Research

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2008-best-overseaspropertymall

2008 was quite an eventful year we witnessed extraordinary property price rallies at the start of the year with markets like Moscow & Dubai each growing by over 75% from 2007 and a generally positive outlook for the year ahead. Although cracks did start to appear in the US market and the year started with a total collapse of the Baltics property market, the outlook was generally optimistic as hardly anyone anticipated the ripple effect the credit crisis would have on the global property scene in markets spanning from Europe to as far off as Phnom Penh.

We have put together a series of some of our most popular posts in 2008 based on reads, links from other blogs/websites, comments and bookmarks from social media sites. Here we go.

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The Knight Frank Global House Price Index Q3 results have confirmed that the annual house price growth, except in Dubai has slowed from the June Q2 report of 4.8% to 3.8% in the third quarter.
With the US and Latvian market remaining at the bottom of the index, the UK is also spiraling towards the bottom. Average prices fell by 0.3% on a quarterly basis and more than half of all countries showed quarterly price falls, with one third now also showing annual price drops.

It is clear that every country in the world is more or less affected by the global credit crunch. An alarming concern is also the fact that prices fell in half of the lists countries during the third quarter of this year.

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larget-transparency-score-changes-2006-2008.jpgThe latest Jones Lang LaSalle Real Estate Transparency Index has been significantly enhanced. According to the report, it is clear that overall transparency has clearly improved since the last survey in 2006.

27 out of a total 56 markets have improved their score and out of those, eight countries moved up one full transparency tier.

Overview

The biggest transparency improvements were found in Dubai, Romania, Ukraine, and Russia. Venezuela is the only country overall whose transparency is lower this time around. On average, Europe’s transparency is higher than in the regions of Africa and the Middle East.

The biggest improvements seen this year were in Vietnam, China (PRC) and India.

Africa’s and regions in the Middle East attract more global attention from property investors which brings the transparency issue to the forefront of the regional governments agendas.

In Latin America it was Panama and Brazil that received the largest transparency overall.

Asia Pacific

The 2008 transparency survey included sixteen countries in a Asia Pacific region. A first time inclusion was Cambodia. Some of the worlds shiniest beacons are included within this region, such as Australia and
New Zealand. The least transparent countries are Vietnam and Cambodia.

gum-shopping-arcade-moscow-russia | credit:EffervescingGUM Shopping Arcade: Moscow’s most exclusive shopping mall

Mercer have just released their new list on the cost of living in cities around the world. If you remember, we blogged about their list last year in the Mercer Global Cost of Living Survey.

There have been some interesting changes although the top position for most expensive city in the world has once again been awarded to Moscow. If this is too much of an expensive market for you, you can always escape to Asuncion in Paraguay as the cheapest. The top ten places on the Mercer survey are clearly dominated by European and Asian cities.

The major blame to the changes and shifts in the rankings can obviously be attributed to the weakening of the US dollar. In total, the survey covers 143 cities across six continents, measuring the comparative costs of entertainment, household goods, housing, food, transport, clothing and more (200 each).

The latest Mercer ranking of cities by cost of living places Moscow, London and Seoul in first, second and third place. Mercer’s own analysis of the rankings gives prominence to changes in exchange rates, and particularly, the fall in the value of the dollar, as the chief ‘motor’ for moves up or down the list. However, in the case of London the change from 5th place in 2006 to second this year is also ascribed to higher property rental costs. Of course, transport costs for London residents are another factor helping the city up the scale. Glasgow (up from 60th to 36th) and Birmingham (up from 69th to 41st ) are among those cities to have moved furthest.

For a true appreciation of what changes in rankings mean for people on the ground it’s important to be aware of developments in Mercer’s benchmark city, New York. The benchmark itself does not remain static; New York housing costs are reported to have risen by an average of 6.5% in the course of 2006. In the US, the consumer prices index rose 3.23% in 2006 and the rise in the 12 months to March (when the Mercer survey was conducted) was 2.77%.

These increase in New York costs of living need to be borne in mind when considering Mercer’s cost of living indices for other cities (which are all relative to New York). So far the serious softness in much of the US housing market does not appear to be showing up in Mercer’s figures.

