Dubai is back in business, or at least on its way to repairing an image devastated by a debt crisis.
Less than three years ago foreign investors turned their backs on Dubai, the tiny desert city-state with grand ambitions built on massive debt, after state-conglomerate Dubai World announced it would restructure about $25bn in debt.
But now, Dubai’s flagship airline has successfully marketed a $1bn bond, hotels have attracted thousands more guests and unrest across the Middle East has persuaded some businesses to move their offices to the more stable emirate.
“At one point I had investors tell me they didn’t want Dubai at all in their portfolios,” said a banker.

But the success of Emirates bond this month, attracting orders of over $6bn, is one of the clearest signs yet of returning confidence and served to show the airline’s importance to Dubai’s economy and international image.
“Being able to get any airline debt away in a world with $100-plus crude oil prices, the biggest component of an airline’s costs, is impressive,” said Daniel Broby, chief investment officer of UK-based asset manager Silk Invest.
“The fact that it was a Dubai-based airline is even more impressive.”
Emirates priced its bond on the same day that global ports operator DP World, another of Dubai’s prized possessions, made its debut on the London Stock Exchange.
“The DP World listing and Emirates bond are the sort of instruments to show that Dubai has returned,” said Saj Ahmad, analyst at FBE Aerospace in London.
Appetite for Dubai debt has been rising in recent months, and CDS levels have sunk back to pre-2009 crisis levels.
Not only is the Dubai government planning to issue new bonds this week after a London investor roadshow, but it recently announced an extension of its bond programme to $5bn.
The pick-up in sentiment is a far cry from November 2009, when Dubai World’s plan to restructure about $25bn in debt sent investors fleeing practically overnight and translated into negative growth for the once high-flying economy.
There is also an unavoidable sense of optimism. In 2010, Dubai’s GDP per capita was just under $42,000, one of the highest in the world.
Driven by trade, financial services and tourism, Dubai’s economy recovered in 2010 with 2.4 percent growth and is projected to expand by another 3 to 3.5 percent this year.
In contrast, the World Bank expects 1.9 percent growth in the Middle East and North Africa in 2011.
Cranes are purring back to life and tourists are flocking back to Dubai’s delights such as a ski slope in the desert, one of the world’s largest shopping malls and its tallest tower.
In the first quarter, hotel guests numbered more than 1.8 million, a 14 percent increase compared with the same period last year, according to the Dubai Statistics Center.
“With the so-called Arab Spring shutting down other major tourists markets in the region, notably Egypt, Jordan and Bahrain, tourists flocked to Dubai,” said Guy Wilkinson, managing partner at Viability Managements Consultants, a hospitality consultancy based in Dubai.
Businesses and capital inflows into Dubai — though hard to quantify accurately — have also increased largely because of political uncertainty in Bahrain, a well established financial hub in the region, money managers and bank executives say.
Many companies have shifted offices or staff to the city, while UAE bank deposits climbed to their highest level in at least more than two years in April.
“Companies are physically moving to Dubai — for some, the regional unrest is an opportunity to have a reasonably large presence in Dubai,” said Ghanem Nuseibeh, founder of Cornerstone Global Associates and senior analyst at Political Capital.
Nuseibeh said it was too soon to gauge whether the liquidity at banks and people moving to Dubai would have any impact on a recovery in the real estate sector – one of the worst affected by the crisis.
But he said between 30 and 50 percent of businesses which relocate to Dubai would remain on a permanent or semi-permanent basis.
On Dubai’s streets, conversations once more centre on eating out at the latest restaurant and watching pop acts like Usher, Macy Gray and Joe Cocker who have all played to packed houses.
But Dubai has been accused of storing up its troubles by postponing debt payments rather than resolving them. Dubai World’s 2010 debt deal delays repayment to after five and eight years, and no Dubai asset sales have yet been announced.
The emirate faces about $30bn in redemptions over the coming two years and refinancing risk remains one of the biggest investor concerns. Issues of creditors taking over assets and enforceability are extremely politically sensitive.
“A lot of debt restructuring was for five years or seven to eight years,” said Monica Malik, chief economist at EFG-Hermes.
“While this gave a sort of breathing space in the shorter term, you still have the issue to try to reduce these debts in the medium term.”
Despite a recovery in global trade and more stability in the banking and property sectors, Dubai’s economic expansion is far behind growth rates seen during the oil and property-fuelled boom years before the global credit crunch struck in 2008.
The size of the emirate’s economy shrunk by 14 percent in 2009, and the overall debt load of Dubai and its companies is estimated at $115bn or 140 percent of its economic output, not far below 143 percent for debt-troubled Greece.
UAE private sector credit growth has been anaemic, at a mere 2.0 percent in February, compared with annual rates of well over 50 percent in 2008, when a construction frenzy peaked. Increased deposits have so far failed to kick-start lending.
But Dubai’s saving grace may prove to be the widely-held assumption that neighbouring Abu Dhabi, the wealthiest of the seven emirates, will be ready to help with the burden if, and when, required

Source: www.arabianbusiness.com June 15, 2011

Increased tenant demand and low levels of rental property coming onto the market pushed rents higher in the three months to April, according to the latest Residential Lettings Survey from the Royal Institution of Chartered Surveyors.

Overall, 42% more surveyors reported rents rose rather than fell in the three months to April, up from 40% in the previous quarter, according to the survey published today (Thursday June 09). Although rents increased across Great Britain, it was London and the South East which saw the most notable increases.

Comments from surveyors reveal that rents in some areas have now risen so sharply that previously affordable homes are now unattainable to many, as an increasing number of renters are priced out of the market.
Despite an upturn in new instructions, supply to the market still remains unable to keep up with demand. Tenants are staying longer, resulting in less availability, while fewer landlords are selling their properties at the end of a tenancy. Just 2.8% of landlords sold property in the three months to April, down from 4%.

Looking ahead, the overall rental outlook remains strong, with 33% more surveyors expecting rents to rise rather than fall. Expectations for rental prices were highest in London, followed by the Midlands, the South East and the North.

‘Although we are beginning to see more mortgages aimed at first time buyers, many potential homeowners are still restricted from getting a foot on the property ladder, leading to increased demand in an already oversubscribed rental market. There has been a small uplift in supply, but the imbalance between demand and availability can only mean rents will continue to rise,’ said RICS spokesperson James Scott-Lee.

The RICS Residential Lettings Survey began in 1998. This quarterly survey provides a comprehensive picture of the lettings market across England, Wales and Scotland as well as a regional breakdown.

Meanwhile, home ownership remains out of reach for many would be buyers, partly because of the high deposits required by lenders, but also due to the cost of available mortgage finance. As a result, surveyors report that many people have little choice but to rent. In the three months to April, 35% more respondents reported demand rose rather than fell, the highest level for over two years.

