Economic recovery in various destinations around the world is having a positive effect on property markets.
As the world begins to exit the global economic crisis many countries housing cycles are starting to turn around and record positive growth. In many cases, this has been aided by a strengthening economic outlook. A strong economy bodes well for the housing market as it is able to generate confidence in investors as well as indicating a long-term stability.
Economic recovery in the European Union is being led by Slovakia and Germany. Figures for the second quarter reveal that the two destinations have enjoyed growth of 4.9 per cent and 3.7 per cent respectively.
However, some traditionally popular destinations for real estate investors did not fare so well. While France and Italy saw modest growth of 1.7 and 1.1 per cent respectively Spain failed to impress experiencing negative growth of 0.2 per cent for the period. The poorly-performing economies of some European countries could go some way towards explaining their recent performance in the property sectors.
Global Property Guide's mid-term report for this year highlighted the struggles that many European Union destinations have been faced with. Spain in particular struggled, with house prices falling by 2.58 per cent year-on-year in the second quarter of 2010.
Turkey Outperforming Europe
One European country which has performed consistently well throughout the global economic downturn is Turkey. The Turkish finance minister Mehmet Simsek said that the country's economy is recovering from the global crisis better than expected.
Speaking at the Second International Conference on Economics at Kyrenia, Northern Cyprus, Simsek noted that growth of Turkey's real gross domestic product for the first half of 2010 stood at approximately ten per cent. "We were expecting a strong recovery but it exceeded even our expectations," he said at the conference. "Full year estimates range from 5.5 per cent all the way to seven per cent, so we do expect some slowdown in the second half of the year, but it looks like our growth will pass the record high among European Union member states."
Asian Countries Still in Front
India's economy grew by 8.8 per cent in the three months through June, its fastest pace in over two years. Before the recession, India's growth averaged nearly nine per cent on a regular basis. Indian leaders have said they would like to push the economy's growth rate back up to the nine per cent mark and eventually to ten per cent.
However, not everyone is so sure about the prospects. "This was the quarter in which you would have seen the fastest year-on-year number for this year," said Tushar Poddar, an economist with Goldman Sachs in Mumbai. "I don't think the nine per cent is coming anytime soon."
The Indian government estimates the economy could grow as much as 8.75 percent this year, and the International Monetary Fund says growth could hit 9.4 percent. "In terms of sustainability, the growth number will settle around 8.5 percent. There will be a deceleration," said Enam Securities economist Sachchidanand Shukla. "You are already seeing a moderation in industrial production numbers."
The news could make the country more appealing to potential property investors, although there are already strict rules in place which are designed to prevent the purchase of real estate by overseas buyers
. "Global uncertainty has taken a toll," Mr Shukla added. "The most important factor is not interest rates or availability of funds. It's got to do with confidence."
Meanwhile, another Asian destination which is economically strong is China.
Earlier this year, the World Bank raised its growth and inflation forecasts for China and urged it to adopt a tighter monetary policy, alongside a stronger exchange rate, to keep inflation under control and prevent property bubbles from developing. The bank today upped its projection for GDP growth this year to 9.5 per cent from 8.7 per cent in November. For next year, the bank has pencilled in growth of 8.7 per cent, matching last year's rate.
"In China the economy has held up very well during the global crisis and growth prospects for this year and next year remain quite good," said Louis Kuijs, senior economist in the bank's Beijing office.
- Friday 03 September 2010