Although a cost of living survey is necessarily a somewhat blunt instrument for accessing real estate in the different cities covered, the Mercer report does throw up some interesting contrasts, nevertheless. Focusing on places covered by Overseas Property Mall in the last few months, it’s interesting that Bratislava is not only more expensive than Prague again, but costs of living there have risen considerably more sharply in the last year.

Berlin continues to be slightly cheaper than Munich or Frankfurt though all three have risen up the table as a result of the increased rate of exchange for the Euro. Sofia is Europe’s least expensive city (ranked 108th). Athens, Barcelona and Madrid, also affected by the Euro’s rise, have all risen a long way up the table in the last year.

Outside Europe, Dubai and Abu Dhabi have both slipped down the table a little. Does this reflect a measure of stability in property prices and rents in the UAE? Interestingly, Dakar in Senegal is higher up at 33rd with a substantial increase in its cost of living index. However, this is probably mainly a reflection of the fixed exchange rate the CFA franc enjoys with the Euro.

Finally, it is worth remembering that Mercer’s methodology is based on the similarities in spending patterns among people in middle and higher income brackets no matter where they originate from. The rankings are of limited value to those relocating themselves, say as a matter of lifestyle choice, who are happy to do as the Romans do when in Rome.

Mercer Human Resource Consulting

Cost of Living Survey – Worldwide Ranking 2007

(including housing)

Top 50

Base City: New York, USA (=100)