Regarding supply of rental property to the market, 6% more surveyors reported new instructions from landlords increased rather than fell, taking the net balance into positive territory for the first time since April 2009. Instructions from landlords to let flats showed the most pronounced change, with a net balance of +6% from -7%. The increase for houses was slightly less than in the previous three month period, +2% compared with +5%.

The UK government plans to release public land for house building to help alleviate the nation’s chronic shortage of residential properties.

From this autumn every government department with significant land banks will publish plans to release thousands of acres of previously developed land to house builders to build up to 100,000 new homes and create 25,000 jobs by 2015.

The Public Expenditure Committee, a Cabinet Committee chaired by Francis Maude, will go through each department’s plans with a fine tooth comb, to make sure every possible site is made available for house building.

Alongside this, property specialists from across Government will work with each department and challenge them to release as much land as they can for new homes.

Ministers are also encouraging councils to follow the lead set by central Government and make their unused land available for development.

Later this year, a new map will be launched to show land and buildings owned by public bodies in each area. A new Community Right to Reclaim Land has been introduced enabling residents to apply to organisations including central Government departments and councils to bring their sites back into use, opening up the books so local people can see for themselves the assets held by central and local Government alike.

Housing Minister Grant Shapps also announced a radical Build Now, Pay Later deal, which offers a boost to house builders who will only pay for the land once work has started on the new homes, providing a lifeline to those struggling with cash flow problems, and enabling them to start building straight away.

‘As one of the country’s biggest landlords, the government has a critical role to play in making sites available for developers so we can get the homes this country needs built. Over the coming months, property specialists will work to make sure no stone is left unturned and no site is left unused, and every department’s plans will come under the close scrutiny of a Cabinet committee,’ he said.

‘It is now up to developers to come forward to make the most of this unique opportunity, and help contribute to our country wide efforts to help get the homes this country needs built,’ he added.

Builders and developers reacted positively. ‘This is a big step in the right direction. The rapid release of publicly owned land has the potential to be an effective catalyst for increasing the supply of land for new homes in this country during the next few years,’ said Mark Clare, chief executive of Barratt Developments.
Liz Peace, chief executive of the British Property Federation, said that as one of the biggest holders of land in the country it’s right that the Government does what it to help alleviate the housing crisis.

‘However, government must give consideration to who has the resources available to get on and build these homes, particularly while banks are still nervous about lending. Institutional investors have access to the scale of funding needed to develop first rate homes to rent, and central and local Government, through its planning powers and capacity to release land can ensure that such schemes become reality,’ she added.

Jasper Masters, head of residential Land Agency at consultants CB Richard Ellis, said the payment deals are important. ‘Since the crash, many of the larger land deals outside of London have been conditional on planning and generally on deferred payment terms, so the government’s new model will fit with the reality of the marketplace,’ he explained.

His colleague Stephen Clark, senior director, Government & Infrastructure, described using public sector land for housing development through an accelerated disposal programme as an excellent proposal. ‘Increasing housing supply is critical at present to support future economic growth,’ he said.

But he added that the government will need to be committed to the programme for it to be successful as previous initiatives such as the public land register have fallen by the wayside. ‘Much will depend on where the major sites lie, as the housing market is quite stagnant outside London and pockets of the South East. Encouragingly 28% of the Homes & Communities Agency’s holdings lie in the South East and East of England, although just 3% is in London.

‘Innovative funding structures in the form of asset backed vehicles and Build now, Pay later should help to progress the programme, particularly given the continuing lack of bank lending. In order to create sustainable communities, it will be important to bring open market and affordable housing on-stream together as no grant will be available for the latter. This will impact on the level of receipts although it is acknowledged that this is only part of the government’s overall consideration,’ he added.

In the current market where residential transactions across the UK have slowed, the residential market in London is showing few signs of a slowdown with strong rental, transactional and development market activity, according to the report from Colliers International.

In terms of rental activity, London is proving resilient in comparison to the rest of the UK. Demand in the London rental market is driving rental prices higher, especially as supply is low.

According to LSL Property Services, monthly rents in London have risen by 8% since April 2010 and reached £988 in April 2011. With the rental market providing such a robust performance, the buy to let market is beginning to recover. S&P recently reported that conditions ‘appear to be supportive for BTL borrower performance in the medium term’, analysts point out.

However, risk adverse lenders and a lack of available finance is putting pressure on the supply of buy to let properties. S&P also reported that due to a fall in debt servicing ratios, buy to let borrowers have less of a financial cushion to cover mortgage payments.

On the residential sales side, London is outperforming the rest of the UK. The Communities and Local Government House Price Index for March 2011, indicates the largest increase in house prices was in London at 5.6%. The smallest increase was in the East Midlands at 0.9%. The key drivers in the London housing market are a lack of supply, with around 1,300 sales recorded over the quarter in Central London. Stock levels remain constrained because potential vendors are reluctant to sell and have no incentive to do so.

The report says that developers are taking advantage of the changes in planning allowing the conversion from office to residential. There are several big deals in the marketplace where developers have taken advantage of the market downturn to turn a profit on their investment.

For example, Marcus Cooper is seeking planning permission to convert the old QVC UK headquarters at Marco Polo House, which it bought in 2006 for £63 million into a residential led scheme worth £500 million. The same developer received planning permission to redevelop 6-10 Cambridge Terrace and 1-2 Chester Gate, NW1 into a £100 million mansion complex. These properties were purchased for £23.7 million in 2006. It is currently involved in converting British Land’s HQ into residential.
Orion European Real Estate fund has bought a site at City Road Basin, London EC1 and it will be the first residential scheme set up by a private equity fund.

Ballymore is seeking planning permission to build a 41 acre scheme at Minoco Wharf in London. The scheme will include 3,500 homes, a high street and new school and is one of the largest ever planning applications in the capital. And Mountgrange is launching a mezzanine fund dedicated to residential development, a first for the UK market.

With the residential market in London outperforming the rest of the UK it is not surprising to see proactive landlords and developers taking advantage of opportunities in the market, the Colliers report adds.

Source: www.propertywire.com

Bulgaria’s crisis-hit real estate Bulgaria’s crisis-hit real estate sector is pinning its hopes on Russian holiday-home buyers rediscovering one of their favorite communist-era travel destinations.

Russians with money to burn are replacing British property buyers who rushed to buy second homes on credit several years ago and are now re-selling at half-price following the economic crisis, according to Antonia Wirt, Bulgarian section chief of the International Real Estate Federation FIABCI.

“In the past three or four years, over 200,000 Russians have bought property in Bulgaria, worth over US$1 billion (726 million euros)” in total, FIABCI president-elect Alex Romanenko told AFP on the sidelines of a conference in the ski resort of Bansko.

