U. K. Property Prices Continue To Rise

Property prices in the United Kingdom continued to increase in June, indicating broad stability according to reports. The latest index from Nationwide shows a seasonally adjusted 0.1 percent month-on-month, following a 0.5 percent increase in May. Only Northern Ireland saw values fall in the second quarter of 2010. In contrast, the annual rate of house price inflation dropped for the second consecutive month from 9.8 percent to 8.7 percent.

Overall U.K. house prices in the second quarter increased by 1.9 percent quarter-on-quarter. This resulted in an annual growth rate of 9.5 percent, up from 8.8 percent recorded in the first quarter of 2010.

According to Nationwide’s quarterly index, the South West of the country showed the strongest regional growth, with prices up by a seasonally adjusted 3.0 percent, and up 12.5 percent annually.  London had the strongest growth overall.  Its prices increased 13.2 percent in the second quarter. Growth in northern and midland regions was weaker than in the southern regions.

Indicators point to an increase in the number of properties for sale while the level of demand remains stable. “This would in part help to explain the recent slowdown observed in the rate of house price inflation,” said Martin Gahbauer, Nationwide’s Chief Economist.

Commercial Real Estate Expected to Enjoy a Boost in 2010

According to a report released by real estate consultants Jones Lang LaSalle, direct commercial real estate transactions volumes are poised to receive quite a boost in many parts of the world in 2010. In fact, the experts at Jones Lane LaSalle predict that volumes will increase by 30% in the Middle East, Europe and North Africa.

These predictions are being made after the market experienced better than expected activity during the first quarter, a time during which the market is traditionally quiet. At the same time, Jones Lange LaSalle cautions that there was also a 75% increase during the first quarter of 2008, at which time volumes managed to reach €20 billion.

When comparing the first quarter of 2010 to the last quarter of 2009, transactions are actually down by 15%. Nonetheless, analysts are confident the market is in a good position for the remainder of the year. This is particularly true in the UK, where the transaction volume of €7.8 billion accounted for more than one-third of all transactions and remained consistent with figures from the previous quarter. Three other countries, France, Germany and Sweden, followed closely behind, with each experiencing an increase in activity when compared to the previous year.

“The first quarter of the year is typically one of the slowest quarters; investors do not have the urgency to press on and close deals as they do toward the end of the year. Typically the first quarter is some 20 to 30% below the fourth quarter, so we do not read a 15% decrease as a sign of a slowing market,” said Richard Bloxam, who is the Director of EMEA Capital Markets with Jones Lang LaSalle, in a Property Wire article. “We expect investment activity to increase throughout the year. Already a number of transactions over €100 million and portfolio deals are under offer in the market. We estimate that direct commercial European real estate transaction volumes will reach at least €90 billion for the full year. This will be around 30% higher than 2009.”

Nigel Roberts, who is the Chairman of EMEA Research with Jones Lang LaSalle agrees, saying there is a growing amount of investor interest in obtaining quality real estate.

“This has clearly been demonstrated by movement in prime office yields when compressed in the majority of the European markets in the first quarter of 2010,” said Roberts. “London prime yields moved in by 50 basis points and continental European markets between 10 to 50 basis points with only a handful of markets remaining stable. Whilst economic recovery still remains fragile, business confidence is generally rising and with improved credit conditions the demand for real estate from core investors is driving down yields. In the short term interest rates sill offer positive cash flow opportunities for leveraged buyers but longer term investors will be looking for improving fundamentals translating into stronger rental markets.”

Property Investors Dominate Australian Real Estate Market

Mortgage specialists expect 2010 will be a good year for Australia’s mortgage industry, but with property investors replacing first time buyers as the main purchasers as reported by PropertyWire.com.

Residential property prices in Australia increased by 11.3 percent after the country’s modest 3.8 percent peak-to-trough falls in 2008. According to the latest published information from RP Data and Riskmark International, the best performing city was Darwin with prices up 17.9%. Adelaide was the worst, recording just a 5.7% increase.

The volume of mortgages last year rose 10 to 12 percent and is expected to grow 4 to 5 percent this year, according to Mark Hewitt, general manager sales and operations, of Australian Finance Group. Investors now represent about 34 percent of all mortgages arranged by AGF, up from 25 percent a year ago. For example, two out of every five mortgages arranged in NSW were for investment properties.

Hewitt said investors looked to property as a ‘safe bet’ to offset the volatility in the share market and general uncertainties surrounding other forms of investment. Investors have been coming back since the middle of last year to take advantage of a tight rental market.

Ordinary families are waiting instead of upgrading. In comparison, property investors, able to take a long term view, are hoping to ride a new upward cycle in property values.

Recovery of London Office Rental Market Underway

Tight supply and rising confidence among financial tenants are expected to boost office rentals in London in 2010, reports property consultant King Sturge.

After falling up to 40 percent in the global financial crisis, prime rents in the London financial district may rise 10 percent by the end of 2010. Rents in the West End are forecast to increase by 7.6 percent. This would mean average rents in the city of London of $77 (£47.50) per square foot and in the West End of $114 (£70) per square foot.

The predicted improvement in rents may ease investor fears that the UK commercial property market’s price rebound could be short-lived due to continued tenant weakness.