Rankings

Cost of Living index

March 2007

March 2006

City

Country

March 2007

March 2006

1

1

MOSCOW

Russia

134.4

123.9

2

5

LONDON

United Kingdom

126.3

110.6

3

2

SEOUL

South Korea

122.4

121.7

4

3

TOKYO

Japan

122.1

119.1

5

4

HONG KONG

Hong Kong

119.4

116.3

6

8

COPENHAGEN

Denmark

110.2

101.1

7

7

GENEVA

Switzerland

109.8

103

8

6

OSAKA

Japan

108.4

108.3

9

9

ZURICH

Switzerland

107.6

100.8

10

10

OSLO

Norway

105.8

100

11

13

MILAN

Italy

104.4

96.9

12

12

ST. PETERSBURG

Russia

103

99.7

13

15

PARIS

France

101.4

93.1

14

17

SINGAPORE

Singapore

100.4

92

15

10

NEW YORK CITY, NY

United States

100

100

16

18

DUBLIN

Ireland

99.6

91.8

17

24

TEL AVIV

Israel

97.7

89.7

18

21

ROME

Italy

97.6

89.8

19

21

VIENNA

Austria

96.9

89.8

20

14

BEIJING

China

95.9

94.9

21

19

SYDNEY

Australia

94.9

91.3

22

25

HELSINKI

Finland

93.3

87.8

23

36

STOCKHOLM

Sweden

93.1

84.8

24

27

DOUALA

Cameroon

92.9

87.6

25

41

AMSTERDAM

Netherlands

92.2

83.4

26

53

MADRID

Spain

92.1

81.6

26

20

SHANGHAI

China

92.1

91.2

28

21

KIEV

Ukraine

91.4

89.8

29

59

ATHENS

Greece

90.6

81.1

30

52

ALMATY

Kazakhstan

89.6

81.9

31

56

BARCELONA

Spain

89.2

81.2

31

48

BRATISLAVA

Slovak Republic

89.2

82.4

33

45

DAKAR

Senegal

89

82.8

34

25

DUBAI

United Arab Emirates

88.8

87.8

35

45

ABIDJAN

Cote d’Ivoire

88.3

82.8

36

60

GLASGOW

United Kingdom

88.1

80.7

37

31

LAGOS

Nigeria

88

85.5

38

15

ISTANBUL

Turkey

87.7

93.1

39

61

MUNICH

Germany

87.6

80.2

40

61

FRANKFURT

Germany

87.4

80.5

41

69

BIRMINGHAM

United Kingdom

87.2

79.7

42

29

LOS ANGELES, CA

United States

87.1

86.7

43

56

LUXEMBOURG

Luxembourg

87

81.2

44

70

BRUSSELS

Belgium

86.5

79.5

45

30

ABU DHABI

United Arab Emirates

85.9

86

45

72

BERLIN

Germany

85.9

79.2

45

62

DUSSELDORF

Germany

85.9

80.4

48

28

TAIPEI

Taiwan

85.8

86.8

49

50

PRAGUE

Czech Republic

85.6

82.1

50

51

ALGIERS

Algeria

85.1

82

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Global real estate investment has never had it this good according to the new Jones Lang LaSalle report “Moving Further and Faster”…

2006 experienced record level volumes of global real estate investment with a 40% increase in investments in 2006 from 2005 amounting to a record $900billion total investment. The lion’s share of global real estate investment continues to be traditionally commercial real estate which accounted for $682billion in 2006, a surge of 38% over 2005, and nearly double 2003 volumes.

Cross border transactions now represent 42% of total investment volumes which has grown by 34% from 2005 levels. Inter-regional investments grew from 23% in 2005 to 29% in 2006.

The breakdown of the $900 billion global real estate investment in 2006 is as follows:

  • Direct commercial real estate investments accounted for $682billion,
  • Investors privatised REITs and other listed real estate owning entities totalled $48bn,
  • and purchased multi-family residential investments totalled $170 billion.

According to the CEO of Jones Lang LaSalle’s International Capital Group, Tony Horrell, “Global real estate markets performed very strongly throughout 2006; it was the first year that all major developed and emerging market returns were both aligned and positive. Investment was driven by increased allocations to the asset class, growth in investible stock and by the increased attention of opportunistic private equity players who identified relative value in the sector. These increased flows into real estate gave rise to two notable phenomena in 2006 an increasing number of ‘mega-deals’, and continued globalisation of the asset class.” Horrell also pointed out the collective rise of 240% (US £39billion) in Global funds invested in the US, UK & Japan.

  • Global funds dominated the German market in particular, purchasing 40 percent (by value) of all German commercial property traded.
  • US investors expended $18billion in the UK, France & Germany (a 51% increase).
  • UK investors spent $18billion principally in Germany (an increase of a staggering 200%)
  • Middle Eastern investors spent about $13billion principally in the US, UK, Germany & South Africa (a 14% increase)
  • And Australian investors spent $12bn, principally in Germany and the UK

Horrell added: “Germany’s relative attractiveness has increased significantly due to a unique combination of willing domestic sellers, underweight cross-border investors, positive yield spreads and a recovering economy. Japan offers investors exposure to a recovering economy and yield spreads of almost 200bps”.

According to Padraig Brown, Global Strategy and Research Director at Jones Lang LaSalle, “Emerging markets had a strong year with over $40bn of transactions recorded (up 74%). Many of these markets have appeared on investor’s radars only recently and are exhibiting exhilarating rates of growth, with the Russian market expanding by over 700% during 2006 and strong deal flow in China, Turkey, Mexico and Brazil.”

“Real estate fundamentals remain strong, with solid economic growth projected, vacancy rates remaining low in most major markets, and development pipelines remaining modest. Rental growth should help support recent yield compression, however investors should note that the pricing differential between prime and secondary product and markets has been lowered and ensure that risks are sufficiently factored into bid prices.”
Regional Highlights: Europe

  • Europe became the world’s most active real estate investment market in 2006 with $305billion invested in the region in 2006 (a 44 % increase from 2005)
  • There was a distinct shift in the UK’s long term dominance of the European market in 2006 were total transactions amounted to US$101bn (4% below 2005) with investment volumes increasing strongly in both Germany and France.
  • Germany was the major global real estate story of 2006. A combination of willing domestic sellers, aggressive cross-border investors, positive yield spreads and a recovering economy resulted in transactions totalling US$62bn – growth of over 140% in constant currency terms. The German market now accounts for 20% of European volumes (up from 12%).
  • The French investment market grew by 70% to $30bn or 10% of European volumes (up from 8%).