“Bulgaria occupies a dominant position in the real estate market in the Balkans, which has a great potential,” he added.

The similarities of the Bulgarian and Russian languages, which both use Cyrillic script, close cultural ties and the common Orthodox religion facilitate contacts and make Russians feel quite at home in Bulgaria, real estate agents say.

“Bulgaria is a familiar country, part of the former Soviet sphere, where our parents traditionally spent their holidays,” said Marina Nekrasova, head of the Russian real estate agency Best.

If not formally part of the Soviet Union, Bulgaria used to be one of Moscow’s staunchest satellites during communism.

The “excellent” quality-to-price ratio offered in Bulgaria’s holiday resorts has also made it a top property investment spot for Moscow and St. Petersburg’s middle class, Nekrasova added.

Antonia Wirt of FIABCI meanwhile highlighted “the accessibility and relatively low costs of high-end services such as spas and golf.”

The Russian wave is welcome news for Bulgarian real estate.

A boom in sales to British buyers before Bulgaria joined the European Union in 2007 led to ballooning prices and massive construction, explained Galina Maximova, head of the Bulgarian property agency Sofconsult.

But in the following years, the crisis caused drastic drops in the sector.

While the total value of real estate deals in 2007 was 1.9 billion euros, this figure slumped by 33 percent year-on-year in 2008, before shrinking by an additional 45 percent in 2009 and by 51 percent in 2010, according to data from the Invest Bulgaria Agency.

Abundant offers have also lowered prices.

“Apartments in luxury mountain resort complexes are selling at unbelievably low prices of less than 750 euros per square meter,” Maximova said.

Five years ago when these complexes were built, prices would have been over 1,000 euros per square meter.

Targeting a well-off clientele, these closed complexes on the outskirts of popular holiday spots have emerged in recent years as an alternative to the wild construction that ruined once-picturesque resorts like Bansko or Nesebar on the Black Sea.

However, with current prices from 875 euros per square meter in Black Sea resorts further south, the Yavlena real estate agency is now forecasting a 300-percent rise in sales along the coast this year compared to 2010, with Russians again dominating the market.

Russians — along with Germans, Greeks and Romanians — make up the majority of tourists both in Bulgaria’s summer and winter resorts and their number is expected to rise further this winter.

Source: www.chinapost.com.tw

The overheating of the Hong Kong property market has left the private housing market severely unaffordable and the trend is expected to continue for the next 20 years, according to research carried out by the Royal Institution of Chartered Surveyors.

Its new report on property affordability over the next five, ten and 20 years, is being submitted to the government to help finalise annual budgets.

Based on the housing needs of Hong Kong’s demographics, the government should be providing enough land for about 22,000 per year for the next five to ten 10 years, the report points out.

Yet current policy only allows for 18 500 units per year. The RICS report says that more land will need to be released for construction if the shortfall is to be made up.

‘At present, there appears to be a mismatch between the supply of small sized flats, Class A flats, and the needs of the average households, but in recent years, we noticed that the unit price per square feet price of large sized flats, Class C, D and E flats, of three or four bedrooms were rising much faster than those small sized flats with one or two bedrooms,’ said David Tse, RICS International Governing Councillor and Chairman of RICS Hong Kong Housing Task Force.

‘RICS is calling on the government to conduct regular surveys on the future aspirations of the average households on types and sizes of flats before laying down appropriate housing and land supply policies to meet the functional and future needs of Hong Kong households,’ he added.

The recently announced My Home Purchase Scheme aims to provide 1,000 housing units a year for the sandwich class populace of Hong Kong. Given the income and asset ceiling requirements of the My Home Purchase Scheme applicants, 35% of total households in Hong Kong are eligible for the Scheme, according to the 2006 Census results.

So there will be a severe undersupply of these housing units, unless amendments are to be made regarding the income ceiling and/or the amount of housing units proffered, this scheme is not going to address the housing demand of all middle income people of Hong Kong,’ said KK Wong, Chairman of RICS Hong Kong.

‘In our recommendation to the government, we have drawn reference from nearby Asian countries or cities including public rental housing that targets middle-income residents in mainland China, rent-to-own option for affordable housing in Singapore and Malaysia and concessionary mortgage provision targeting young people in Taiwan,’ explained professor Eddie Hui, of the department of building and real estate at the Hong Kong Polytechnic University.

‘We wish government could take these as examples and form its own sustainable and long-term housing supply strategy for Hong Kong,’ he added.

‘Based on the survey results, we found that housing in general has becoming less and less affordable as property prices continue to escalate. This situation has become worse since the ceasing of Hone Ownership Scheme construction and supply in 2003,’ he explained.

‘For those who are not eligible for public rental housing, or do not seek government housing assistance, purchasing a property has a big impact on their living quality. It could only be worse for them if interest rates rise in the future, or they are forced to purchase even more costly flats due to the lack of supply of lower-cost private properties on the market.’

UK residential property prices fell 0.9% last month and fell at their fastest annual rate for 16 months as faltering demand continues to put downward pressure on the real estate market, according to the latest index, published today (Friday March 04).

The Halifax index shows that prices were 0.4% lower in the three months to February and on an annual basis have fallen 2.8%m making the average house price now £162,867.

But the index flies in the face of two other reports from earlier this week showing that property prices in the UK have edged upward in both January and February.

The January data from the Land Registry’s flagship House Price Index shows that prices increased 0.2% from December and the February index from the Nationwide Building Society shows that prices in the UK increased by 0.3% and are now just 0.1% lower than a year ago.

Halifax said that with prices 2.8% lower than a year ago as measured by the average for the three months to February against the same period a year earlier, this is the biggest annual decline since October 2009 and sales remain low.

Also the number of mortgages approved to finance house purchase, a leading indicator of completed house sales, increased by 7% between December and January on a seasonally adjusted basis, according to Bank of England industry wide figures. Despite this increase, approvals remain historically low with the total number in the three months to January being 4% lower than in the preceding three months.

The decline in properties coming onto the market continues. The latest Royal Institution of Chartered Surveyors survey showed a reduction in new seller instructions for the fourth successive month in January. This trend, if sustained, should improve the balance between demand and supply and help to prevent a more significant fall in house prices.

‘There has, however, been little change in house prices over the first two months of 2011 as a whole. February’s monthly decline of 0.9% offset January’s 0.8% gain. Overall, we expect a modest 2% decrease in house prices in 2011. Uncertainty over the economic outlook is likely to weigh down on housing demand this year,’ said Martin Ellis, housing economist at the Halifax.

‘Fewer properties have been coming onto the market in recent months. This trend, if sustained, should improve the balance between demand and supply and help to prevent a more significant fall in house prices,’ he added.

