munich and Hamburg - reached a three-year high in terms of the take-up of space at the end of last year. Vacancy rates in the nation fell year-on-year, the firm noted, attributing this to high demand for offices coupled with a low level of new properties coming on to the market. The organisation also asserted its confidence in the appeal of commercial real estate investments in the country by predicting transaction volumes in the property market will exceed 20 billion euros (GBP 16.7 billion) in 2012.

According to Savills, deals worth 22.6 billion euros were carried out in 2011, a 20 per cent rise in the volume of commercial real estate purchases made during 2010. The firm highlighted "strong demand" from both domestic and international investors as one of the main reasons why Germany's commercial property sector is likely to perform well over the course of the next 12 months.

London Real Estate "A Target for Overseas Investors"

Wed, 25 Jan 2012 00:00:00 GMT

An increasing number of overseas investors are entering the London property market, with Savills recently reporting that 55 per cent of all transactions for central London real estate in 2011 were concluded by international buyers. This is a three per cent rise over 2010, while the firm also noted nearly three-quarters of property investments valued at over £5 million were accounted for by foreign purchasers. Director of Savills research Yolande Barnes commented: "The best addresses in the best locations have become elevated to international asset class status and are valued as a relatively safe store of wealth in an uncertain world."

Naomi Heaton, chief executive at London Central Portfolio (LCP), agreed that many investors see the UK capital's prime real estate as a safe haven for their money, adding that "others wish to accumulate through an asset-backed investment strategy". She also highlighted the weakness of sterling against other currencies, particularly the Chinese renminbi, noting this could encourage more investors from the Far East to consider the opportunities available in London.

In fact, a recent report published by LCP pointed to the increasing number of Chinese buyers entering the central London property market. Head of investment at the firm Hugh Best explained such investors are "looking at diversifying their property exposure from China". He added this may be an especially appealing prospect at present due to the predicted fall in Chinese real estate values in 2012, coupled with the strength of the renminbi against the pound. Meanwhile, the higher education system in the UK may be another reason Chinese buyers are attracted to London property.

Ms Heaton stated that pupils from China are now the biggest single student group in the country, with more than 90,000 of them heading to the nation to study in 2010. Families who have the means to send their children overseas for an education are often keen to buy them a property to live in, the firm asserted, with many buyers in this demographic favouring new or off-plan apartments. Mr Best said: "There could be an explosion in the number of Chinese families looking for, and being able to afford, a UK education and a London property to go with it."

World to Feel the Effects of Chinese Property Market Lull in 2012

Wed, 25 Jan 2012 00:00:00 GMT

The world has never been more internationalised than it is today. For better or for worse and like it or not, our economies are all reliant on one another. This is good from the angle that we shouldn't see another World War (touch wood) but bad from the angle that if one of the major economies makes an error in its economic management and crashes, we are all likely to feel the consequences. For example we all know that the global financial crisis started with the US easy credit bubble burst in 2006 it sparked a domino effect on economies around the world.

The latest troubles brewing on the horizon of international economic happiness is of course the continuing EU debt crisis, but this is quickly being overtaken by the situation in China. China is the fastest growing economy in the world and, while it is still much smaller than the US in overall size, it is still considered one of the economies capable of sending a shockwave throughout the global economic infrastructure.

This is not just in hearsay or commentary; the International Monetary Fund testified to this when it asked China to join the Financial Sector Assessment Program (FSAP), along with 24 other "systemically important" economies including: Brazil, Britain, Hong Kong, France, Germany, Italy, Japan, Russia and the United States.

The findings of China's first FSAP were that, while "China has made remarkable progress in its transition toward a more commercially-oriented and financially sound system", and while the economy is in generally good shape, more must be done to protect it from potential shocks. The report mentioned: deterioration in loan quality due to rapid credit expansion, growing disintermediation by shadow banks and off-balance sheet exposures, and the uncertainties of the global economic scenario, as well as - the big one for us, - a downturn in real estate prices.

A downturn in real estate prices is no longer a potential threat; it is a current reality and one that we look like being faced with for a considerable period of time - contrary to popular belief. Chinese property prices are falling and they are falling hard.

According to the latest home price data released by the National Bureau of Statistics on Dec. 18, average home prices in 70 monitored cities fell 0.17% in November from a month earlier - the second consecutive monthly decline. Prices decreased 0.13% in October and rose just 0.01% in both September and August. The data also showed that prices of new homes in 49 out of 70 cities dropped month on month in November, up from 34 in October.

What's more we know there is no let up in sight. Prices are falling because of the government crackdown, which started off gradual but ended up choking the market from every angle, home purchase restrictions, higher down payments for multiple homebuyers and curbs on onshore and offshore financing options for domestic developers. The government has said that it will not be relaxing these policies until prices are at a "reasonable level" and who knows what level that is for a communist government.

Developers are already finding it hard, facing possible credit downgrades from international ratings firms as property transactions fall sharply and they find it harder to raise capital. Yu Liang president of China's largest listed developer China Vank said the firm is ready to take cautious measures to get through tough times that may further worsen its property sales. The firm has seen sales fall for the past 4 months, to the low of RMB 8.29 billion ($1.3 billion) in November, from RMB 10.34 billion in October.

What's more experts at the Noah (China) Wealth Management Centre are predicting a 3.5% decline in prices for this year, which is more than the 1.65% decline seen in 2008 at the height of the international financial crisis. The question is, has the IMF factored in the potential for developers cutting jobs and/or going bankrupt as a result of a real estate downturn, or would it be a second risk emerging at the same time and potentially enough to put the Chinese economy in real danger. Another question, how long would the government allow jobs to shrink before it puts the genie back in the bottle? And finally, if the Chinese property market does all out crash how much will it impact on the rest of the world?