While London is poised for recovery, in the rest of the UK, King Sturge predicts rents will continue falling due to weak demand, although at a slower pace than in 2009. Experts have said the poor outlook for the regional markets could further widen a pricing gap between prime commercial properties and lower-grade assets, and this could postpone a general recovery in the sector by five years or more.

Indian Real Estate Market Improves

The Indian real estate market is on its way to recovery, with the residential real estate segment leading the way, according to a new Ernst & Young report. The demand for residential real estate has revived due primarily to improved affordability. Developers are focusing more on most projects, which are more salable, than on luxury developments. Improved liquidity, softening interest rates and price corrections have also contributed to the recovery.

Although India’s residential sector is improving, the commercial, retail and hospitality markets continue to struggle. The global economic slowdown has caused the IT sector and multinationals to halt expansion plans in the country. Analysts say that most retailers have put off their expansion plans in India due to the decline in their revenues and profitability. And developers have moved away from hospitality projects, which require a long period of time to complete.

The report names Delhi as the most preferred Indian destination for real estate developers and investors. Mumbai is a close second.  Key factors that help Delhi retain its top position are the fast-paced improvements in physical infrastructure, such as the metro railway and modernization of the international airport.

Foreign Investors Test U.S. Markets

From 2005 through 2008, foreign buyers claimed at least $100 billion of US commercial property, a significant sum, according to Real Capital Analytics as noted in an AFIRE News article. In recent years, foreign investment in United States real has accounted for less than 10 percent of all property acquisitions. However, foreign investors are starting to take interest in the U.S. again though origins of the capital are changing and actual acquisitions so far have trended on the low side.

Through third quarter of 2009, acquisitions by non-U.S. investors have totaled just $2.1 billion. However, the market share of foreign buyers is up slightly overall, as a percentage of all U.S. acquisitions, and with notably higher investment for office, hotel and apartment sectors.

Foreign Investment into U.S.

Israel’s Increased Interest Rate Raises Economic Concerns

Israel‘s recent increase in the mortgage interest rates has the market concerned that the higher rates will discourage borrowers and lead to a drop in property purchases. Israel has been the world’s top performer in residential real estate. Two key factors have helped Israel defy the worldwide real estate slump: lack of available land for development and tax breaks for investors. Prices rose 12.5% in the second quarter from a year earlier, double the increase for Switzerland, the second best performer among countries tracked by London-based property consultants Knight Frank.

Israel is one of the first countries to raise interest rates since the start of the global recession. In August, the Bank of Israel raised the interest rate to 0.75 percent to combat rising inflation. Some economists are predicting that interest rates will go up to 2.5%, according to propertywire.com.

While some predict increased interest rates will cause property prices to plunge, others forecast it will stabilize the market.

Prices will probably ‘stabilize’  rather than plunge, said Ayelet Nir, chief economist at IBI Ltd.  However, in some locations in Jerusalem, Tel Aviv and the coastal city of Netanya, prices are likely to remain high due to a constant demand from Jews from the US, France and the UK, according to Bernard Raskin, regional director of Re/Max Israel, the country’s largest property broker.

Global Housing Market on the Mend

The world’s housing markets show signs of hope. Sixteen of the 27 countries that have published their third quarter results with GlobalPropertyGuide.com experienced rising prices. Only 11 countries reported falling prices. After being negatively affected during the economic slump, the UK, Canada, Germany, Singapore and South Africa are finally noting positive price changes quarter-on-quarter.

The world seems polarized between economies of Asia and those of Eastern Europe and the UAE. Except for Thailand, the Asian economies are enjoying strong economic growth and high residential property price rises. In contrast, growth in Eastern Europe and the UAE has stalled and property markets have crashed.

On the global scale, while some markets’ increases are more modest than others, the over-arching trend is toward recovery.

Dubai Real Estate Bubble Bursts

The Dubai government has admitted to a debt of $80 billion that it cannot repay. Of that debt, Dubai World, which is the flagship of the Emirate and the company behind such iconic developments as The World and Palm Jumeirah, owes $60 billion. Just a year ago, the Dubai government was proudly announcing its resilience against the global market downturn. And Dubai World was considered one of the key drivers of the economic boom in the region.

As a result of this revelation, an estimated 400 projects worth more than $300 billion have been canceled, shut down or ordered to move slowly as developers try to cope with property prices that are still on a downward spiral. Dubai World has announced a six month stand still and said it will not be able to pay creditors until at least May 2010. The debts are frozen until at least May 2010, with accountants at Deloitte working to draw up a restructuring plan.

Tips for Buying Property Abroad

No matter how appealing a Tuscan villa or English cottage may be, purchasing property in another country needs to be fueled by wise decision making, not impulse buying. You can help your clients turn purchases into a great deal with 12 basic tips offered by Property Investment.  Key tips include:

  • Never sign a contract that you do not understand. (For example, contracts written in a foreign language).
  • Always get advice from independent specialists who are proficient in the chosen country’s laws, processes and specifics of buying property there.
  • Ensure you do not inherit a debt on the property before you purchase
  • Always give yourself a cooling off period if you see a must-have property and are tempted to put down a deposit right then.
  • Arrange your mortgage in the currency that you earn in where possible, unless you are going to receive rental income from that property in the local currency.

Help your international property clients by giving them a list of these tips, customized with your company logo and details about your international real estate service offerings.