Investors See Scandinavia as Safe Haven from Euro Debt Crisis

Investors are looking towards Scandinavia in the wake of the Euro debt crisis, but this area isn't immune from risk as some experts are predicting there could be a property bubble forming. Sweden is currently paying less than Germany to borrow for 10 years, and government bond yields in Norway are at a record low.

In spite of this Robert Shiller, who helped create the S & P/Case Shiller home price index feels both countries could be at risk of asset bubbles which could damage their economies, and is warning that policymakers should do more to protect their property and credit markets from imbalances.

House prices in Norway have doubled from 2001 to 2010, and the annual increase last month was a more than respectable 8.5%. Household debt is predicted to increase to 204% of disposable income this year which is the highest level since 1988.

According to the International Monetary Fund, homes in Sweden seem to be overvalued, making price falls likely. Values have tripled during the past 15 years, although house prices fell by 2% last quarter having reached a peak which resulted from tax cuts, low rates and a strong economy.

At the moment both Norway and Sweden may seem to have little to worry about as both have still retained their triple A rating, and the Swedish housing minister, Stefan Attefall doesn't appear concerned, feeling the boom is at least partially driven by a shortage of housing. Both countries are rated as being extremely low risk, with Norway offering the lowest risk while Sweden is the third lowest after the US.

Russian Buyers Becoming Prolific in Overseas Property

During the boom Russians became prolific in the world of overseas property, particularly in Bulgaria, Ukraine and other coastal hotspots in the region, but also in Spain and the Med. They, like buyers from almost all nationalities became rare during the financial crisis, but according to many reports they are now becoming as prolific as ever.

According to aiGroup, who surveyed Russian investors at their three property shows between September and November, 71% of Russian investors are planning to complete a purchase in the next 3-6 months.

More than two thirds of Russian overseas property exhibition visitors are looking to complete a purchase in the next three to six months. Kim Waddoup, chief executive of the group said that exhibitors at his Moscow and St Petersburg property shows reported "stronger than ever interest in their properties".

The reports are confirmed by official data, which shows a surge in capital flight out of Russia into foreign assets and investments. According to central bank chairman Sergei Ignatyev has estimated $49.3 billion has left the country in the first nine months of the year, already outstripping 2010’s figure of £35.3 billion. $13 billion of capital left Russia in September alone…70% of the third-quarter total.

Turkey is a firm favourite among the new breed of investors according to other reports. International Residence surveyed 499 Russian investors at the Moscow International Investment Show in March this year, and found Turkey to be the third most popular country among those looking to buy. Spain and Bulgaria were first and second.

US Births Hit an 11 Year Low, Affecting the Housing Market

  The birth rate in the US is at an 11 year low, and experts think decisions to delay having a family or forego having babies altogether may prolong recovery of the property market. The low birthrate will mean a lower rate of consumer spending on child related services and goods, and it's estimated the cost of having raising a child until the age of 17 is $226,920 with housing being one of the largest expenses.

Last year the number of registered births fell to 4 million which is the lowest level since 1999 as Americans worried about unemployment, falling house prices and low pay rises are lacking the confidence to plan for a new baby.

The US birthrate may not recover until 2013, and is likely to lead to slower economic growth. It’s being predicted that the employment rate will increase by 2.6% during the fourth quarter and that economic growth will be too weak in 2012 but to make much of an impact on the jobless rate.

Economists think the impact of a slowing birthrate could be huge as they point out households will choose to rent for longer periods of time, and there will be fewer people looking to move up the chain. Recently there have been signs of a pickup in the economy, and if this continues it could lessen the impact.

Consumer confidence improved in November and is at a four-month high, and retail sales increased by 0.5% last month. Claims for unemployment insurance have also dropped to their lowest level since April, which is a pretty good sign that the labour market may finally be recovering.

US Shadow Homes Inventory Looks Set to Keep Prices Low

Hundreds of thousands of homes are either in foreclosure or have been repossessed by the banks, but have not yet come on the open market. There are already more homes for sale than people want to, or are able to buy, and with an estimated 1.6 million homes in the country's shadow inventory property prices are likely to remain depressed for years.