It is unlikely to affect it as bad as the American crash. Chinese homeowners tend to have much bigger deposits than was common in America, which means that banks wouldn't take such a hit. That said China is a massive owner of sovereign debt, especially American, as well as American state-guaranteed mortgage backed securities. At a time when finding buyers for sovereign debt is perhaps more important than it has ever been, the last thing we need is China having an economic hangover from its binge on real estate regulation.

Ultimately time will tell, as always with China we just have to hope for the best, but prepare for the worst.

Down and Dirty with the Property Recovery - UK

Tue, 24 Jan 2012 00:00:00 GMT

Many people feel like - "if I hear one more commentator say it's a mixed bag I am going to shoot him/her and then myself", but there is no other way to describe it. In fact it is so mixed that one can easily find enough evidence to support the theory of a strengthening recovery in UK housing or a weakening one.

For example: RICS has reported a marginal rise in new residential buyers for the last 2 consecutive months, and this is now backed up by house builder Taylor Wimpey, which has today revealed that after 2011 "exceeded expectations" it has likely already hit its target of increasing operating profits into double digits, a target set for this year.

The presence of more buyers is also supported by the gradual but continued growth in mortgage approvals. According to the latest report from the British Bankers Association, approvals fell slightly from 35,196 in October 2011 to 34,738 in November, but this was still higher than the 6 months average of 33,509 - creeping up.

So, it does indeed look like the residential recovery is strengthening, however with unemployment still soaring, house prices still too high in many places and the mortgage market still constricted, most people concur that buy to let investors are behind the current strength, not healthy first time buyers etc.

On the commercial side, IPD has just reported strong returns for 2011. According to the latest release of its monthly property index, commercial property across all sectors returned 8.1% in 2011. The office sector was the best performing with 9.3% returns according to the index, followed by industrial with 7.6% and retail with 7.2%. These are good returns, but they still represent a significant slowdown in returns compared to last year, when IPD shows UK commercial property returned 14.5%.

However compared to property equities and equities, which lost 8.8% and 3.5% over the year according to IPD using data from the FTSE, property is still doing well. In fact bonds were the only investment to outperform commercial property with returns of 15.6% in 2011.

The returns for 2011 as a whole was good considering the worsening Euro crisis and the hit taken as the US lost its triple AAA rating earlier in the year, but the IPD data also showed a worrying trend towards the end of 2011. According to their data capital values fell slightly in November and December, which is worrying going into a new year. Phil Tily, Managing Director of IPD UK and Ireland said:

"Hopes were high at the beginning of 2011 - sectors such as shopping centres and City offices were expected to perform well - and by mid-year, talk was about a recovery in the secondary sector. However, the worsening situation in 2011 has seen expectations cut, and 2012 may be a year of re-evaluation in regards to pricing levels, and a heavy concentration on income."

Overall one could evaluate 2011 as a year in which the residential sector was able to strengthen its footing, while the commercial sector managed to tread water. But in the words of a famous song, in 2012 it's: "Let's go round again". Europe is still crumbling, the US still can't get its act together, and we have our own share of very difficult problems to overcome. But at the same time we have glimmers of hope, like student property returns and prime residential prices both about doubling in London last year according to different indices. So, strap yourself in for another year.

Threat of Recession Weighs on UK Property Market

Tue, 24 Jan 2012 00:00:00 GMT

A marginal decline of capital value growth in the UK's commercial property sector was recorded in December, new figures show. The IPD Monthly Index revealed the rate of appreciation of such real estate assets slid by 0.1 per cent last month and now stands at 1.2 per cent. Meanwhile, income return reached 6.8 per cent. The total return on commercial property investments in the UK was 8.1 per cent in December, the IPD data noted, with all three market sectors - offices, retail and industrial - hit by the downward trend.

Managing director of the UK and Ireland at the organisation Phil Tily commented: "During the last three months of the year, as the euro situation worsened and the threat of recession increased, returns tailed off considerably." He added that offices were the only property class that remained in positive territory, despite the difficulties, although stressed the 0.2 per cent level of growth "represented a considerable slowdown".

Mr Tily stated much of the optimism about the performance of the UK's commercial real estate sector that was present at the start of 2011 has now gone, with expectations for this year adjusted accordingly. He said: "2012 may be a year of re-evaluation in regards to pricing levels, and a heavy concentration on income." Meanwhile, the Centre for Economics and Business Research (Cebr) released figures this week that indicate the UK is already in a recession.

According to the Cebr forecasts, the country recorded negative gross domestic product (GDP) growth in the final quarter of 2011 and this is set to continue in the first three months of this year. The organisation has also revised its predictions for the UK's economy, shifting from 0.7 per cent GDP growth to a decline in GDP of 0.4 per cent by the end of 2012 - with the potential for this to fall further "if developments in the eurozone are especially negative".

London Student Property 'A Lucrative Investment'

Tue, 24 Jan 2012 00:00:00 GMT

The returns generated by London student property investments almost doubled in 2011, compared to the previous year. This is according to Knight Frank, which revealed a lack of supply in the real estate sector, coupled with strong demand, has helped push this assets class forward. The organisation noted returns from student property in the UK's capital have risen from 8.4 per cent in September 2010 to 15.1 per cent in the same month last year.

Head of student property at Knight Frank James Pullan stated further rental growth in the sector is expected over the coming 12 months, with "rising global interest in the UK's educational excellence" another factor helping to boost the student accommodation market. "The growth in the capital has been fuelled by the particularly robust performance of the core market, and more specifically, accommodation with rents of less than GBP 220 per week," he asserted.

While London is undoubtedly outperforming the rest of the country in the student accommodation sector, regional markets still offer good returns to investors, the Knight Frank report added. Total returns for the regions stood at around 10.5 per cent for the 2010/11 academic year, a slight drop from the previous 12-month period, but still "robust", the firm said. Looking ahead, the organisation highlighted the potential impact of higher tuition fees, which will be introduced at the beginning of the 2012 academic year. However, the firm does not expect this to have a detrimental effect on investment in student property due to the undersupply present in the market.