Most economists reckon house prices will fall this year as tight credit conditions and a weak economic recovery deter homebuyers. Howard Archer, economist at IHS Global Insight expects house prices to fall by around 5% in 2011 and ultimately decline by around 10% from their 2010 levels.

‘It is clear that critical to the development of house prices over the coming months will be the amount of houses coming on to the market, mortgage availability, how well the economy and jobs hold up as the fiscal squeeze increasingly kicks in, and what happens with interest rates,’ he said.

Paul Hunt, managing director of Phoebus Software said that although these figures show house price growth has been flat since the beginning of the year, given that the Halifax index is compiled through the number of approvals it makes, the sample size may be partly to blame for this volatility.

‘The valuable message from this index is that sustained growth is unlikely to return to the wider market until mortgage lending picks up. While most house price indexes showed small price increases last month, this will not become sustained growth until doubts about rising inflation and unemployment are lifted from lenders’ minds,’ he explained.

‘While I am sceptical that prices have been moving as much as Halifax suggest, it’s worth remembering that market activity remains subdued and this will keep a check on prices as the year goes on,’ he added.

Source: www.propertywire.com

Vietnam remains as an attractive destination for real estate investors in 2011, said CBRE Vietnam General Director Marc Townsend here.

Townsend quoted head of Franklin Templeton Fund’s market integration section Mark Mobisus as saying that Vietnam would witness the return of big investors to its private investment market this year, reported Vietnam news agency.

He also cited the assessment of the Association of Foreign Investors in Real Estate (AFIRE) as saying that Vietnam is one of the five leading integration markets together with China, India, Brazil and Mexico for real estate investors in 2011.

Townsend also predicted that the tendency of buying houses will sharply increase as the Vietnamese dong devalues and people shift their investment focus on real estate.

The market for retail space will be the most attractive one as the retail space in the centre is limited and retailers will invest in small trading areas and suburban areas and rent front street houses.

He affirmed that real estate services like training, market survey, material sources and marketing will be improved and put online.

Source: www.bernama.com

Next year is likely to be more of the same for the UK real estate private lettings market with tenant demand remaining high, it is claimed.

The autumn has seen demand from tenants increase by 32% compared to the same period last year with rental stock, on the other hand, down by 12% over the same period, according to Caroline Kavanagh, group lettings director of Badger Holdings Group, parent company to Townends Estate Agent.

The record levels of demand are being driven by the large number of people either priced or consciously opting out of the sales market and deciding that renting, rather than buying a property, is their best option for the time being, she believes.

‘On the supply side, we are seeing more tenants staying on in their existing properties, preferring to accept a rent increase rather than risk searching for something suitable in the open market. This has been exacerbated by a reduction in the number of new investors entering the market to satisfy additional demand,’ said Kavanagh.

‘Much of what we have seen in 2010 is likely to continue as we head into 2011. Tenant demand is likely to remain high and outstripping the supply that will be available. Factors to consider for any current and new landlords stepping into the market will be the VAT increase and possible likelihood of interest rates rising,’ she explained.

‘As would be buyers remain in the rental market for longer due to the ongoing challenges in securing a mortgage, I would expect to see strong applicant levels, as we have done throughout 2010. However, if landlords raise prices, it is possible we will see more tenants giving notice as they will no longer see the benefit of staying from a price point of view and may well make the move,’ she added.

Mortgage finance is still the main obstacle for those wishing to invest, but Kavanagh thinks it is possible that we may see a few new landlords dipping their toes in the market as buy to let mortgage lending improves and the opportunity for long term investment and stable rental income continues to present itself as an attractive proposition.

There are still some vendors switching to the lettings option, although not as many as in 2009. ‘Going forward, those that are in a position to let will do so and value the rental income they receive. This is where working alongside a sales business works well, as it enables those landlords that originally wanted to sell to try and find an investor with a tenant in situ, which is something we have seen more of towards the end of 2010,’ she said.

‘The lettings market remains strong and landlords have more choice because of the level of demand which, as we enter into 2011, will enable them to achieve the best tenants at the best possible prices,’ she added.

Douglas Sleaper, group sales director of Townends Estate Agents, believes that despite recent price falls, property values will still end the year higher than they started for most of the market.

‘It is possible that the first half of 2011 will see further house price decline, with signs of recovery coming in the second half of the year, the opposite of what happened in 2010. We are also seeing a return of buy to let investors, attracted by an increased range of specialist mortgages available and of course enhanced yields due to rising rents and falling prices,’ he explained.

He also points out that the impact of Government spending cuts will vary from region to region, with London and the South East faring better than northern regions, not least because a smaller percentage of employment comes from the public sector.

Source: www.propertywire.com

The construction and real estate sectors in Dubai have seen a decrease of almost 5% in 2010 and recovery is some way off, according to officials.
The property and construction sectors are the worst hit in the emirate by the global economic downturn, according to Sami al-Qamzi, director general of the Dubai department of economic development.

‘I believe that all the main sectors have registered varying proportions of growth (in 2010), except property and construction which saw a five percent drop,’ he told AFP.

Growth in the construction sector is based on supply and demand, thus ‘its recovery will take a longer time,’ added Qamzi, who was speaking on the sidelines of the Global Agenda Summit in Dubai.

The world debt crisis has exacerbated economic woes in Dubai as its real estate sector plummeted when international finance dried up. Property sale prices in the emirate are estimated to have more than halved in value since peaking in 2008.

And the emirate is likely to see an increase in vulture funds targeting the rise in distressed real estate assets coming onto the market towards the end of the year.

The Global Distressed Property Monitor, compiled by the Royal Institution of Chartered Surveyors (RICS), found that the number of distressed assets coming onto the market in the UAE increased in the third quarter of 2010 and will increase further in the last quarter of the year.

Jonathan Fothergill, director of valuations at Cluttons UAE, which took part in the RICS survey, said it is no surprise. He confirmed that a number of GCC and international funds are ‘currently undertaking due diligence on the Dubai and Abu Dhabi commercial and residential real estate markets who are taking the view that we are moving close now to the bottom of the market, and that the next six months or so provides the optimum time horizon for real estate acquisitions’.

Evidence of such vehicles operating in the market was highlighted last week by the launch of the UAE’s first Real Estate Investment Trust (REIT), a joint venture by Dubai Islamic Bank and French property firm Eiffel Asset Management.

‘The timing of this would indicate that there are both an increasing number of assets available to buy at the right price, and a growing confidence that property investment requirements are changing to long-term, low risk and secure profiles,’ said Murray Strang, senior valuations officer at Cluttons UAE.

The increase in distressed selling was echoed by Tom Bunker, investment sales consultant at Dubai based agency Better Homes. “We have already seen examples of distressed properties hitting the market well below what they were purchased for and in some cases below the price level at which they were originally sold by the developer,’ Bunker told Arabian Business.