Regional Highlights: North and SouthAmerica

  • Real estate investments in North and South America were US$283bn in 2006, up 31 %.
  • Cross-border investment represented 25 % of total investment (up from 16 % in 2005) and inter-regional investment reached 22 % of total investment (15 % in 2005).
  • Investment markets in the Americas region are overwhelmingly located in the U.S. (96% of the region’s transactions by value, and 40% of global investment).
  • Other investment markets include Canada and the rapidly growing cross-border markets of Latin America – dominated by Mexico and Brazil.

Regional Highlights:Asia

  • Real estate investments in Asia in 2006 were $94bn, up 41 %.
  • Cross-border investment represented 32 % of total investment (up from 29 % in 2005) and inter-regional investment was 22 % of total investment (18 % in 2005).
  • Japan’s resurgence dominated the Asia Pacific market where transaction volumes surged 128% to US$52bn – 55% of total investment in the region.
  • Yield spreads were guaranteed for investors in Japan due to its interest rates which remain the world’s lowest.

Read the full Jones Lang LaSalle report here. What are your thoughts about commercial real estate investments in 2007? Do you think they’ll surpass 2006 levels? The Jones Lang LaSalle report is quite optimistic about 2007.

We would like you to check out the new International Herald Tribune Real Estate Blog – Raising the Roof. And don’t forget to drop by our own overseas property forum, it’s new and needs your support.

Global house prices continued to rise rapidly in 2006, but at a slower pace than in 2005. Northern Europe leads the house price boom.

Leading the charge was Estonia with an impressive 54% house price increase in 2006. This followed average dwelling price rises of 57% in 2005, and 25% in 2004 (see table).

Estonia was followed by Denmark which experienced 23% house price rises in 2006, then by Norway (14%) and Ireland (13%). Other countries in northern Europe also had impressive house price increases, including Sweden, UK, and Finland.

Early indicators suggest that Latvia’s strong house price growth will continue in 2006, following 27% house price rises in 2005. This will be verified as soon as official statistics come in.

Outside Europe, South Africa, 2004’s star performer, continues to experience strong house price growth, with 2006 house price rises of 12.7%. However, this is a far cry from the 33% increases recorded in 2004, and the 17% rises of 2005.

Countries attracting immigrants are also experiencing strong property price increases, particularly Canada (11%), New Zealand (10%) and, to a certain extent, the US (8%) and Australia (6.5%).

Central Europe lags behind

Southern Europe, the favorite destination of second home buyers and holidaymakers, is also experiencing strong house price increases.

France experienced a 12.5% house price increase from 3Q 2005 to 3Q 2006, while Spain registered a 10% rise in 2006 and Italy 6.6%. However property prices in Portugal dipped marginally (-0.4%), following a lacklustre recent past.

Austria’s housing renaissance continued, with 6.8% price increases in Vienna, after 8% price rises during 2005.

Most countries in Central Europe, however, remained unexciting. 2006 saw very small price increases in Switzerland (2.9%), Luxembourg (2.9%), Germany (2.8%) and Poland (2.2%).

Philippines leads Asia

The Philippine real estate market registered the highest price growth in Asia during 2006 at 11.6% (Philippine property prices had dropped most after the 1997 Asian Crisis).

Indonesia’s house prices rose 8.76%, from 3Q 2005 to 3Q 2006. However Indonesian inflation was high in 2006 at 13%, so in real terms Indonesian house prices actually fell.

Singapore’s residential property price index rose 7.6% y-o-y to 3Q 2006, the city state’s highest price increase since 2000.

Malaysia and Taiwan are still muddling through, and saw only marginal price increases of 1.4% and 1.1%, respectively.

The previous strong house price growth in Thailand during 2004 and 2005 came to an end, as the political crisis spilled over to the economy, and 2006 saw house price falls of almost 1%.

Japan has not seen the end of more than a decade of property price falls. Commercial property values are rising in Tokyo and some major cities, but in the rest of the country property prices are still static.