Mr Pullan noted there are some locations that will benefit more than others from the rising cost of higher education, though. "The winners from the new tuition fee regime will be the most prestigious universities amid a 'flight to quality' as students search for the very best course available for their fees," he commented. A report published last year by Savills identified 40 higher education establishments out of 114 universities surveyed as "first-class" institutions. The student housing market in these areas are expected to thrive, however, the organisation revealed there are ten locations it would advise investors to avoid, due to the likelihood of student numbers falling and demand for properties therefore waning.

Falling Demand to Hit UK Commercial Property Sector

Tue, 24 Jan 2012 00:00:00 GMT

A decrease in tenant demand for commercial real estate will have a marked impact on the sector over the course of 2012. This is according to the Royal Institution of Chartered Surveyors (Rics), which revealed that, overall, tenant demand slid during the final quarter of 2011. In its UK Commercial Market Survey, the organisation stated that, even in London, fewer businesses are seeking new space, recording a notable fall in the number of firms seeking new offices in the capital. As a result of this trend, rental expectations for the coming year weakened in every area, except for prime offices in London where further growth is anticipated.

Simon Rubinsohn, Rics chief economist, commented: "Rental expectations have predictably become a little more negative in the face of the recent run of grim economic news." He added that even in the prime London office sector, the outlook for demand is "a little less strong than it was". Looking ahead, Mr Rubinsohn explained it will be difficult to achieve a "sustained recovery" in the commercial real estate market until a resolution to the eurozone's debt crisis has been reached.

However, property economist at Capital Economics Kelvin Davidson explained recently that the ongoing problems with eurozone economies may boost real estate investment in London. "On the one hand, you could see investors lose confidence in some European countries and European assets and put money into London property, which is often perceived as a safe haven," he stated. Mr Davidson acknowledged that another potential result of the eurzone debt crisis could be investors removing their funds from overseas markets and returning them to their home country.

He added that the UK's economy is expected to fall back into recession during 2012, which is likely to result in falling capital values across the country's commercial real estate market. He went on to predict a five per cent decline in the prices of such assets over the coming 12 months, with rental values also falling by between two and three per cent.

Investment in Global Commercial Property 'Resilient'

Mon, 16 Jan 2012 00:00:00 GMT

The volume of investment entering global commercial property markets during 2011 was higher than in 2010, new research has found. Preliminary figures from the Jones Lang LaSalle Global Capital Flows report revealed USD 400 billion (GBP 260.2 billion) was made available as direct investment in commercial real estate markets around the world over the past 12 months - up by 25 per cent on the year before. According to the study, the final quarter of 2011 saw three per cent more money flow into commercial property assets than the previous three-month period, with transaction volumes of over USD 100 billion recorded.

David Green-Morgan, global capital markets research director at the firm, highlighted the Americas in particular, where transaction levels climbed by 60 per cent. He added the Asia-Pacific area managed to continue on a strong growth path following a successful year in 2010. Meanwhile, the Europe, Middle East and Africa (EMEA) region saw investment volumes rise by 16 per cent. Despite the positive global performance, there are still concerns that may affect commercial property investments in 2012.

Head of the international capital group at Jones Lang LaSalle Arthur de Haast commented: "Sentiment and economic forecasts in Europe imply that we could be in for a difficult year, although in the Americas in particular, confidence does seem to be returning on the back of improving economic indicators." However, research conducted by the organisation into investment in European retail assets paints a favourable picture for the continent, with the annual transaction volume expected to be over 28 billion euros (GBP 23.4 billion) in 2011 once all the figures have been analysed. This represents a 35 per cent increase over 2010.

Investors in the retail sector have been focusing on real estate assets in the UK and Germany, the firm noted, while France and Sweden each experienced large deals during the final quarter of last year. Head of European retail capital markets at Jones Lang LaSalle Jeremy Eddy explained investors were only interested in prime property and predicted that this approach will continue into 2012. He added it is important for investors to seek opportunities "outside of the core markets", as this is likely to lead to "greater returns in the long term".

Can Stateside Property Positivity Bleed Over The Atlantic?

Mon, 16 Jan 2012 00:00:00 GMT

Any adverbs used to describe the US recovery will likely be synonymous with slow and/or painful, but when you look at Greece, Spain, Portugal, Ireland and even the UK to a certain extent you are forced to take the stand that any recovery is better than no recovery or worse, a second dip recession, which looks less and less likely for the US with every passing month.

As a result, real estate investors stateside are becoming more confident. The UK and the US have held hands so many times during the international financial crisis, showing similar trends at similar times, unfortunately few (read none) of them very positive. Can real estate investors once again link hands with our "special partners" across the pond in feeling positive about investment prospects in our fair nation?

My gut says yes, we will see a similar rise in sentiment in the coming months. It isn't by magic or even wild coincidence that we experience many of the trends in our economy and real estate market as they do in the US; it is because we share similarities. We both have control over our own currency and (in our case near-complete) control over our own fiscal and monetary policy. When the US was printing money to combat the recession, we fired up the presses on our end for example.

But it isn't just that. We are both great nations with a rich history and a great entrepreneurial spirit. The US has its sheer size, but we have London, which is one of the most important financial centres in the world, and we also have one of the strongest currencies in the world. These, among many other things give investors reasons to feel confident. While our banks are in trouble and can't lend, these things are part of the reason why young companies are able to find finance on the private sector, while Greek companies struggle to stay afloat.

One thing we don't currently share with the US is a recent upturn in the pace of economic recovery. Job growth in the third quarter of 2011 beat expectations, with 241,000 private sector jobs added in September and October. In total 1.8 million private sector jobs have been added this year in the US, according to a recent report by Marcus & Millichap in Calabasas, Calif. Retail sales, excluding auto and gas, also beat Q3 expectations with a year-over-year increase of 6.1 percent in October, according to the U.S. Department of Commerce.