The states of Ohio, Georgia, Illinois, Florida and California have the largest shadow inventory is according to Realty Trac, which is a firm that tracks foreclosures and delinquent properties throughout the country.

Property prices in Ohio are down right across the state, and none of the areas seems able to maintain more than one month growth in prices, and it's not just affecting states with large shadow inventories, as Iowa had been largely unaffected by the boom and bust of the housing market, but is now beginning to see the negative effects of shadow inventory.

It can often take as long as a year before the banks get a foreclosure property on the market, and the likelihood is once it does sell it will be for a greatly reduced price.

According to Realty Trac, California has nearly 270,000 homes in its shadow inventory, while Ohio has nearly 70,000 homes. Apparently there are a couple of factors which are slowing down the resale of such properties, as legislators imposed a moratorium on foreclosures in 2009 as well as other delays, and lenders are increasingly seeking to keep homeowners in their property.

The value of the nation's shadow inventory has been estimated at $405 billion, and it's thought it will take at least four years to clear.

Standard & Poor Predicts Further Price Drops in Gulf Region

A gloomy report from Standard & Poor predicts that property prices and rents in the Gulf region will continue to fall for the rest of the year. The agency thinks that developers will continue to postpone projects in favour of renting out and managing current stock, and it went on to say that it expects to see a shift away from luxury property towards more affordable housing, and that this will be particularly pronounced in Saudi Arabia.

According to a credit analyst for the ratings agency, prices and rents will continue to decline for the rest of the year, even though some of the properties in Qatar, Bahrain and the UAE have lost up to 60% of their value.

Apparently part of the problem is that the legal and regulation framework in these countries needs to be reformed to help stimulate the property market. Another problem is that the markets are oversupplied, and even though some people want to buy they cannot afford these luxury properties and cannot obtain finance.

The property market in Bahrain and Egypt is expected to remain slow, at least in the short term, which is due to the protests earlier in the year, and a considerable number of projects have been delayed or even cancelled.

Construction isn't expected to restart on any major scale until the political situation has stabilised, and the proper authorities are put into place to issue permits, licenses and property titles. There is also the possibility that property firms in the Gulf region may eventually adopt a real estate investment trust status, as at the moment REITs are relatively rare in this area.

Growth Predicted in US Commercial Property

According to a recent report by PricewaterhouseCoopers LLP, the United States commercial property sales are expected to increase within the next few years, as more and more property investors gain confidence in the market as a whole.

According to this quarterly survey, job growth, as well as higher business and consumer optimism, are encouraging purchasers to get into the market now with the interest rates where they are. By waiting, interest rates could increase, as well as push prices up in the office, industrial, multifamily, and retail sectors.

Everyone is awaiting recovery of the real estate industry, and as confidence grows among investors, the better will be the results for the industry. The long wait has caused some investors to become more eager to get back in there.

According to an index from the Massachusetts Institute of Technology Center for Real Estate in Massachusetts, commercial real estate prices surges 19 percent in 2010. Estimates from real estate experts believe that commercial property transactions could increase up to 40 percent this year, to $135 billion.

Additonally, the PricewaterhouseCoopers report stated that with low interest rates and stiff competition among buyers, the chances of getting good returns on investments are favorable. In 27 of 31 office markets, capitalization rates decreased.

It is estimated that within the next two years, most industrial markets will improve, with 86.2 percent expected to be in recovery by 2012 as demand surges. With supply and demand becoming more balanced, vacancy rates should decrease and the rental industry should increase.

The multifamily sector has been doing quite well due largely to more challenging lending restrictions and limited home buying opportunities. As a result, demand for apartments have increased and are expected to continue for the next couple of years.

http://www.bloomberg.com/news/2011-03-21/deal-volume-to-drive-u-s-commercial-real-estate-recovery-pwc-survey-says.html