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/

Los Angeles is getting tough on the owners of foreclosed properties who leave them empty and let them fall into disrepair by increasing fines. In particular officials are cracking down on financial institutions such as banks and mortgage companies that seize properties and leave them to fall into a state of disrepair.

It is the city’s largest attempt to date to deal with a neglected 27,000 foreclosed properties that become an eyesore and also bring down the prices of neighbouring real estate.

‘It is right that the banks should be held accountable to cleaning them up. A lot of vacant homes have become a nuisance because of the foreclosure crisis,’ said Betty Steele, one of several community activists who is encouraging residents to report problem properties via the city’s 311 hotline.

New rules mean that officials can hand out fines of up to $100,000 against financial institutions that seize homes and allow them to fall into disrepair. They also mean that lenders, who often don’t consider the properties their responsibility until the title is transferred, are now responsible as soon as they issue a default notice.

They also require lenders to register their inventory of properties which will make it easier for officials to identify bank owners because property records lag behind property transfers and the foreclosure market is very fluid. The new registry should allow inspectors to easily identify owners when constituents call in to complain about a property.

But the California Mortgage Bankers Association criticised the moves and said it creates unnecessary paperwork for lenders because property records already are publicly available. ‘Increased bureaucracy is not the answer. Lenders and banks have a vested interest in keeping up homes because the better condition the house is in, the more money they are going to recover when they sell that house,’ said spokesman Dustin Hobbs.

California is one of the worst hit states in terms of foreclosures and overall the number of foreclosures is still rising in the US and expected to continue doing to this year and into 2011.

Real estate foreclosures in the US reached a record for the second consecutive month in May, with increases in every state, as lenders stepped up property seizures, according to the latest report from RealtyTrac.

Bank repossessions climbed 44% from May 2009 to 93,777, while foreclosure filings, including default and auction notices, rose 1% to 322,920. One out of every 400 US households received a filing.

Senior vice president Rick Sharga warned that a quarterly record for home seizures is possible if June is anything like May. He predicted last month that another five million delinquent mortgages will end in foreclosure in addition to properties that had already been repossessed.

And it is nowhere near the peak. ‘The second quarter won’t be the peak. I’m not even sure 2010 will be,’ he said. He added that the total amount of individual filings could reach as high as 4.5 million in 2010, up from 3.9 million filings in 2009.

Source: http://www.propertywire.com/news/north-america/us-foreclosure-property-crackdown-201007124301.html

The commercial real estate market in Hungary has reached the bottom of the cycle but recovery is expected to be long and slow, according to analysts.

Improvement can be expected in 2011 with the industrial sector leading the way followed by the office market and then the retail sector, a new report from consultants King Sturge International says.

The high vacancy rate in the office market, some 25% in speculative buildings, will decline in 2011 largely because of a drastic decline of new delivery, the report says. This will allow the market to slowly absorb the available space in the next two years, bringing vacancy rate down to 16% by the end of 2012.

A more optimistic scenario may see the vacancy drop to 10%, but that assumes a faultless economic reform and bumper global economic growth. Some sub-markets such as CBD and Váci út corridor, will recover faster, but the further away from the downtown, the longer it will take to see a significant reduction in vacancies.

The major change created by the 2008/2009 crisis is that new developments will have to be pre-leased from 30% to 50% before construction can start, which historically rarely happened in the Budapest office market, the report points out.

The industrial real estate market was faster to adjust to the new economic difficulties. Developers stopped all speculative developments and currently only one warehouse is under construction on a Built-to-Suit (BTS) basis. Vacancy is high at 19.4%. ‘The market is still suffering from the Rynart bankruptcy which saw vacancies jump from 9% to 17% in 2008,’ the report says.

King Sturge believes that from an occupational perspective, the industrial sector will be the first to emerge from the crisis. ‘The Western Europe recovery will support Hungarian exports. In addition, the weak Forint and the excellent road network make Hungary an attractive logistics location. This will contribute to recovering demand for warehouse space,’ the report says.

The retail sector entered the crisis on a more solid footing than the other real estate sectors. Shopping centres are practically never built on a speculative basis and vacancy was always low. However, retailers are suffering greatly from declining consumption and high unemployment. King Sturge does not see any immediate improvements in these two factors.