These figures aren't going to knock anyone's socks off, but they do point to an increasing pace of recovery in the US for this year. According to a report into the fourth quarter of 2011 by CBRE the commercial real estate picture is also improving, with falling vacancies in the office, industrial and multi-family housing sector, and stabilisation in retail availability levels.

Meanwhile the UK seems to be going in the opposite direction, worse than expected. Today's 0.6% decline in industrial production figures for November was worse than expected, and more downbeat than the latest private business surveys. Unemployment is becoming a bigger problem and experts are predicting further growth in unemployment this year. It is hardly surprising that commercial real estate outside London is not doing too great.

However, there are some signs of hope on the horizon. Many analysts believe that the GDP figure will be slightly negative for Q4 2011, but that it will turn around again in Q1 2012 thus we will avoid a double dip recession. This is based mainly on the latest purchase managers' index for December, which showed a "surprisingly buoyant" picture according to the report's author. PMI for the services sector, which accounts for 70% of UK GDP rose to 54 (any figure over 50 indicates growth), for the construction sector the PMI rose to 53.2, and the manufacturing PMI rose to 49.6.

Neville Hall, at Credit Suisse, said: "It does suggest that, after what looks as if it could be a pretty poor fourth quarter of 2011, as if the economy has regained a bit of momentum going into 2012."

"And that probably means that even if the fourth quarter growth numbers are negative the UK could successfully skirt recession rather than go through another double dip."

According to the latest poll of business confidence matched September's two and a half year low, investor sentiment is also in the pits (outside London). Based on this sentiment is unlikely to fall any further and this alone makes a rise more likely. Prices are also still severely depressed, which reduces risk, and the government's massive commitment to infrastructure development. All of which could fuel investor sentiment. Time will tell.

London Provides Greek and Italian Investors With Safe Haven

Mon, 16 Jan 2012 00:00:00 GMT

Italians and Greeks are pouring millions of Euros into the London property market, which is standing out as one of the few safe-havens within Europe. On the first wave of the financial crisis, investors from Italy and Greece joined investors from across Europe and around the world in London to capitalise on the weak pound and bag some bargains.

Now, while the pound is still much weaker than it was before the crash, this is no longer the main driver of foreign demand in London. The pound has found a new level against the euro, and now Europeans investing in London are doing so to secure the value of their savings against the possibility of devaluing cash, especially given the unshakable possibility that the single currency could yet be dissolved.

"London is a place to put cash outside of the Eurozone, and certainly outside of the south European countries," said Liam Bailey, head of residential research at international property broker Knight Frank. "It's fair to say that is a real and live trend."

Chinese and Indian buyers, by far the biggest are also buying because they see London as a safe-haven, but it is a greater testimony coming from Greeks and Italians, because one can't ignore the fact that the UK has about as big a problem with debt and deficits as they do. However, the obvious difference is that London is not in the Eurozone, which, at the moment makes it immediately and massively safer for investment.

Surprising though it may be Greeks and Italians are buying up prime London properties in growing number, according to data from Knight Frank. Last year Greeks and Italians were responsible for 1.7% and 1.9% of upmarket property purchases in London respectively. This year both were responsible for 2.63% of purchases. Spaniards are also buying, this year they were behind 0.7% of purchases compared to 0.6% last year.

Another report by Knight Frank shows that a total of £7.8 billion worth of prime London properties were sold in the year to end September, and that Spaniards, Greeks and Italians accounted for £393.8 million of that, which is 5.1% collectively.

Practically anyone with any real wealth, particularly those with substantial cash reserves is feeling very nervous about the rapid devaluation of cash in most currencies as those not fighting debt balloons and deficits have roaring inflation, and some have both. Either way it is not a good time to hold a lot of cash. This first triggered the gold rush, and after gold prices soared prime property in prime locations became the next safe-haven.

Greeks have particular cause for concern. They are undoubtedly in the worst shape in Europe, despite their being under a bailout agreement with the ECB, they are practically bankrupt and the austerity measures they are forced to impose to beg for the next handout are becoming more and more severe, but nothing seems to make any difference. There is a real risk of Greece abandoning the Euro or vice versa, which would mean a massive shake up in the value of any wealthy Greek's assets.

Italians aren't in quite the same boat. Yes, they have high public debt, and their sovereign borrowing costs are getting dangerously high, but they have low consumer debt and a much better chance of surviving the crisis intact if they are able to start doing the right things to stimulate the economy. That said; if Italy does fall into the need of a bailout the EU's current fund just can't cover its marker. So, what would happen then? Would Italy be forced to leave the Euro? Again, this is a big risk for wealthy Italians holding cash.

Spain is in much the same boat as Italy, but its sheer economic size and power mean it is safe for a while yet. However, if Italy does fall over, then the worries will instantly become a lot more real for Spaniards. It is likely the closer Italy looks to needing a bailout the more London property purchases we will see involving Spaniards.

Then you have Portugal and Ireland, both of which have been reasonably quiet ever since they were forced to ask for emergency aid. However, they could yet have their apple carts rocked by any of the events above.

Italy is almost certainly too big for the EU or ECB to cover its debts without major outside assistance. Ireland and Portugal are receiving their assistance from the ECB and IMF, Italy or Spain going the way of the bailout could force the complete dissolution of the single European currency, which would likely mean no more ECB and more uncertainty for Portugal and Ireland. If Ireland and Portugal's wealthy haven't already started putting their money into safe assets then it will probably start soon.

The same goes for any country in the Eurozone. If the euro goes they will all be forced to go back to their old currency, and face the value of their cash reserves taking a real beating. It will be interesting to watch the numbers of buyers from Eurozone countries in safe-haven cities as fear about the safety of the Eurozone increases (and/or hopefully eventually decreases).

East London’s Post Olympics Future

Mon, 16 Jan 2012 00:00:00 GMT

It is no secret that the London Olympics 2012 are to be predominantly hosted in the long-rundown Eastern part of the city (AKA East London, as in Eastenders). As a result the boroughs of Newham, Hackney, Tower Hamlets, Stratford and Waltham Forest, which were previously some of the most deprived in London, are now becoming somewhat chic.