Residential property prices in the UK fell for the fifth month in a row as demand from buyers slums, the latest indices show.

Average house values dropped 0.8% in November as the seasonal winter slowdown starts a month early, according to the latest data from Hometrack. This follows fall of 0.9% in October and 0.4% in September.

‘The seasonal slowdown in the housing market has kicked in a month early, with demand for housing falling at the fastest rate for 20 months,’ said Richard Donnell, director of research at Hometrack.

‘Concerns over the economic outlook on the back of recent spending cuts, together with widespread expectations that house prices are set for a period of retrenchment, are driving the continued weakness in demand. It is inevitable that this trend will continue as we move into the new year from both a seasonal and sentiment perspective,’ he added.

Demand for property fell 4.3% this month, the biggest monthly decline since January 2009. However, the number of homes on the market is also set to fall in coming months as vendors reduce asking prices or withdraw property from the market. Hometrack expects this to shore up prices in the second part of next year.

As the outlook has become uncertain, so the supply of homes coming to the market has begun to fall, the Hometrack report also shows. The number of properties for sale fell by 0.4% in November, the first time in nine months that the survey has registered a fall in supply.

Prices are set to remain under downward pressure but a tightening in supply means that by the end of 2011 prices are forecast to fall by 2%. ‘A continued reduction in the supply of homes for sale seems inevitable in the coming months as vendors either reduce asking prices or withdraw property from the market. We expect this to act as a support to pricing levels over the second part of 2011,’ added Donnell.

The latest figures from the Land Registry show that prices fell 0.8% in October, the largest monthly drop since February 2009 on the index that is based on actual sales.

At the same time mortgage approvals have reached a 19 month low as a result of weak consumer confidence, low wage increases and tough conditions imposed by lenders.

Eight regions in England and Wales experienced increases in their average property values over the last 12 months. The region with the highest annual price change is London with an increase of 7.6%. The East experienced the greatest monthly rise with an increase of 1%.

The region with the greatest annual price fall is the North East with a fall of 0.9%. While Yorkshire and the Humber experienced the most significant monthly price decrease, down 1.8%. ‘Data from the Land Registry provides further evidence of a modest slowdown in the housing market. Prices have now fallen for two consecutive months according to this series although it is worth bearing in mind that they are still somewhat higher than where they were a year ago,’ said Simon Rubinsohn, Royal Institution of Chartered Surveyors chief economist.

‘The latest numbers do show significant regional variation and the likelihood is the divergence in pricing between different parts of the country will become more marked over the coming year as public spending cuts begin to bite,’ he explained.

Source: propertwire.com

Property prices in Singapore, generally accepted as already being too high, are set to rise again, according to the country’s central bank.

It says that low borrowing costs and excess liquidity globally may push the island’s property prices higher again, setting back government efforts to cool the market.

There is a risk that financial institutions may ease lending standards and extend more loans to make up for narrowing interest margins, the Monetary Authority of Singapore said in its latest Financial Stability Review. Buyers may also take on ‘excessive leverage’ amid expectations of a sustained period of low rates, the central bank added.

In August the government increased down payments for second mortgages and imposed a stamp duty on property held for less than three years to curb speculation but so far it does not seem to be having much of an effect.

‘There is a possibility that transaction activity and prices could pick up again given the current global conditions of flush liquidity and low interest rates. The government will continue to be vigilant in monitoring developments in the property market, and if necessary, adopt additional measures to promote a sustainable property market,’ the central bank said.

The government has made more land available for development in a bid to further cool the market. Some 17 sites on its list of property are to sell for residential developments in the first half next year. About 8,100 apartments can be built on the sites, comparable to the supply in the second half this year, the most since it started its current land auction system in 2001. Another 13 sites are being considered for release that could yield a further 6,200 homes.

Despite these measures private residential property prices increased 2.9% in the third quarter of 2010 from the previous three months, when they climbed 5.3%, figures from the Urban Redevelopment Authority show. Singapore’s government forecasts economic growth of 15% this year and expansion of 4 to 6% in 2011.

‘As the property market is sentiment sensitive, a pick-up in activity could lead to rapidly escalating prices. If economic recovery disappoints on the downside amidst continued uncertainties in the global economy and market confidence is dented, prices could fall,’ the central bank added.

‘On the other hand, if the economic recovery continues apace, there could be widespread implications on buyers who overextended themselves when interest rates eventually rise.’

Source: propertywire.com

India is ranked as the fifth most attractive destination for future real estate investments in a list topped by China, according to a latest report of FCCI and Ernst and Young.

In the list of top nine attractive destination for real estate investments, China is followed by the US, UK and Singapore.

“India ranks fifth on the overall index, as it scores better on the country economy development index and the real estate market index, but fairly low on the regulatory index,” the report released here said.

As per the report, there is no single clearance system for approval of investment in real estate sector in India. “In addition, the approval system is not time-bound and take up to two years,” it said.

On China, it said: “Even amid cautious market sentiments and tightening of government policy, China remains attractive as an investment destination primarily due to its impressive economic growth record and favourable demographics.”

However, India has the potential to even overtake the Chinese attractiveness, “if government allows real estate investment trust (REIT) and real estate mutual funds (REMF),” said Dean Hodcroft, E&Y’s Head of Real Estate for India, Europe, Middle East and Africa here.

Globally, REITs and REMFs have contributed significantly to the real estate finance and developers overseas have capitalised on the growth potential of the sector, the report said.

“However, this source of finance has not seen a similar response in India primarily due to policy issues and lack of clarity on government’s intention to promote such alternative source of funding,” it noted.

Hodcroft observed that while global investors are wary of investing in China as they are concerned that Beijing can change the policy anytime, New Delhi should strive to make regulations more investment-friendly.

“India has a strong macro economic story which needs to be supported by some regulatory changes like availability of liquid vehicle for investment such REMFs and REITs,” he added.

Hodcroft said as much as $200 billion private equity fund is waiting to be invested globally and India has a chance to get more than its fair share.

Source: http://economictimes.indiatimes.com/

Turbulent scenes during the violent protests earlier this year in Bangkok do not seem to have affected Thailand’s real estate market, according to consultants.

In recent months there has been no significant change in the property sector, according to James Pitchon, executive director at CB Richard Ellis Thailand.

Although there was a lull in real estate launches in March and April developers are again marketing new projects although most are one bedroom units as Thai rather than foreign buyers are dominating the market.

He says there are three main types of buyer currently in the market. End user owner occupiers have increased but there are concerns about the affordability of new projects for owner occupiers as rising land prices have increased prices.

Low deposit savings rates are driving local investors to property. ‘Even after the .025% interest rate increase in July, it is tough to find savings rates for three month deposits of better than 0.75 %. Buy to rent investors are hoping for yields of 6 % or more but will still be content with any return better than current savings rates which are currently negative once inflation has been taken into account,’ explained Pitchon.