The report points out that the government reform package will take time to generate jobs and increase Hungarian purchasing power with sectors such as the civil service facing pay cuts of 15%.

‘We are at the bottom of a long cycle, one that since 1992 has seen the emergence of a modern real estate sector. Supply and demand were growing year on year and even if rents were declining, yields were compressing. The global recession ended this cycle,’ the report explains.

‘Historically, all major European cities have experienced the same boom and bust and all have recovered. Budapest is facing its first serious crisis and it will recover, albeit slowly. But in every crisis there are opportunities. Tenants who are planning for growth can secure advantageous lease terms,’ it says.

‘Developments will have to be considered more carefully, with a better understanding of real market demand and not simply the volume of activity,’ it adds.

Source: http://www.propertywire.com/

Property vultures are circling to pick the bones clean of deals as the US property clock has wound prices back to the same levels as they were in 2003, according to financial researchers Standard and Poor’s.

House prices fell 18% in April in S&P’s 10 and 20 city indices.

Commercial property has crashed alongside home prices registering a 20% decline, with market expectations of another good way to go – perhaps another 20%.

“Now that the meltdown has happened, the new emerging market is the United States,” Tom Shapiro, president of real estate investment firm GoldenTree InSite Partners, said at the Reuters Global Real Estate Summit in New York.

“I think there’s going to be the best opportunity to make money in the last 20 years in real estate in the US.”

GoldenTree InSite pulled the plug on US real estate investment in 2006 and focused attention and cash on Brazil instead, with investment in residential and office properties.

The company has a war chest of about a $1 billion to sink in to property, and is ready to return to the US market and take advantage of the right projects that need or will need money when they come up short.

“We are just at the point now where we are seeing some very interesting entry points on certain transactions,” he said.

New York-based GoldenTree InSite invests institutional funds.

Shapiro said his firm likes big cities, such as Los Angeles and New York where struggling commercial real estate markets tend to rebound strong.

“San Francisco right now is a pretty interesting place to think about because San Francisco is a very diversified economy,” he said.

Meanwhile, residential property prices fell – but the rate of decline is beginning to show signs of holding steady fueling hopes that the market will soon hit rock bottom.

“While one month’s data cannot determine if a turnaround has begun; it seems that some stabilization may be appearing in some of the regions,” said David Blitzer, chairman of the committee in charge of S&P’s index. “We are entering the seasonally strong period in the housing market, so it will take some time to determine if a recovery is really here.”

Phoenix posted the largest annual decline of 35.3%, while Las Vegas slipped 32.2% from last year and San Francisco fell 28%. Denver, Dallas and Boston posted the best performance in terms of annual declines, down 4.9%, 5% and 7.7%, respectively. On a month-on-month basis, Dallas saw 1.7% gain from March while Las Vegas lost 3.5%.

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

Many major global property markets recorded positive price growth in 2008 but by the end of the year that had stopped or fallen in 75% of locations, according to a new report.

There were wide variations in performance around the world with Hong Kong showing the sharpest annual drop in property prices with a fall of 24.5%, the Knight Frank 2009 Wealth Report, shows.

While Bangkok saw residential prices rise by 22.5% and overall just under 50% of the locations featured managed to record positive price growth on an annual basis in 2008.

Other real estate markets saw a drastic change from boom to bust. For example, Dubai recorded annual overall growth of almost 11% but property prices fell by 19% in the last quarter of 2008.

The report, which includes new research from Knight Frank and Citi Private Bank, shows that prime property in Monaco is the most expensive in the world costing an average of €55,000 per square metre for the best properties with London and Manhattan in second and third place.

But despite house price falls almost 55% of high net worth individuals plan to increase their exposure to residential property over the next two years.

Global farmland prices started to slip last year on the back of falling commodity prices, but remain more resilient than residential or commercial property. Exchange rate fluctuations mean affordability in some countries has increased for US dollar and euro-backed buyers, despite strong price increases in local currencies.