The boroughs are being regenerated and now first-time buyers, owner-occupiers and investors are keen to buy houses in the area. What's more, according to agents the buyers are mostly from the aspiring middle class, who increasingly buy for the modern, coffee-shop lifestyle. But it is easy to overstate just how much of this is directly because of the Olympics. It is easy to think that it is all investors planning to capitalise on the high rents they can charge during the Olympics, but this is not the case.

Housing in these areas is much cheaper than the rest of London, and even the rest of east London, meaning that, unlike most boroughs in London, first time buyers can actually afford to buy here. Bow, which is just slightly further west, has only really seen an upturn in the last 5 years, but even it now is too expensive for most first time buyers. So, they have to move further east. While before the areas being rundown may have put buyers off, now that they are regenerating this is no longer a problem.

"We get a lot of single girls who want to buy here which is a good sign," says Ian Conway of Felicity J Lord's Stratford branch who is at the coalface of housing influenced by London 2012 accommodation. "Developments are safe and transport is second to none."

According to the firm, most of the buyers here are owner-occupiers, who are attracted by the more cosmopolitan atmosphere. "The regeneration of Stratford is great and even just looking outside our office, we can see they really cleaned it up: there are plants, there’s greenery. It's doing wonders for the area, because obviously Newham was the most deprived borough in London previously."

But they were regenerating before we won the Olympics. However, few people argue that getting the area ready for the event has not seen things pushed a lot farther a lot faster than they would have been had we had a different decision in Singapore in 2005 (when London won the bid to host 2012).

According to reports from previous Olympic Cities, the real benefit of the regeneration is not seen until after the event, and that would certainly look to be the case in London as well. If it were mainly speculative investors buying purely to cash in on the games, then the benefit would be limited after the event, and in fact may be partially reversed.

But because these are owner-occupiers and first time buyers buying because of the regeneration, the benefits will either long outlast the Olympics or become more pronounced when the chariots roll out. This is because, those buying now will be pretty much frozen in place until after the Olympics, not least because many are buying in new developments that won't be ready to move into until nearer Olympics time. After the event they can start to develop their properties, extensions, garages, conservatories etc, and also start to think about selling and moving up the ladder. Either way, these rundown areas are no longer that, and will become part of the mainstream London housing market for the foreseeable future.

"Healthy Returns" Recorded for UK Commercial Property

Fri, 13 Jan 2012 00:00:00 GMT

Those with commercial property investments in the UK have experienced "relatively healthy" returns during 2011, it has been asserted. According to the CB Richard Ellis (CBRE) Monthly Index for December, the annual return on such an investment last year stood at 8.1 per cent. However, the firm stressed there is a disparity between the income generated by different asset classes, with properties in the central London office and retail warehouse sectors among those to do well, while offices in the outer London/M25 area or the rest of the UK underperformed.

Head of economics and forecasting at CBRE David Wylie described the figures for the commercial real estate market as a whole as a "respectable performance given the broader economic background". He noted returns were predominantly generated by income, rather than capital growth, which reached 1.9 per cent at the end of 2011. "Performance across different parts of the market, and more importantly across different grades of property, was very skewed in 2011, with strength in central London offices and prime assets in particular helping to offset weakness elsewhere," Mr Wylie stated.

The office market was the most buoyant sector last year, the CBRE data showed, posting a return of 9.1 per cent. Properties in central London generated 12.7 per cent, while those elsewhere in the UK were much lower. The rest of UK category saw annual returns of just 3.3 per cent, while premises in outer London/M25 area achieved a return of 4.8 per cent. In terms of the price of rents, the office sector was the only one to experience growth, with retail and industrial properties both posting declining rental values.

Earlier this month, partner in the commercial research team at Knight Frank Darren Yates commented that uncertainty among investors about the outcome of the eurozone debt crisis has held back investment volumes in the UK's commercial real estate sector over the past few months. He predicted a solution to the problems faced by European governments would encourage more investors to enter the marketplace and boost the country's commercial property industry.

Positive Outlook for Prime Central London Property

Thu, 12 Jan 2012 00:00:00 GMT

Predictions for the year ahead in the prime central London property market are upbeat, which may encourage an increasing number of people to make a real estate investment in the city. Knight Frank recently revealed homes in the capital experienced price growth of 12.1 per cent during 2011, with a 0.8 per cent rise in values recorded in December, compared to November. The firm pointed out property prices in prime locations in London are now 40 per cent higher than they were in March 2009, when the market was badly hit by the collapse of Lehman Brothers.

Although the organisation is anticipating continued growth for values in the residential real estate sector in 2012, it believes this will slow down over the coming 12 months to stand at around five per cent by the end of the year. However, Naomi Heaton, chief executive at London Central Portfolio, has suggested investors could see greater capital appreciation. "Including the downturn during the credit crunch, prices from 1995 to date have increased on average by 8.2 per cent [per annum]. There is no reason, given the turbulent times that this has incorporated, not to expect this to continue over a further five-year period," she asserted. Ms Heaton stressed that any property investment in the central London market needs to be part of a long-term strategy, though.

Earlier this month, director of residential research at Savills Lucien Cook highlighted international buyers as the driving force behind the prime central London real estate sector at present. He added a shortage of new stock coming on to the market will help keep prices stable in the near future. Mr Cook's assertion about the importance of overseas investors was backed up by a statement released by WA Ellis partner Karen Carpmael earlier this month. She noted the majority of transactions at her firm in the run up to Christmas involved overseas buyers.

