Senin, 31/08/2009

Commercial Property Faces Slow Global Market
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Commercial Property Faces Slow Global Market

GLOBAL PROPERTY SURVEY from Royal Institution of Chartered Surveyors says the global market of commercial property is still slow. Price discounts and incentives have not been enough for raising lease prices worldwide. In the coming months the market is predicted to be filled with pessimisms and alarms. Worries about the impacts of the global crisis have shifted from the residential sector to the commercial sector. The slowing market in the commercial sector has not been caused by developers’ excessive speculations but by investors’ uncontrollable enthusiasms.

Indeed, commercial property assets have been popular since a decade ago. Many people, who initially did business in the capital market, have diverted their investments to the property sector in hopes of minimizing business risks. During that period, people could easily obtain small scale funding, which made it easier for them borrow money for buying property assets.

But, such investors were too busy calculating the possibility of making profit rather than calculating the financial costs of their projects. Such investment strategies might succeed when lease prices and capital values were rising and the number of residences was small. As the economy fell into recession, funding become limited.

As such, investors were trapped in a condition that had never been anticipated, and this situation led to the decline in the commercial property market. According to Simon Rubinsohn, RICS Chief Economist, financing is among the factors behind market slowdown, and a decline in lease activities has affected lease prices and economic growth until 2010. Additionally, there are predictions that the condition of commercial property market will remain slow in the coming years as the US economy has not yet shown any recovery signs.

The results of the latest survey conducted by RICS show a slowdown in the commercial property market, the deepest fall in the past five years, due to the global crisis. The hardest hit are the property market in Singapore, Ukraine, Spain and Ireland. Surveyors found lease activities in Spain and Ireland dropping by 97 percent while in Singapore and Ukraine they have fallen by 100 percent. The global crisis has caused transaction activities fall 80 percent worldwide.

But, there are positive signals from countries that have experienced significant growth like Hong Kong and the UK. Hong Kong’s commercial property market grew 57 percent. In the UK, it grew 46 percent and rose in line with the rising numbers of prospective buyers while supply is limited. This development has helped push prices up. But, not all supply is what buyers actually want.

Accordingly, the number of prospective buyers will rise around 63 percent in July. The number of house buying transactions also increased in July, and this was the best condition in the past decade. On average, within a period of three months, as many as 15 property projects were sold out, up from 13 in the previous quarter.

Property sales ratio rose 25 percent, which helped jack prices up. The highest sales ratio was in London and in the southeastern part of the UK, while the lowest was in its northern part. Concerning the development of the commercial property market in Asia, Rubinsohn said, “Emerging Asia in particular stands out as the regional outperformer with a marked slowdown in the pace of rental declines and tenant demand in China and India rising for the first time since 2008. In emerging markets, those countries tied into Chinese trade relationships appear to be weathering the storm better than most with parts of Latin America and Africa including Mauritius, Nigeria and Ghana holding up relatively well.” (NS)