‘Covering a period of global wealth destruction rather than creation, the report’s annual analysis of prime residential property markets and the behaviour and attitudes of the wealthy has become even more relevant,’ said Liam Bailey, head of residential research at Knight Frank.

‘Even the world’s richest people have cut their discretionary spending and most desirable prime residential property markets have now been affected by the global downturn. Although almost half the locations in Knight Frank’s Prime International Residential Index managed to show a positive overall return in 2008, price growth had either stalled or started to decline in nearly 75% of them by the end of the final quarter,’ he added.

But it is a positive sign that the rich are committed to property despite the gloom, he added.

Source: http://www.propertywire.com/

Over 23,000 four and five star hotel rooms are expected to be completed in Bangkok, Singapore, Hanoi, Ho Chi Minh and Kuala Lumpur by the end of 2012, according to a new report published by CBRE Hotels.

“The nature of demand for hotels is notoriously volatile, with factors impacting demand as varied as they are unpredictable,” said Mr. Robert McIntosh, Executive Director, CBRE Hotels Asia. “Conversely, forecasting market supply is somewhat easier, despite some uncertainty in construction timeframes.”

The actual number of rooms to be added is greatest in Singapore. Although the increase in Hanoi is high in percentage terms it is not substantial in terms of the total number of rooms.

Singapore will experience the largest number of addition hotel rooms of the five cities, with nearly 10,000 four and five star rooms expected to open by the end of 2012. Assuming all projects proceed, this represents a 39 percent increase in supply over a relatively short period of time.

Hotel supply in Bangkok is expected to increase significantly, with over 6,000 four and five star hotels rooms set to enter the market by the end of 2012. This represents an increase of 26 percent bringing the total supply of four and five star hotels in the city to over 31,000 rooms.

In Vietnam, the existing supply of four and five star hotels in key cities is relatively small compared to other markets. In Hanoi, new four and five star hotel supply is expected to total nearly 3,000 rooms representing an increase of 75 percent. Whilst this appears high, the market is growing from a relatively small base of just under 4,000 rooms (Singapore and Bangkok have over 30,000 four and five star rooms each). In Ho Chi Minh City, existing supply of four and five star hotel rooms is expected to increase by 38 percent to reach a total supply of over 7,000 rooms by the end of 2012.

The addition of new supply to these cities is essential in promoting further development of the tourism industry and to ensure capacity exists to accommodate future growth of visitor arrivals. This is particularly important in Ho Chi Minh City which currently suffers from a shortage of supply.

Finally, the hotel market in Kuala Lumpur will experience a modest increase in hotel rooms to the end of 2012, with the market set to increase by just ten percent to reach 20,400 hotel rooms. While average room rates and occupancy levels are less than those in Singapore, the relatively small increase in supply is unlikely to pose a significant challenge to the market in the next couple of years but it should help boost total tourism revenues.

With the worldwide credit crunch, property prices are going down all over the world. In this view Indian Real estate prices in need to fall by 20% or more if the market is to pick up, the head of India’s largest private bank has warned. He denied the news that his bank has tightened credit so much that property related businesses are finding it hard to source funds for developments.
However developers across the country have cancelled or delayed projects because of lack of funding and they are turning to affordable housing projects as the market has stalled for luxury villas and apartments.
Indian property developers have asked both local and central governments to relax the home density rules. Current rules say that builders cannot construct houses for more than 400 people on a hectare of land. Developers want the number to be doubled.
Property prices in India have doubled since 2005 are now expected to return to their pre 2005 rates.

What investors are worried now after buying the property when there was a boom and developers were spending thousand on publicity to get max. investment from foreign countries that government had not proper laws to save the benefits of investors. The following news published in gulf news reflects the views:

“Investors in Dubai’s off-plan market are counting on draft laws aimed at protecting them, that are expected to come into play soon.

Several investors aired their views on the issue on the Gulf News website.

“I bought a unit off-plan a year ago. The developer said construction would start in a couple of weeks. Construction has not started yet and the developer is sending letters to pay or I will face daily charges. I have already paid 30 per cent of the total price,” said Frank, a Canadian investor.

And Frank is not the only one.