Global Hotel Investment to Remain Stable in 2012

Wed, 11 Jan 2012 00:00:00 GMT

The latest Hotel Investment Outlook report from Jones Lang LaSalle has predicted that, despite the continued uncertainty in the global economy, investment volumes in hotels will "hold steady". The firm anticipates that more than USD 30 billion (GBP 19.38 billion) will be transacted by the end of 2012. Arthur de Haast, chairman of Jones Lang LaSalle Hotels, explained there are still appealing investment opportunities in the hospitality sector. "So far, the dislocation in the financial markets has not impacted underlying trading fundamentals. This has reassured investors to a certain degree and has underscored the attractiveness high-quality, income-producing hotel real estate as an asset class," he stated.

In terms of global hotel markets where growth is expected, China remains among the most prominent, with the organisation commenting it has "good momentum" despite the pace of expansion slowing down. Other markets that may appeal to those seeking a property investment in this industry include Poland, Russia and South America, the report added. Speaking at the Arabian Hotel Investment Conference recently, global chief executive officer of Jones Lang LaSalle Hotels Mark Wynne-Smith highlighted some areas to look out for in 2012. "Cities which will achieve RevPar (revenue per available room) growth will be the favoured other locations - Barcelona, Warsaw, Moscow, Istanbul, for example," HotelierMiddleEast.com quoted him as saying.

The news provider also cited comments from Puneet Chhatwal, chief development officer at The Rezidor Hotel Group, who said he has noticed "a continued rebound in some of the markets which hit rock-bottom during the recession". In particular, he highlighted Ireland and the Baltic nations, although he stressed any growth here is from "a low base". The most recent HotStats European Chain Hotels Market Review released by TRI Hospitality Consulting revealed Istanbul's hoteliers recorded a 15.2 per cent increase in RevPar in November compared to October, while the Total Gross Operating Profit (GOP PAR) rose by 40.9 per cent in the same period. Meanwhile, Barcelona experienced RevPar growth of 8.4 per cent and an increase in GOP PAR of 23.6 per cent in the same timeframe.

UK Commercial Property 'Likely to be Stable in 2012'

Tue, 10 Jan 2012 00:00:00 GMT

The UK's commercial real estate market has reached a kind of plateau, with little change expected in capital values or yields over the coming months, it has been claimed. Partner in the commercial research team at Knight Frank Darren Yates explained there is unlikely to be much further yield compression among commercial assets in 2012, which will affect the total returns generated on such investments. "This year, in terms of total returns, you are probably looking at 6.5 per cent for the all property level and most of that is going to be income - you are not going to get much growth in capital values."

Mr Yates also highlighted the uncertainty over the outcome of the eurozone crisis as one factor that is affecting the commercial real estate market, particularly in terms of investment volumes. He asserted many investors are "sitting back in a 'wait and see' mode". Therefore, he predicted a resolution to the sovereign debt issues in mainland Europe would help boost the commercial property sector in the UK. However, a recent Deloitte report highlighted the opportunities available to investors "with cash, nerve and a long-term perspective", noting there will be chances to "take market share and to acquire assets on the cheap".

Deloitte anticipates a drop in the value of UK commercial property over the course of 2012; although the firm pointed out prime real estate assets will continue to perform well due to high demand, while premises in secondary locations will suffer. "The same desire for risk aversion that drives the prime market has led to both a lack of investor demand for secondary properties, as well as difficulties in financing it," the organisation commented. Mr Yates also believes the outlook for prime real estate markets is relatively good, stating that strong demand is helping underpin the sector.

Confidence in London Commercial Property Drops

Mon, 09 Jan 2012 00:00:00 GMT

The London commercial property market is experiencing its lowest level of confidence in two years, according to a new study. The survey by Lloyds Banking Group - which examines the views of developers, builders, agents and other industry figures - revealed a decrease in the net balance of experts who believe the sector will grow over the next half-year from 32.2 in August to 2.8, the Financial Times (FT) reported.

Factors such as the impact of changes to regulation in relation to bank lending and the ongoing eurozone crisis have helped dampen sentiment for the capital's office market. "There appears to be a recognition that the challenging economy is going to be here for far longer than anyone anticipated," Lloyds corporate real estate managing director Lynda Shillaw explained.

The survey comes after a report from Jones Lang LaSalle spelled out a mixed outlook for the UK's commercial property market, with little growth expected in the first six months of 2012, but the Olympics forecast to provide a boost in the latter part of the year. Andrew Smith of Aberdeen Asset Management told the FT that while the Lloyds survey "paints a more subdued picture" for London, the city has so far "proved resilient, buoyed by international demand and limited new supply" and "there remains a modest but general appetite to increase property investment".

However, analysts at Morgan Stanley released a research note earlier this week suggesting real estate investment trusts in the UK will experience a five per cent drop in net asset values in 2012, with a further six per cent decline expected next year, Bloomberg reported. The number of properties classified as prime is "highly likely" to fall and overall real estate values could decrease by eight per cent due to a lack of new lending by banks, the note indicated.

Top Tier Cities and International Gateways Offer Hope for Hotel Market in 2012

Mon, 09 Jan 2012 00:00:00 GMT

In the last few months, fears over a double dip recession have taken a toll on the stock market. One of the hardest hit sectors has been the hotel industry, because it is traditionally one of the first to feel the effects of a recession, and so investors have decided to let it feel some of the pain a little early. Understandably, another effect of this has been to cause demand to fall among hotel buyers, actually, to die off is a more appropriate way to describe the reduction.

Like the world of residential property though, not all areas are being affected equally by this problem. Last year UK house prices fell by about 4%, but in the top areas of London they grew by over 10%, in the year ending Q1 2011 house prices in France grew by about 5%, in Paris they grew by 22%, and we could go on.

The same is being seen in the hotel sector; several prime cities are seeing hotel revenues continue to grow, and while hotel stocks are still falling because of the wider situation, hotel buyers can still see that these cities present good opportunities to buy now while prices are becoming increasingly attractive. In fact, in this respect hotels in these cities become even more attractive to buyers, a: because they are now proving to be near-recession proof, and b: because the current climate brings the opportunity to pick up bargains.