‘There are limited investment choices in Thailand, the stock market is seen a being volatile, the fixed income market is very small and so money is being driven to the property market,’ he added.

Speculators in the market are causing concern. ‘If speculators stop buying then the volume of sales will fall which may not be a bad thing, but if they buy then default on the final payment then that is where there will be problems,’ said Pitchon.

Despite the turmoil though in April and May developers are still able to sell some projects out on the launch day. ‘Interest rates are going to have to rise substantially before people decide that the keeping money in the bank on deposit is better idea than investing in property,’ he added.

Pitchon said the Thai government may decide that non interest rate measures such as higher deposits may be necessary if they feel the condominium market is overheating. Non-interest rate measures have been announced in China, Hong Kong and Singapore. ‘In the larger unit luxury sector there is some unsold inventory in completed buildings and developers are taking steps to clear this stock with incentives such as guaranteed yields and furniture packages inclusive in the price,’ he explained.

‘We estimate that unsold inventory only accounts for less than 3 % of the total downtown stock and will not trigger a fall in prices,’ Pitchon added. Indeed, in some of the better developments that have been completed over the last three years prices have continued to rise, he said.

Source: http://www.empadvisers.com/pages/low-interest-rates-keep-thai-property-ma

Investors from the United States to tiny land-hungry Singapore are on the hunt for real estate in Japan, with over USD 2 billion in deals already cemented since late last year and more in the offing.

In the buyers’ sights are a thick catalogue of properties, many of them in Tokyo, a city populated by thousands of office buildings and condominiums.

“Hotels, Tokyo offices, Tokyo residential, I would say, will be the three specific sectors and opportunities that are being most sought after by international investors,” said Alistair Meadows, Asia Pacific director for International Capital Group at global property services firm Jones Lang LaSalle.

Buyers who have already declared their interest include Mapletree Investments, the real estate arm of Singapore’s state investor Temasek Holdings, with close to USD 1 billion in new cash earmarked for office buildings, data centres and research and development facilities.

Joining Mapletree in the rush are American private equity firms Blackstone Group and Fortress, Germany’s Deutsche Bank and US-based Jones Lang LaSalle’s funds arm LaSalle Investment.

Franklin Templeton is looking to buy a portfolio of distressed loans at a discount, which would provide attractive returns and allow access to physical assets, while Blackstone plans to buy Morgan Stanley’s loans, which are backed by commercial real estate such as office buildings.

Taiwanese real estate broker Sinyi Realty set up operations in Tokyo a few months ago. And for wealthy Chinese, travel agencies have even started offering “Buy Japanese Property” tours.

Realtors say major foreign private equity groups, real estate trusts and realtors have earmarked an estimated USD 6.6 billion for investments in Asia, showing interest in Japan’s bricks and mortar assets and property debt.

“While we are cautious around the country’s fundamentals, we do believe that the sheer size of the market allows for opportunities,” said Peter Kim, Managing Director, ING Real Estate Investment Management, which has funds invested in Japan.

A bottoming out of real estate prices and a recovery in the debt market are some positives investors are buying into.

Marquee deals already done include a Hong Kong investor’s buy of the Hyatt Regency hotel in Hakone from Morgan Stanley for an estimated $56 million.

Malaysian investor YTL Corporation also inked a deal in March to buy Hilton Niseko Village for about USD 48.3 million, marking a major investment in a Japan’s well-known ski resort in Hokkaido.

In a clear indication that office buildings values are set to grow, cap rates — the income that the property will generate divided by its value – have stopped rising.

“We reiterate our view that cap rates will decline in the second half of 2010 and that real estate prices are very likely to rebound,” Barclays Capital said in late August.

Distressed or marked-down properties in Japan, such as debt backed by commercial real estate, are also emerging on the radars of foreign buyers.

“We are finding a degree of success in finding deals through trust banks or lenders who have taken control of over-leveraged assets,” said Jacques Gordon, global investment strategist at LaSalle Investment Management.

As foreign money pours in, the real surge in buying may just be starting, predicts Mark Brown, a real estate analyst at researcher Japaninvest.

The gap between what distressed property owners are asking and the amount buyers are willing to pay is closing fast, he notes, adding that would lead to plenty of new deals.

Source: http://www.moneycontrol.com/

A series of official comments in recent days have shown that the Chinese government remains committed to forcing down housing prices, despite worries about a weak global economy and complaints from property developers.

The government’s determination to keep cracking down on its frothy real-estate market may be a political necessity but risks hurting growth at a time when much of the world economy is weak, and contrasts sharply with efforts in the U.S. and Japan to add fuel to the fading global recovery.

Despite government measures in place since April, property prices have not fallen much in major Chinese cities, and housing sales have actually picked up in the last few weeks — signs the measures aren’t achieving their declared aim of curbing speculative purchases and making homes more affordable.

Government officials, while emphasizing they are committed to supporting growth, are unequivocal that more needs to be done to fix the housing market. China’s chief economic planner, Zhang Ping, told the nation’s legislature last week: “Current housing prices in some large and medium-sized cities are still too high.”

For the rest of the year, the government will “further implement measures to contain the overly rapid rise of housing prices in some cities, and curb speculative and investment demand for housing,” said Mr. Zhang, the head of the National Development and Reform Commission.

A range of official voices, including an advisor to the central bank, a banking regulator, and commentaries in state media, have agreed: Housing prices still need to come down.

Changing course now would hurt the government’s credibility with the public, analysts say. Many urban Chinese feel the surge in property prices over the past year has put home ownership out of their reach. Yet the repeated promises that tough policies will not be changed could also leave Beijing with less room to maneuver if growth slows more sharply than anticipated.

“These tightening measures will have to continue for at least a few more months,” said Deutsche Bank economist Jun Ma. China’s government is also pushing ahead with other restrictive measures, he noted, such as controls on lending, tighter supervision of public-works projects and closures of energy-wasting factories.

The drive to cool property markets in China—as well as in other booming Asian economies like Hong Kong and Singapore—comes as Japan is rolling out a new stimulus package and the U.S. looks for ways to bolster its own expansion.

By contrast, most forecasters expect China’s economic growth to ease to a still-rapid 8% to 9% by the end of this year, from 11.1% in the first half. And its core manufacturing sector continued to expand in August, according to the closely-watched purchasing mangers’ indices issued Wednesday.

The measures introduced in April included higher down payments and mortgage rates for many home buyers, limits on purchases by nonresidents and more construction of affordable housing.

At first, the moves seemed to have their intended effect, quickly cooling a booming market: Sales fell, and nationwide average housing prices were flat in both June and July.