“I invested in a property in April, but the developer hasn’t started construction yet and I don’t think they will be able to build now, since there is no finance for new projects available and most clients are defaulting because of the financial situation,” Katharina, a Dubai resident, said.

“The overwhelming majority believes that refunds should be given and projects cancelled if construction has not yet started,” Bilal, an investor from Karachi, said.

“Yes, I think if six months pass and the developer has not started construction, the contracts should be cancelled and buyers should get refunds,” he added.

These comments follow recent news about two draft laws set to bring further protection for investors in the shaky off-plan market.

One states that developers own the land and complete 20 per cent of construction before selling off-plan.

The second law says the payment plan must be linked to construction progress, thereby forcing developers to start work and making sure investors pay only 20 per cent of the property price up-front.

Now would be an ideal time for the laws to become effective with investors still worried about some developers.

Investors with Union Properties projects are concerned the developer is short of money, following a recent Prompt Payment Initiative offered to them for a two-week period only.

While any investor would welcome 10 per cent being slashed from their outstanding balance, especially given the current economic climate, some are viewing the initiative as a warning signal. Some investors are worried that the developer is running low on cash and the five projects will be delayed or stopped if no one chooses to settle the balance.

Union Properties wrote letters to investors of five of its projects, offering them a 10 per cent reduction in the remaining balance of their units, if they chose the Prompt Payment Initiative.

“If you choose to settle the balance due on or before February 15, 2009, we will reduce the amount due by 10 per cent as an incentive for early settlement,” said Union Properties in letters to investors of Index, Limestone House, Green Community Motorcity, Uptown Motorcity and the Control Tower.

Union Properties had also announced a rent-to-own scheme back in November.

In light of potential investor cash-flow issues, it is not clear if anyone or most investors, will be able to stump out the remaining cash.

Officials at Sorouh did not respond when contacted repeatedly by Gulf News last week.

Source: http://www.gulfnews.com/

Here are some comments from an expert about property crisis in UK. Do you agree with these?
Property prices in the UK commercial sector may fall as much as 25% this year as banks curb lending to investors, according to analysts.

The UK sector is expected to do worse than the commercial sectors in both France and Germany, said Moody’s Investors Service.

It is also predicting that by the end of the year, valuations in Britain may have dropped as much as 45% from their peak before the credit crisis started in 2007.

In a report on European commercial mortgage-backed bonds it also said that French real estate may fall as much as 20% and predicted a 15% decline in Germany.

Sales of bonds backed by European commercial mortgages totalled €6.3 billion last year, an 89%decline from 2007. Issuance tumbled because investors shied away from hard-to-value assets as banks reined in property lending, the report said.

‘To stop the downward trend and for the commercial mortgage-backed securities market to reopen to a meaningful extent, the availability of financing for commercial real estate must recover. This is highly unlikely for 2009,’ analysts said in the report.

Moody’s downgraded 55 bonds backed by commercial mortgages last year and boosted the ratings of 11, the report said. Falling property prices will continue to ‘negatively impact’ ratings this year, the report added.

Moody’s is also downbeat about the rest of Europe, Africa and the Middle East with the outlook remaining muted. It described investor sentiment as weak and added that any improvement would not come until lending increases and prices stabilise.

‘We believe that the availability of financing for real estate must recover with property values stabilizing and the capital markets must return to some kind of normality,’ the report concluded.

Thanks to www.propertywire.com

A new survey indicates where property investment experts reckon you can find the best bargains and also reveals where they are likely to buy in 2009.

Asia looks a better bet than other parts of the globe, but for cash rich individuals, London also offers bargains, according to the survey by Reuters.

Tim Murphy, Hong Kong-based founder of IP Global, owns over 100 apartments and houses around the world and started a firm that finds residential property for clients.

‘I’ve just come back from a trip to London and had a very interesting week. In the last few days there are even graver concerns about the UK economy and banks. But there are some incredible property deals, especially for built property,’ he said.

‘Developers want to unload their last assets. For the right deal, you can get anything from 35 to 60% discounts from a year ago. And the currency is a huge advantage. In US dollar terms, a property that was $2 million a year ago is $600,000 now,’ he explained.