According to October data from HotStats, Istanbul hotels are recording exceptional revenue growth at the moment, while Paris, London and Rome are all seeing revenue measures in decline for the month. According to the data Istanbul hotel rooms made 16% more in revenue per available room (RevPAR), 19% more total revenue per available room (TrevPAR), and a 43% increase in gross operating profit per available room (GOPPAR). Within Europe Dublin was the only other city to see any real hotel revenue growth, with a 5.9% growth in RevPAR, a 2.4% growth in TrevPAR, and a 4.2% growth in GOPPAR.

However, we see that there are no cities in Switzerland in HotStats European press release. Switzerland is currently seen as one of the world's safe-havens because of its strong, stable economy and also its strong currency. Zurich would be the prime city for hotel investment in Switzerland.

In the Middle East HotStats sees the biggest growth in hotel revenues in Dubai.

Several cities in Germany have recently been highlighted as having the potential for massive growth in the hotel sector. Hamburg is seeing massive growth in the commercial sector, the hotel sector looks undersupplied and undervalued in the city, and hotel investors are paying very close attention to Hamburg.

Jones Lang La Salle has just named their top 5 cities for hotel acquisitions in its bi-annual Hotel Investor Sentiment Survey. The report said:

"In the short-term, the markets that ranked highest for acquisition targets across the globe include Scandinavian cities Stockholm (66.7 percent) and Copenhagen (62.5 percent). Chicago, Milan and San Francisco round out the top five cities."

Entering The Era of Shared Ownership

Mon, 09 Jan 2012 00:00:00 GMT

The only answer that one can really give to this question in all honesty is, quite possibly. Looking at it pragmatically it is far more likely the renting is going to become a long term norm, but for those determined to get on the property ladder we could well see shared ownership become a norm, it is already becoming much more common.

The UK property market has changed over the last 50, 40, 30, 20 and even 10 years. Since the 50s it has been common place for men and women to find it easy to get jobs in their local area, and to spend their entire lives working in the same job.

That is no longer the case. For the last 20 years it has been becoming gradually more common for people to move around the country to find employment in their chosen field. Housing market analysts talk about aspiration (ambition) to own a home, but in the last 20 years this ambition has been more than taken over by ambition to find a good job, earn good money and to climb the ladder in our chosen field.

Renting is much more suitable for those who need to be flexible enough to move around the country for work or promotions, as the people with the fewest ties, who can move the quickest are often the quickest climbers on the ladder.

During that time we have also seen another change. Affordability of housing has been on the slide constantly. In the 50s the most someone would pay for a house would be 2 times their salary, with most costing much less than that.

According to reports the current long term average is 4 times. Looking at the historical Halifax house price index and comparing that with their House Price to Earnings Ratio index we can see that 3-3.5x is a much more comfortable level, and we see a series of mini-corrections when the 4 times mark is crossed, with a major correction in 1989 and 2007 when the HPER crossed the 5x mark. We can see that in fact 4x is only a long term average if you look at it since 2002, which is when the market was already heading for a fall.

However, we take from this that housing has become less and less affordable over the last 50 years. Along with the job factors laid out above, the lack of affordability, and at present a lack of mortgage availability and/or practicality (huge deposits) is all increasing the trend towards renting.

But at the same time, that is constantly making property ownership and even better investment. And at the same time you will always have those people who want the security, control and status of ownership, and who are unable or unwilling to reconcile just how much more renting costs in the long term. This doesn't make them any richer or anymore able to afford to buy outright, so for them shared ownership is the most suitable option.

We have covered the pros and cons of shared ownership in many articles on this site so we won't do so again. Shared ownership is here to stay and it is rising rapidly in the current climate, rising into a new norm? Only time will tell.

Britain’s Building Bailout Balls Up

Fri, 06 Jan 2012 00:00:00 GMT

As the world embarks upon what is no doubt set to be a turbulent financial year, the latest pomp and spin from the UK government is its poorly titled "Get Britain Building Fund".

The fund, announced and reiterated by top property government bod Grant Shapps, is set to stimulate the property market by getting all those unfinished properties finished off and onto the market by lending developers cash to get the job done.

420 million pounds will be thrown at the building industry in a bid to get unfinished projects back on course, with the proviso that the projects are completed by 2014 and the government is paid back.

What the press at large seem to have missed (and Mr Shapps too come to that), is why exactly these projects are left unfinished in the first place. Forgive my cynicism, but could it be they were priced incorrectly in the first place perhaps? Or planning regulations prevented anything getting done at any sensible rate? Could it be that the projects were started with the same mentality that has driven the mortgage market over the past few years – "house prices always rise, so bugger the cost and build away!"

I suspect most will be a combination of some or even all of the above which seriously begs the question why throw good money (that the government doesn't have and can't afford) in to a giant hole?

The whole idea is nearly as bad as trying to bail out a sinking battleship with a teaspoon, or perhaps a failing bank that lent out too much money, only to continue to get it wrong and hand out huge bonuses to its traders.

Even looking at the maths it doesn't make much sense: 420 million is being thrown at this latest ruse with the intended end result being 16,000 new properties – a cost to the government of 26k and change per property, which is expected to be paid back by the developers.

So, logic prevailing it pans out something like this:

Builder starts project a few years ago when house prices are on the rise.
Builder runs into trouble because of council delays.
Building costs go up.
Selling prices start to fall because the banks have lent out too much money, both to developers and the public.
Builder thinks sod this – delays have caused costs to rise and selling prices are falling, so shuts down the development.
Builder leaves site to decay until government notices and dishes out cash to make it look pretty again and uses it as a novelty gimmick to "rescue" the housing market.
Builder gets a shed load of cash to do some work – meanwhile costs continue to rise and house prices continue to fall.
Then (and this is where the really mind numbing futility of the whole exercise kicks in) the banks won't give a mortgage to anyone because they have no money and require too high a deposit on a property that was priced at peak levels and has had another 26k added on to it to pay back the government.

One day, someone will figure out at government level that it simply isn't possible to lend or borrow your way out of a recession.

