Asia House Prices Lead the World
♫ Friday, February 13th, 2009Shanghai, China (up 35.4%) was the world’s strongest residential property market during the past full year, according to a compilation of official and private-sector statistics by the Global Property Guide. Bulgaria (up 34.6%) was in second place, followed by Slovakia (up 32.5%) and Singapore (31.1%). The worst performers were the United States (down 8.9% by Case-Shiller calculations), Ireland (down 7.3%), and Estonia (down 3.9%). Asia-Pacific’s strong performance was led by China, Singapore (31.2%), Hong Kong (25%), the Philippines (15.2%), and Japan (8.4%). In most cases, this was due to strong economic growth.
Price rises in Japan have now paused. Outside the US and Europe, Japan has been the hardest hit by the credit crunch. In March, Reicof, a listed property investor, failed with debts of Y42.6 billion (US$422 million). Deals are now being postponed, and the credit squeeze is hitting private real estate funds, which tend to be highly leveraged, and have borrowed mainly from foreign banks. These private funds are finding it hard to refinance and are being forced to unload property.
Hong Kong surged ahead this past year (up 25%), but transaction levels have now fallen sharply, despite declines in interest rates in line with the US. Singapore’s residential market is still holding steady, but last year’s euphoria seems to be over. In both Hong Kong and Singapore prices are high by most yardsticks and there are low rental returns, usually a harbinger of price weakness.
China’s housing market seems to be on the verge of significant weakness. It has a history of very strong cycles, and the authorities have discouraged the house price boom by prohibiting foreign acquisitions, by higher interest rates, and by credit controls. South Africa’s market seems to be weakening, having experienced the first decline in 8 years. The Baltics has been hard hit. Latvia, last year’s star performer (up 69%), was this year’s biggest disappointment with a price decline of 1.7%. Estonia followed Latvia down with a decline of 4%.
Eastern Europe shows sign of weakening, partly due to the end of inward money flows associated with buy-to-let boom, but more importantly due to past price rises. Yet there are many islands of strength. Slovakia has seen continued price rises. Land prices in Bratislava increased by an average of 50% in 2007. The price of residential apartments also rose strongly. Strong economic growth, continued foreign investment, a burgeoning mortgage market, and a shortage of new developments, are all contributing to Bratislava’s performance, which looks likely to continue at least next year.
In Bulgaria, Sofia prices are still rising strongly, while the coast and mountain resort booms are over. Those looking for upcoming trends may want to consider Latin America. The increasing willingness of Americans to retire abroad and to look beyond the Caribbean has led to strong buying interest in both beachfront property and in colonial cities such as Guatemala’s Antigua, Nicaragua’s Leon, and Colombia’s Cartagena.
Office Rents And Occupancy Costs in Asia Pacific
♫ Thursday, January 15th, 2009Asia’s major office markets remained robust in the third quarter of 2007. Vacancy rates remained low at 5% or less in key Asian financial cities including Tokyo, Singapore, Hong Kong and Shanghai. With the low availability and the strong demand from multinational corporations (MNCs), Grade A office rental appreciation continued in Asia. However, office rents rose at a slower pace in CBDs since some tenants moved to non-core areas upon lease renewal. More anchor tenants have also committed or are planning to relocate their back offices to secondary business districts for lower occupancy costs.
Australian & New Zealand GDP
The GDP growth rate for Australia over the year to June 2007 was 4.3% and is expected to increase to around 4.6% by the end of 2007. Growth in GDP for New Zealand was 2.2% for the year to June 2007. While the economic rebound in early 2007 has flattened out somewhat, conditions remain supportive of continued moderate growth. Positives include sustained high commodity prices, increased government stimulus to households, continued business and government investment and capital and infrastructure expenditure.
Tokyo
Tight market conditions continued to drive up rents in Japan’s capital in the third quarter. The steady upward trend in rents made more cost-conscious occupiers with expansion requirements look to more affordable locations, Grade A vacancy remained low at 1.3%. However, the vacancy rate for all-grade office buildings in Tokyo’s 23 Wards was also low at 1.7%. Given the continued shortage of prime office space and the persistence of strong demand, rents are expected to continue to trend upward for the foreseeable future.
Singapore
The recent uncertainty in global financial markets has had no discernible impact on Singapore demand for office space. Demand for quality office facilities remains broad-based, though the financial and insurance sectors were predominant among those with larger space requirements. With rents at record levels, there is increasing tenant resistance to rental hikes, and occupiers are more prepared to explore lower cost locations and consider relocating to business parks or high-tech space. Several sizeable pre-commitments by companies in the banking and insurance sectors are expected during the final quarter of 2007.
Hong Kong
In the present situation, MNCs have little choice but to decentralize and/or split their operations to meet cost requirements and space demands, thus providing an extremely strong pre-commitment response to new prime office buildings nearing completion.
Sydney CBD
Leasing activity remained strong in the first half of 2007 in the Sydney CBD office market, with net absorption reaching 87,200 square meters. Solid positive net absorption is forecast to continue during the second half of 2007. Many tenants have taken advantage of leasing incentives still on offer, expanding from locations already within the CBD. Market rent growth has picked up significantly, driven by the strong demand and falling vacancy rate. Prime net face rent growth for the year to September 2007 was 11%. Reduction of incentives continues and this is likely to drive further growth in effective rents in the short- to medium-term.