Emerging Market Real Estate Outperforms Europe
Thursday, August 05, 2010

Property markets in South America, Asia and Eastern Europe are outperforming those in the UK and the Eurozone, says the Royal Institute of Chartered Surveyors (RICS) Global Property Survey for for the second quarter of 2010.

The RICS survey indicates that occupier demand is rising in the majority of countries across the globe with the notable exception of the UK and Eurozone countries where tough fiscal measures appear to be having a more pronounced impact on the appetite of businesses to take up new space.

Significantly, the report notes, France is bucking the negative Eurozone trend with more material signs of an upturn in sentiment towards real estate reflecting, in part, the relatively resilient performance from the domestic economy. Significantly, surveyors in the US reported a rise in tenant demand across all three sectors for the first time in three years, the survey shows.

Brazil is leading the way with the net balance of surveyors reporting a rise in occupier demand moving from 70% to 85% with markets in Peru and China also performing well. By way of contrast, demand in the UK turned negative for the first time in a year with the net balance falling from a positive 14% to a negative 4% while the net balances in Spain, Germany and Greece are all in negative territory.

Transactions fell in the UK for the first time in a year with the net balance of surveyors reporting a fall in activity sliding from a positive 24% to a negative 5%. More surveyors again reported a drop (than a rise) in activity in the United Arab Emirates and Greece.

Indicators in China still remain strong despite measures introduced by the Chinese government to address the property boom, the survey reveals. Indicators for occupier demand, rental expectations and the number of investment bidders per property all remain firmly in positive territory.

Elsewhere in Asia, RICS says that the latest numbers from India suggest a strong showing from real estate in the second quarter despite the increase in interest rates.

Looking forward into the third quarter of 2010, sentiment towards capital values is particularly strong in France, Peru and Brazil while surveyors are most optimistic on rental increases in Brazil, Hong Kong and Peru.

Other key points highlighted by the survey include:

• New development starts are rising in Brazil, Peru and Argentina
• Surveyors report first declines in Japanese yields since 2007 on uptick in investment demand
• Investment bidders per property rose at a faster pace in the US
• Capital values are still declining in Ireland, Spain and Greece
• Occupier enquiries are strong in Brazil and Republic of Ireland UAE indicators are less negative than in Q1
• Rents are now increasing in the Ukraine

"The real estate world continues to be split broadly speaking between the emerging and developed economies," observes Simon Rubinsohn, RICS chief economist. "Strong growth in many of the former, including the likes of Brazil, Hong Kong and India, is continuing to boost demand for new space from occupiers as well as encouraging investment activity."

"Meanwhile in many of the latter, fiscal retrenchment allied to bank deleveraging continues to place significant obstacles in the way of a meaningful recovery in the commercial property market," Rubinsohn adds.