Tip of the week – find an unfinished development and apply for a grant!

Mixed Outlook for Commercial Property in 2012

Fri, 06 Jan 2012 00:00:00 GMT

The UK commercial property market is likely to see mixed fortunes in 2012, according to a new report. Jones Lang LaSalle's latest Property Predictions publication suggests this year will be stronger than 2011 and will serve as a platform for further growth in 2013, but notes there are several economic metrics - such as decreased consumer spending power - that may hamper any expansion.

Jones Lang LaSalle UK executive chairman Richard Batten predicts that the first half of 2012 will bring little movement in either direction, but the Olympic Games together with asset purchasing activity on the part of the Bank of England "will provide a much-need[ed] boost to confidence" in the latter six months of the year, albeit at a relatively slow rate. Rental returns on commercial property investment look set to remain steady, although the early part of the year will be "difficult", says Jones Lang LaSalle Europe, Middle East and Africa research director Andrew Burrell.

This comes after the IPD UK Monthly Index for November 2011 revealed the first capital decline in the UK commercial property sector in 28 months due to factors such as the eurozone crisis, high inflation and unemployment, and negative forecasts for economic growth. Overall returns on real estate investment stood at 0.5 per cent and were entirely accounted for by income returns. The retail industry drove the drop in capital values, with the office market being the only category to experience positive growth of 0.1 per cent.

"Average rents have not seen as strong a recovery as prime thus far, but also show modest year-on-year increases," Mr Burrell explains. "Overall, commercial sectors show much greater rental stability than during the global downturn of 2008-09." It is expected that a shortage of quality properties will keep prime headline rents strong, although the central London market is likely to see a significant slowdown this year.

Chinese House Prices Drop Again

Thu, 05 Jan 2012 00:00:00 GMT

House prices in China fell for the fourth month in a row in December 2011, new figures have revealed. Statistics compiled by China Real Estate Index System and SouFun Holdings show average values dropped in 60 of the 100 cities examined compared with November, with the average price standing at 8,809 yuan (GBP 894.50) per square metre of space - a trend that may lead to real estate investment opportunities for some buyers.

While average home values in China were up by almost 2.9 per cent in December compared with the same month in 2010, this was a lower rate of growth compared with an increase of just over four per cent in the 12 months to November 2011, Dow Jones reported. In all, 37 Chinese cities recorded a monthly rise in house prices, with three locations seeing no change.

Peter Bai Hongwei of investment bank China International Capital told Bloomberg that he believes property prices will reach their lowest level in the third quarter of this year. However, he added: "It's actually very hard to tell whether China's property market will succeed a soft landing." The report comes as cities such as Shanghai mull the possibility of continuing measures to restrict house purchases in 2012. Mr Bai said: "Property is likely to be the last sector that the government will relax policies this year."

The figures follow a publication issued by the National Bureau of Statistics (NBS) last month pointing to a drop in both new and existing home sale prices in November compared with October. Prices of newly-built houses fell in 49 of the 70 cities assessed by the agency, while those of second-hand residences decreased in 51 locations. The NBS's figures replaced China's previous national property price index - which included data on median house values - in February last year.

Germany's Property Market - Riding Out the Economic Storm

Thu, 05 Jan 2012 00:00:00 GMT

The economic difficulties experienced by eurozone nations during 2011 have been well documented, with countries such as Spain, Portugal and Ireland seeing their property markets take a significant hit. Germany is often considered to be one of the most stable nations in Europe, so how has the ongoing debt crisis affected its real estate sector? According to the Knight Frank Global House Price Index for the third quarter of this year, the value of homes in Germany has climbed steadily during 2011. Annually, the cost of purchasing a dwelling increased by 2.8 per cent in this three-month period, with a 2.7 per cent rise recorded between the second and third quarters of the year.

Founder of ProVenture Property Matthew Littlecot explained investors have seen the value of their real estate assets in Germany increase significantly, noting that many are now selling properties to German and international buyers for between 30 and 50 per cent more than they bought them for. "It's not just because the economy's been good for the last five years and is still increasing. It kind of winds back to when the wall came down in 1989-1990 - the property market was reset back then," Mr Littlecot commented.

He suggested one of the main reasons why investors have been attracted to the German property sector is the strength of the rental market. Mr Littlecot revealed the "lively rental market" in the nation was what encouraged him to make a real estate investment in the country. He said: "Depending on where you go - like in the west of Germany - around 50 per cent of people rent property. So, places like Frankfurt, Munich, Hamburg have a very low owner-occupation level, even in those affluent places."

As a result, tenants are often successful professionals who have made the decision to rent, whereas in the UK, renters tend to be those who cannot afford to get on the property ladder. This also means tenancies are often longer, on average five to seven years, in Germany than they are in the UK. "It's nice and stable in terms of rental yield," Mr Littlecot noted, adding: "It's pretty much an arm's-length investment - you don't have to get in and change furnishings and decorate - you do that on the way out, back to a new standard."

Typically, investors can realise a yield of between eight and 12 per cent on their residential real estate assets in Germany, he pointed out, which is better than many other European nations at present. With rental demand holding steady, Mr Littlecot is optimistic about the future of the country's property market for investors. "As rents increase, property prices will increase in line with that - and that's a typical situation for the German market," he stated.

A report published by BNP Paribas Real Estate earlier in the year revealed that Germany has firmly established itself as a target for global investors, with the nation attracting some 17.3 billion euros (GBP 14.5 billion) in total investment in its commercial property market during the first three quarters of 2011. The research highlighted the country's growing share of the investment market in Europe, noting it accounted for 21 per cent of the money flowing into western European property sectors during the three months from July to September in 2011.

The summer 2011 European Investment Bulletin released by Savills noted there was a recovery in prime yields across the continent as a result of interest from investors in prime assets. Eri Mitsostergiou, from the European research department at the firm, commented that, in general, investors "remain wary of secondary markets amid downside risks to the European economic outlook".