As we approach the end of 2010 the industry experts start forecasting their market predictions for the year ahead. We have taken a closer look at five of the property industry reports; from Knight Frank, Jones Lang LaSalle, Cluttons, ING Real Estate Investment Management and Savills. Below is a summary of each of the reports:
Jones Lang LaSalle:
- Market improvements are predicted in Europe, Latin America and Asia
- They are expecting global commercial property investment to improve but not to pre-crisis levels
- They forecast that the US CMBS (commercial mortgage-backed security) market will also show an improvement
- They are negative on European markets particularly Spain, Ireland and some of Eastern Europe, with further price falls predicted
- They remain positive on the global property market as a whole forecasting growth
- They predict an increase in interest rates in Europe and the US which they expect will test the property markets
Savills (UK Residential):
- They predict a fall in values but not an extreme dip
- They remain negative on the UK residential property market and do not expect any price rises
- They predict buyer sentiment to remain negative
- They expect positive growth only in the Central London residential market
- They predict that the cost of high loan-to-value (LTV) lending will remain high
- Their view on the UK commercial property market remains uncertain due to the impact of the Government's Comprehensive Spending Review and quantitative easing
- Within the office sector growth is only predicted in Central London
- The global commercial property market is forecast to remain positive
- They are uncertain what the long-term consequences of quantitative easing will be on the markets
- An improvement in the markets is predicted but it will be slow and steady rather than a sharp rebound, although the office sector is not expected to improve until 2012
- No individual sector, market or country will stand out as a clear outperformer.
Collectively the reports illustrate a mixed view of the property market in 2011, with some predicting falls in property prices and other predicting a recovery. There is continued uncertainty in the market.
The global property markets will depend on economic recovery and individual government's actions to improve the economy and property markets.
The performance of any commercial market will depend on employment rates in that area or country. In the UK the retail property market will also be affected by the rise in VAT that has been put in place for January 2011.
Another factor that will impact on the market will be the availability of finance and whether or not banks will start to lend again in 2011. Lending restrictions have remained tight since the beginning of the financial crisis.
There are differing opinions on Asian markets, with some remaining positive about the future and others predicting a slowdown. The Jones Lang LaSalle report states: "In Asia Pacific, strong economic conditions and business confidence will boost office take-up in 2011."
Emerging markets are expected to perform better than established ones, as the majority of established markets are still recovering from the impact of the global financial crisis. Although it is worth noting that emerging markets carry higher risk for investors.
Most of the reports were positive on commercial and residential Central London markets; one reason for this could be the 2012 Olympics and the increase in construction that will occur leading up to the games.
As with any other forecasts or predictions there are no certainties and no-one can be sure of what the year will bring for the global property markets.
- Monday 20 December 2010