But there hasn’t yet been a major adjustment. New figures from Soufun, a real-estate consultancy, show property prices were actually higher in August than July for most of the 30 major cities it surveys. That includes a 12.3% rise in the capital city of Beijing, which already has some of the nation’s highest prices.

Housing sales have also rebounded, and in southern cities such as Guangzhou and Ningbo they are back to levels reached before the government’s new policies started.

The latest data “should strengthen Beijing’s view that a reversal of policy tightening measures put in place earlier this year is not appropriate for the time being,” said Brian Jackson, an economist for Royal Bank of Canada.

A commentary in the People’s Daily, the Communist Party’s newspaper, Tuesday reinforced the message: “With house prices still high and not falling, the results of the policies are still quite far from what ordinary people expect,” the commentary said.

Xu Ce of the State Information Center, a government think tank, said in a report this week that the government needs to be careful not to crush real-estate investment, which is a major support for the broader economy. But he agreed that containing the rise in house prices is necessary to avoid a potential banking crisis, and broader political strains.

“The overly rapid rise in real-estate prices is now not just an economic problem, but an issue that affects the lives of a majority of people as well as social stability,” Mr. Xu wrote in the report.

Source: http://online.wsj.com/

Singapore property magnate Kwek Leng Beng is in discussions to sell a parcel of land in Malaysia that could be the most expensive in the country’s history, the Malaysian Business Times has reported.

The roughly 32,000 square foot parcel owned by Beng’s City Developments Ltd in Jalan Bukit Bintang, Kuala Lumpur could go for as much as RM3,000 (US$953) per square foot. Currently the most expensive land deal recorded in Malaysian history is Sunrise Bhd’s purchase of Wisma Angkasa Raya in Jalan Ampang, Kuala Lumpur for RM2,588 (US$822) per square foot.

At RM3,000 per square foot, the land in Jalan Bukit Bintang would fetch RM96 million (US$30.5 million).

The land is located between the Grand Millennium Kuala Lumpur hotel, which City Developments Ltd also owns, and the Pavilion Kuala Lumpu shopping centre. The owner of the Pavilion is believed to be interested in purchasing the adjacent plot, as well as YTL Group.

The land was originally slated to be developed into the Millennium Residences, a 42-storey luxury condo development, but construction stalled after starting in 2008, the Business Times reported.

Source: http://www.property-report.com/

The number of California homes pushed into the formal foreclosure process between April and June dropped for the fifth consecutive quarter to the lowest level in three years. The declines were greatest in the most affordable areas, where foreclosure activity continues to fall from extremely high levels over the past two years, a real estate information service reported.

A total of 70,051 Notices of Default (“NODs”) were filed at county recorder offices during the April-to-June period. That was down 13.6 percent from 81,054 for the prior quarter, and down 43.8 percent from 124,562 in second-quarter 2009, according to San Diego-based MDA DataQuick.

Last quarter’s total was the lowest since second-quarter 2007, when 53,943 NODs were recorded. The peak was in first-quarter 2009 when 135,431 homeowners received foreclosure notices.

“Obviously, motivated sellers and accommodating lenders have played a part in bringing the default filings down, especially when it comes to short sales. Public policy has also been a factor. We also need to remember that prices have come up off bottom over the past year. If they continue to rise, fewer homeowners will find themselves under water, which is a significant factor in letting a home go,” said John Walsh, DataQuick president.

While mortgage defaults spread from lower-cost sub-markets up into more expensive neighborhoods over the last year, that trend appears to be leveling off. The most affordable zip codes in the state, representing 25 percent of the total housing stock, accounted for 40.1 percent of all default activity last quarter, down from 40.9 percent the prior quarter and down from 44.9 percent a year ago.

California’s mid and high-end markets tended to see smaller quarter-to-quarter and year-over-year declines in mortgage defaults last quarter. For example, zip codes statewide with median sale prices of $8000,000-plus collectively saw mortgage defaults drop 11.3 percent from the prior quarter and 30.4 percent from a year ago. At the other end of the price spectrum, zips with sub-$300,000 medians saw defaults fall 13.4 percent from the prior quarter and drop 46.2 percent from a year ago.

However, the concentration of defaults remained much higher in the less expensive areas: Zips with sub-$300,000 medians collectively saw 10.6 default notices filed for every 1,000 homes last quarter, compared with 2.9 per 1,000 homes in zips with $800,000-plus medians.

Although the number of default notices filed on homes with $800,000-plus mortgages is down from last quarter and a year ago, those high-end defaults now represent a greater percentage of all defaults because NODs have dropped more steeply in lower-cost areas. Last quarter 6.1 percent of the default notices filed in 15 of the state’s priciest coastal counties, from San Diego to Marin, were on homes with $800,000- plus mortgages. That’s up from 5.9 percent the prior quarter and 5.7 percent a year ago, to the highest level since the foreclosure crisis began nearly five years ago.

On primary mortgages, California homeowners were a median five months behind on their payments when the lender filed the NOD. The borrowers owed a median $15,008 in back payments on a median $325,567 mortgage.

On home equity loans and lines of credit in default, borrowers owed a median $4,187 on a median $65,740 credit line. However the amount of the credit line that was actually in use cannot be determined from public records.

While many of the loans that went into default during second quarter 2010 were originated in early 2007, the median origination month for last quarter’s defaulted loans was August 2006, one month ahead of July 2006 for the prior four quarters.

The lenders that originated the most loans that went into default last quarter were World Savings (2,982), Washington Mutual (2,547), Countrywide (2,532), Wells Fargo (2,177) and Bank of America (1,049). These were also the most active lenders in the second half of 2006, and so far their default rates on loans in that period are well below 10 percent.

Smaller subprime lenders had far higher default rates for loans originated during that period: ResMAE Mortgage, Ownit Mortgage, Master Financial, First NLC Financial Services and Fieldstone Mortgage all had default rates of more than 65 percent of their originated loans. These and most other subprime lenders are long gone.

Most of the loans made in 2006 are owned and/or serviced by institutions other than those that made the loans. The servicers pursuing the highest number of defaults last quarter were ReconTrust Co, Cal-Western Reconveyance and NDEx West.

San Diego-based MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Notices of Default are recorded at county recorders offices and mark the first step of the formal foreclosure process.

Although 70,051 default notices were filed last quarter, they involved 68,734 homes because some borrowers were in default on multiple loans (e.g. a primary mortgage and a line of credit). Multiple default recordings on the same home are trending down, DataQuick reported.

Mortgages were least likely to go into default in San Francisco, Marin, and San Mateo counties, following the historic norm. The probability was highest in Madera, Sutter and Merced counties.

The number of Trustees Deeds (TDs) recorded, which reflect the number of houses or condo units lost at the end of the foreclosure process, totaled 47,669 during the second quarter. That was up 11.2 percent from 42,857 for the prior quarter, and up 4.4 percent from 45,667 for second-quarter 2009. The all-time peak was 79,511 in third- quarter 2008.