In Asia, he recommends keeping an eye on Hong Kong and China. ‘Hong Kong will have a very difficult first half of the year. If there are bargains, I’ll buy, not now, but maybe after the summer. I’m quite optimistic long-term. Rents are coming down, but the cost of funds is coming down much more. If you buy a HK$2 million to HK$5 million dollar property the yield is 4 to 6%,’ he said.

David Edwards, Asia director for LaSalle Investment Management, the property funds arm of Jones Lang LaSalle said he will buy in 2009 and he is looking at the more volatile, faster correcting markets such as Hong Kong and Singapore, which he expects to bottom first.

‘It’s too early to say if it will be the second half of 2009 or the first half of 2010. There’s not enough visibility given the gyrations of panic. But it’s a good idea to build an equity position and get ready,’ he explained.

Aaron Fischer, head of property research at CLSA, is not sure if he will invest this year. ‘I just sold a house in Australia. If I were to pick countries with the smallest declines, they would be Japan and Indonesia. In Japan house prices don’t move,’ he said.

Brett McCarthy, fund manager at Sydney-listed Challenger Kenedix Trust, reckons that the Sydney market is a good prospect. ‘The city is going to grow for a long time and it’s geographically very constrained by national parks and mountains, so in the long term, you think the property price would go up in Sydney, but of course in the short term, some parts of the market have got a lot of pain,’ he said.

Robert Lie, Hong Kong-based Asia head for Dutch property investment firm Redevco, predicts that Asia will recover before other regions. ‘I’d say invest in China, but as a foreigner you have to live there 12 months before you can buy. I think Hong Kong prices will adjust pretty quickly and I do believe that if the global economy revives, Asia will recover first. There’s inherent scarcity in the market for land and apartments. And high-end prices will drop significantly, but they’ll come back,’ he said.

Simon Lyons, London-based joint CEO of Enstar Capital, revealed he has recently bought an apartment in the Swiss Canton of Vaud. ‘That outsiders can buy at all in Switzerland is a relatively new phenomenon. A limited number of property permits are granted to non-residents each year and only certain properties, primarily in tourist areas, are eligible for purchase, meaning demand is always ahead of supply,’ he explained.

Mark Callender, UK-based Head of Property Research, Schroder Property Investment Management, said it is not the right time to buy. ‘UK housing prices look about halfway down right now, so it’s not quite the right time to buy. And the expectation is for prices to drop by another 10 to 15% this year,’ he said.

Source: http://www.propertywire.com/

Here is an abstract of a news published on website www.nce,co.uk/international which itself is disclosing the position of property development in Dubai.

Aldar Laing O’Rourke – a joint venture between Abu Dhabi-based developer Aldar and Anglo-Irish contractor Laing O’Rourke – shed around 200 jobs, about 10% of its staff. Numbers were unavailable for NDY job cuts. “Following the significant downturn in the Dubai property and construction markets in the last quarter of 2008 we have reduced staff numbers in our Dubai office,” said an NDY spokesman. 

The outlook for construction is looking bleak in Dubai as the number of construction contracts awarded across the United Arab Emirates as a whole fell by 85% in 2008, according to research by MEED Projects (NCE 8 January 2009). A range of factors including the shortage of credit, fears of a property oversupply and materials price inflation, have created a downturn in the Dubai real estate market.

Despite the Dubai downturn, markets in other Middle Eastern countries like Qatar and Saudi Arabia are expected to remain buoyant and several large infrastructure projects are progressing.

Our readers are welcomed to comment on it.

More payment plans are being offered to property investors in Dubai is a sign that the real estate market is maturing.

It is claimed and advertised on TV that developers are introducing innovation into their payment plans expanding it over number of months and reducing the instalment size.

The move is also welcomed as a way of lessening the impact of the economic downturn.

The extended plan being offered to existing customers gives 90 months to pay 85% of the value of the property once a threshold of 15 per cent of the purchase cost has been paid and is the first of its kind to be introduced by a private developer.

No doubt ‘Developers can’t afford to be as stiff as they were before. The market is maturing and heading towards the end-user,’ but still some end-users feel that they can loos their investment if market could not mature.

What are your comments?

Your comments are welcomed.