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Global Real Estate Opportunities  Trophy Property  Rental Yields  Investment Property Demand 

By - Tuesday 27 July 2010

Real estate offers investors a good long-term opportunity at present, with low prices and liquidity working to attract buyers looking for a good return on investment.

This is the view of portfolio manager Urdang, which believes that there are significant openings which can be exploited in the markets currently.

Peter Zabierek, senior portfolio manager for the company, highlights Hong Kong and Singapore as two regions that are likely to enjoy substantial growth, with an increase in trade and visitor numbers likely to be the main drivers.

However, the expert urged caution for those looking at European and UK markets because of debt concerns, lack of credit from banks and current austerity measures.

"There are forecasts of 750,000 jobs to be lost in the UK, which will hit office, retail and residential spending," he explains.

"These three sides are crucial for real estate investments. This will have a downward pressure on yields. This will continue until 2013. There is not a lot of new development. It will be a few years before demand is restored."

Indeed, this recommendation of a cautious approach to European markets is one that is replicated by many commentators.

And despite the plethora of cheap and reduced real estate that is available, many are advising that current economic instability could create an environment that many investors would do well to steer clear of.

Confidence Returning

Despite this, the news follows a recent survey conducted by property website the Young Group, which found that 87 per cent of real estate investors in London expect their portfolios to increase in value or remain stable for the remainder of the year.

This rise represents a large jump of ten per cent in confidence amongst prospective and current property investors, compared to that seen in the second quarter of the year.

However, buyers are still experiencing difficulty in securing funding for Buy to Let purchases - something which is reflected by the number of individuals looking to expand their portfolios.

Neil Young, chief executive officer of the property portfolio manager, explains: "This perhaps accounts for the fact that although investors are increasingly positive about prices and unquestionably see property as a long-term investment that provides robust returns, they do not expect to secure additional investments over the next 12 months in as great a number as in previous quarters."

Added to this, the latest figures from Cushman and Wakefield and DTZ both show that interest in European property is rising.

The indexes reveal that real estate transactions in the region have continued to grow during quarter two, even with increased reservations and uncertainty surrounding the sovereign debt crisis.

Cushman and Wakefield reported that deal volumes in the second quarter stood at 25.2 billion EUR, a 19 per cent increase on the first quarter, while DTZ said investments totalled 21.4 billion EUR, representing a growth of 11 per cent.

France, Germany and the UK dominated transactions, with the markets accounting for 64 per cent of the total volume, while demand also spread to new areas such as the Nordic region.

Trophy Property

Indeed, part of this recovery and increase in sales can be put down to a rise in interest from overseas investors looking for trophy real estate.

A number of Chinese, Koreans and Malaysians are looking to take advantage of the prospect of increasing rental yields in prime locations over the next few years.

The new buyers are trying to capitalise on the recent global economic crisis, which has resulted in a reduction in new grade A property being constructed and, as such, an increase in rents of existing buildings.

Randall Hall, chief executive officer of Savills China, explained that the strength of the yuan against other currencies had also helped to drive up interest in Europe.

He said: "The recent tightening policy toward Chinese domestic property investment has led to an increased appetite for overseas real estate purchases."

"The appreciation of the yuan against major currencies over the past two years also meant that Chinese buyers could acquire foreign real estate assets at a bargain."

Bright Future

Indeed, the increased demand for European property is something which is reflective of the recovery of global markets in general.

The recently released Global Property Guide: Mid-2010 Property Markets report shows that many countries are experiencing an upturn in fortunes and have successfully managed to reverse the downward trends experienced during the crash of 2006-07.

It suggests that conditions are looking a lot better in the world's real estate markets than they were a few years ago, with lower interest rates and higher government spending helping to get things back on track.ADNFCR-3415-ID-19907315-ADNFCR

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*This page is provided for information purposes only and should not be construed as offering advice. IPIN is not licensed to give financial advice and all information provided by IPIN regarding real estate should never be treated as specific advice or regulations. This is standard practice with property investment companies as the purchase of property as an investment is not regulated by the UK or other Financial Services Authorities.


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