The global property boom is slowing

Many more countries experienced nominal house price increases in 2006, than price falls. Yet the pace of housing price increases in 2006 was generally down on 2005.

Several countries experienced quite significant slowdowns in their housing markets, without seeing actual price falls. Countries in this category, where the price rise rate dropped by more than five percentage points, include Poland (6.6 percentage point reduction on previous rate of house price rise), US (5.6% reduction on previous rate of house price increase) and New Zealand (5.02% reduction on 2005’s price-rise rate).

However, US house prices showed no actual decline in 2006, either during the year, or from one quarter to the next, according to the OFHEO house price index, despite some press reports to the contrary.

It is tempting to attribute the slowdown in many countries to interest rate rises, especially in Europe and the US.

However, other forces came into play in some countries. Israel (typically not included in most ‘global’ house price reports) experienced price declines in 2006 (-4%), after a recovery in 2005. The price fall can be attributed to the war with Hezbollah in Lebanon, and other political troubles.

The dramatic upsurge of Hong Kong property prices in 2003 and 2004, and sudden cooling down in 2005 and 2006, also deserve a better explanation than the usual speculative bubble theory.
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The Global Property Guide is a research publication and web site (http://www.globalpropertyguide.com) for the high net worth investor in residential property.

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Global investment in real estate may increase 26 percent to US$600 billion this year as investors chase stable returns, according to a report published Wednesday by Jones Lang LaSalle Inc.

Investment in the first half amounted to US$290 billion, with spending in Germany and Japan almost doubling, said Jones Lang LaSalle, the world’s second-largest publicly traded real estate brokerage. Investment in the Americas rose to US$129 billion, followed by US$117 billion in Europe and US$43 billion in Asia.

“Across the world, fund managers are receiving record fund inflows as populations in developed countries approach retirement age,” Tony Horrell, head of Jones Lang’s international capital group in London, said in the statement. “Many of these funds are attracted by real estate’s strong stable returns.”

Investors are buying more shops, offices, hotels and industrial properties to broaden their range of assets. Banks such as Goldman Sachs Group Inc. and other buyers are targeting countries such as Germany and Japan, where property returns have lagged behind markets such as the U.K. and Ireland.

Real estate investment is becoming increasingly global with US$128 billion, or 44 percent of all investment, spent on cross- border transactions in the first half, said Jones Lang. That was 69 percent higher than in the same period a year ago, it said.

Inter-regional spending, involving investors from outside the region where the asset is located, rose 68 percent to US$90 billion, or 31 percent of total spending, from a year earlier, Jones Lang Lasalle said.

“In relative terms, the globalization of real estate investment has had the greatest impact on developing markets, said Horrell. “In Central Europe and some Asian and Latin American markets, inter-regional investors are purchasing the majority of available prime quality stock.”

The U.S. accounted for 43 percent of all investment in the first half compared with 45 percent a year earlier. The U.K., home to the world’s most expensive offices, slid to a 14 percent share from 20 percent in 2005.

Inter-regional investment in the Americas more than doubled to US$33.5 billion, with Middle Eastern investors, buoyed by surging oil prices, accounting for 14 percent of international spending. The U.S. accounted for 96 percent of all investment in the region, with New York, San Francisco, Chicago and Boston the most popular cities for non-U.S. purchasers.

Global investors spent more than US$9.5 billion on U.S. hotels in the first half, in addition to “sizable” office and industrial property purchases, said Jones Lang.

The share of investment going to Germany doubled to 8 percent, with global investors buying more than 40 percent of all the German commercial real estate that was traded in the first half. Transactions in Germany in the first half almost equaled the total for the whole of 2005 as German investors sold a net US$24 billion of assets.

Japan accounted for 8 percent of all real estate investment, up from 5 percent a year earlier. Investment in Japan accounted for half of all spending in Asia compared with 35 percent in the same period in 2005. Investment in Asia as a whole rose 40 percent from a year earlier.

Jones Lang’s total excluded the US$30 billion spent privatizing publicly traded real estate investment trusts such as Trizec Properties Inc., as well US$16 billion on developments funded in advance and more than US$60 billion on residential apartments.