In the last real estate cycle, TDs peaked at 15,418 in third- quarter 1996. The state’s all-time low was 637 in the second quarter of 2005, MDA DataQuick reported.

There are 8.5 million houses and condos in California.

Collectively, some of California’s most expensive zip codes saw a relatively large increase in the number of homes foreclosed on last quarter. For example, the 92 zip codes that had $800,000-plus median sale prices in the first half of this year saw the number of homes foreclosed on jump 33.6 percent quarter-to-quarter, and jump 65.7 percent from a year earlier. Last quarter’s foreclosure total in these high-end areas was at its highest level since lender repossessions began their steep ascent four years ago.

Still, the concentration of foreclosures in these zips with $800,000-plus median sale prices was relatively low last quarter – 1.2 foreclosures per 1,000 homes. That compares with 5.6 foreclosures per 1,000 homes across all zip codes statewide last quarter, and 9.9 foreclosures per 1,000 homes in zips with median sale prices below $200,000. The latter areas – places hit hardest by foreclosures in recent years – collectively saw foreclosures rise 10.4 percent from the prior quarter but fall 4.5 percent from a year ago.

On average, homes foreclosed on last quarter took 9.1 months to wind their way through the formal foreclosure process, beginning with an NOD. That’s up from 7.5 months for the prior quarter and 6.4 months a year ago. The increase could reflect, among other things, lender backlogs and extra time needed to pursue possible loan modifications and short sales.

Of all the homes foreclosed on statewide during a two-year period ending in March this year, 85.7 percent had been resold on the open market as of the end of last month. A year ago the figure was 83.5 percent. It cannot be determined from public records how many of the unsold foreclosed properties are currently for sale, not for sale or have been made rentals (and therefore should not be expected to sell anytime soon).

Foreclosure resales accounted for 36.0 percent of all California resale activity last quarter. It was down from a revised 42.5 percent the prior quarter, and down from 49.9 percent a year ago. The peak was 57.8 percent in first-quarter 2009. Foreclosure resales varied significantly by county last quarter, from 9.5 percent in San Francisco to 61.7 percent in Imperial.

At formal foreclosure auctions held last quarter, an estimated 25.5 percent of foreclosed properties were bought by investors or others who don’t appear to be lender or government entities. That was up from 24.6 percent the previous quarter and 17.9 percent a year ago, DataQuick reported.

Source: http://www.nuwireinvestor.com/

If housing prices are not checked and land issues not resolved, they could threaten social stability and the national economy.

Housing prices in major Chinese cities apparently increased at a slower pace in June thanks to the central government’s strenuous efforts since March to cool the overheated property market. Some government departments have said the slower price rise shows the policies to rein in the property market are working.

But China’s realty problems, accumulated over the years, cannot be solved in a short period. In fact, under the false appearance of “initial success” an even greater crisis is brewing, which will not only have complex implications for the national economy, but also be of far-reaching political and social significance.

The “seesaw battle” between the central government and various vested interest groups reflect the nation is suffering from “real estate disease”.

After seeing how difficult it is to implement tougher property policies, the public has realized that the vested interest groups have become powerful enough to resist or tamper with the central government’s property-control policies.

Speculators, banks and property developers all are gambling with the prospect of rising housing prices. By putting off the sale of new houses, prices have been controlled for now, while rentals have increased unexpectedly in recent months. But in many cities, such as Shanghai, Hangzhou, Shenzhen and Nanjing, banks never stopped providing loans to people buying a third house.

The real estate industry, which accounted for only a small part of China’s GDP in the 1990s, has become a pillar industry in just a few years because of the machinations of vested interests.

From the economic structure’s point of view, real estate is a basic industry because it involves so many upstream and downstream sectors, and the construction boom did contribute immensely to China’s recovery from the global economic crisis.

So, a downturn in the housing market will not only hurt related industries, but also drain local revenues, which depend heavily on land transfer fees and the real estate.

In essence, similar to the financial industry in the United States, China’s real estate sector is “too big to collapse”. Therefore, it would not be an exaggeration to say that the real estate sector has hijacked the Chinese economy.

Source: http://news.xinhuanet.com/

Dubai’s property companies may face significant refinancing risks as the emirate’s real estate market is likely remain under pressure until at least 2012 to 2013, according to Fitch Ratings.

The property industry ‘is likely to see a period of stagnant growth at best and a double dip contraction at worst,’ said Bashar al-Natoor, director at Fitch’s Europe Middle East Africa corporates team.

It is a blow to real estate investors who have been looking for signs of recovery since property prices have fallen by 55% since their peak in the middle of 2008. Some analysts expect property prices to fall another 20 to 40%. Developers such as Union Properties PJSC are trying to sell assets to pay debts and complete projects.

Without a major improvement in market conditions, sizeable disposals, equity raising or significant government support, ‘it is unlikely that developers will deleverage quickly enough to repay the upcoming 2011/2012 maturities from internal resources,’ al-Natoor added.

The credit outlook for Dubai’s real estate remains negative as the availability and the cost of debt is likely to deteriorate, prompting investors to demand higher risk premiums, al-Natoor confirmed.

Dubai’s real estate and construction industries will continue to weaken on increased customer delinquencies, tighter liquidity and the reliance on short-term maturities, according to the report.

‘Oversupply, limited mortgage availability and rising interest rates will also pose significant constraints for real estate companies and buyers,’ it concludes. Dubai rents are expected to decline over the next 12 to 18 months as developers try to prevent tenant defaults, Fitch added.

Meanwhile the latest figures show that sales prices are level. The price of apartments, villas and commercial properties remained stable in second quarter of the year compared to the previous three months with minimal reductions in villas across just two areas of the city, according to a new report from Astecto Property Management.

The Asteco Q2 2010 Report said that no change was recorded in the sales price of apartments and offices, with flats in Dubai International Financial Centre (DIFC) and on Palm Jumeirah still commanding the highest prices.

‘The market is at a stage where pricing can vary from unit to unit in any particular property. We have noticed some overseas clients, who bought property on Palm Jumeirah, are prepared to sell at a much lower price per square foot as the exchange rate is more favourable without them incurring any discount,’ said Elaine Jones, chief executive officer of Asteco Property Management.

Villas are roughly the same as the first quarter of the year in all areas except The Meadows and The Springs, where prices declined 5 and 6% respectively mainly due to the large number of units available in the area, their age and the fact that owners who initially bought into this development at low launch prices, are in the position to reduce their asking price without making a loss, the report also pointed out.

Palm Jumeirah villas remain the most expensive at AED1,800 per square foot due to its iconic water front development, with the Green Community at the opposite end of the scale with villas selling for AED700 per square foot.

Source: www.propertywire.com