Source: China Post

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Timeshare and shared ownership properties have been endorsed by a major new study undertaken across the region.

Revealed for the first time at today’s exclusive conference at Dubai’s icon of hospitality, the Burj Al Arab, the symposium included 18 presentations and panel discussions covering every aspect of the leisure real estate market.

Commissioned by RCI Middle East, part of the world’s largest holiday exchange and rental travel group, RCI Global Vacation Network, the research findings formed the basis of a programme that attracted an audience of high profile executives from around the world.

Stephen Holmes, Vice Chairman of Cendant Corporation, parent company of RCI, provided the keynote address, along with Awadh Al Ketbhi, Director of Conventions at Dubai’s Department of Tourism and Commerce Marketing.

The research focused on the burgeoning Arab tourist market and the holiday preferences of Arab travellers. More and more of them are expressing a preference to holiday within the region and this survey is essential reading for all those involved in the local hospitality and leisure sectors.

Fieldwork was undertaken during March across a sample of nearly 1,000 high-earning nationals from Saudi Arabia, Kuwait, Iran, Egypt and the UAE. Undertaken by the Pan Arab Research Centre, (PARC), the face-to-face interviews were analysed and edited by NorthCourse Advisory Services, a member of the Cendant group that provides comprehensive consultancy and turnkey solutions for prospective developers around the globe.

The research revealed that the concept of shared ownership products is ideally suited to the higher income Middle Eastern national. Also, that many Saudi and UAE nationals are more inclined to consider buying a timeshare property over and above other options. Longer stay purchases, known as Fractional Ownership, typically involving a share of a larger number of weeks rather than just one or two, were also a major preference, especially amongst Kuwaitis and Egyptians.

The study demonstrated that the entire sample travels regularly and that holiday choices are largely based upon destinations that offer good family solutions and shopping rather than activity and adventure tourism. Food and fine dining is definitely high on the agenda for all respondents in the survey.

Topics of particular focus during the research were 4 leisure travel options – family holidays, religious travel, big trips and festive travels; the clear leader is family holidays. Many travel in larger groups, with extended family, friends and household staff; the larger, luxurious type of accommodation found within shared ownership developments, can fulfil these requirements perfectly. Notably, 40% of Saudi Nationals take household staff away with them, and 46% of UAE Nationals take their parents.

Dubai and the UAE as a whole are the most popular destinations for all nationalities, especially when considering a timeshare purchase. The potential is significant – the Middle East market alone could support USD$540 million in annual timeshare sales. With regard to fractional ownership, the most attractive locations were Dubai, Sharm El Sheikh and Makkah. Although this is a smaller market in terms of volume, gross annual sales are estimated at USD $642 million, greater than for timeshare due to higher-value properties. Another exciting new shared ownership product is religious timeshare, which has received an extremely positive response amongst Muslim communities across the globe, who all have a common interest in travelling to Makkah.

These findings clearly demonstrate the major potential for shared ownership developments within the Middle East, where to date construction within the Gulf region exceeds USD$1 trillion, according to MEED reports. Within Saudi Arabia the value of new projects has doubled to more than USD$200 billion in the last 12 months.

Vivienne Noyes-Thomas, Managing Director of RCI Middle East, commented ‘today’s symposium is a unique forum packed with ground-breaking information for all those with an interest in property development, hospitality and sales. With close on 150 delegates from 15 different countries, it has drawn substantial interest from developers, government organisations and the entire leisure real estate industry.’

Other topics covered by speakers from the US, Europe and Asia at today’s symposium included The New Generation of Luxury Timeshare, Condo Hotels and Buy to Use and Let property models. Spanish tourism marketing expert Euologio Bordas set the background with a review of Global Tourism Trends and Shared Ownership within the ‘Dream Society’. Key business leaders from the local community – including Elaine Jones, CEO of Asteco, James Wilson, CEO of Nakheel Hotels and Resorts, Patrick Smith, VP Asset Management for IFA Hotels and Resorts – examined the opportunities for these new business models in the regional property and leisure development marketplace.

Source: AME Info