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Industry Brief

Trends in Real Estate 2009

International Real Estate Industry Heads Towards a Trough

World Economy Derails

Following a period of robust growth, the world economy is losing momentum with growth rates faltering against a backdrop of high commodity, and crude oil prices, and unprecedented financial shock, which initially erupted as a result of the subprime mortgage collapse in the United States. In what emerged as liquidity crises in the short-term money markets, and believed by many to be confined only to the housing market, has quickly spread to other sectors gathering a storm of financial upheaval resulting in losses to both US and European banks. The impact of the now full-blown financial crises is now being painfully felt across the entire global financial network. Rising concerns over solvency, and the clampdown on lending, has further decelerated economic growth pushing the US economy into recession, while other developed economies including Europe stand precariously on the edge. The impact on developing economies still remains largely uncertain. However, undertones in the market point to a significant weakening in economic growth in these countries. The Asian economy, for instance, is expected to slow during 2009, but unlike the developed countries, spending power is not likely to receive a major blow, given the relatively higher national savings at both the government and household levels. In comparison with the developed countries, national savings rate in Asia as a percentage of the GDP stands at 45% as against just 20% in developed economies.

Developed Economies Take the Brunt

US: Entangled in a Massive Crises Never Before Witnessed
The epicenter of the global slowdown, the US economy continues to deteriorate, despite measures taken by the European and US governments in controlling the financial crises in the form of extension of deposit insurance, injecting massive levels of liquidity into the financial system, cuts in policy rates to shore up liquidity, and passing of legislations that channel the use of public funds into purchasing troubled assets from banks. As the financial upheaval assumes frightening proportions, the US economy is expected to feel the perspiring heat of a full-scale financial-stress-driven recession.

Pitted against this background, the commercial real estate market is collapsing with debt becoming increasingly scarce, and expensive, and transaction activity remaining depressed at an all time low resulting in plunging construction starts. The complete meltdown of the financial system is creating a massive distress in the real estate market with credit being totally withdrawn from this sector. The subprime crises, which initially curbed the public debt market has now spread to the private lending sector with portfolio real estate lenders, and commercial banks, which were hitherto still providing credit to the commercial real estate sector, freezing all lending activity. The growing void in the real estate debt market is eliciting an impact most profound and the downward pressure exerted on the already exacerbated sector is poised to worsen in the upcoming years. Industrial and commercial properties are witnessing stinging falls in occupancy rates, falling tenant demand, and rentals. The residential housing market similarly, is witnessing declining home ownership, new constructions, and eroding property values.

Europe: Hopes for a Recovery Dim Further
In Europe, the economic outlook has been largely clouded as a result of the global financial crises. As the European economy finally braces itself for a prolonged period of recession, subdued GDP growth in the EU stands at a forecasted 0.6% for the year 2009 with Western Europe bearing the brunt of the recession. Tightening bank lending, falling property values, spate of new fund redemptions, shrinking debt, weakening economic climate and the threat of possible defaults in loan covenants, are all pushing the real estate market in Europe further into an abyss. Although, the present mayhem in the market creates opportunities for lucrative buy of real estate securities, investors are expected to adopt a wait and watch strategy. The downfall of US investment banks has extended additional bargaining power to local banks in Europe. Nevertheless, there has been a general tendency among these domestic banks to suspend real estate lending. As a result, average leverage ratio of real estate transactions in Europe is expected to deteriorate in the short-to-medium term.

Despite falling office space demand, rental rates posted an increase in Europe, largely due to robust growth stemming from Russia, Turkey, Poland, and Czech Republic, which have helped counterbalance declines in Western Europe. Interestingly, although sluggish, residential home prices in Europe rose by 1.5% in the 1st three months of 2008, despite weak consumer sentiments, this is largely due to steady housing demand in Central and Eastern European countries. Bulgaria, for instance, posted a 32.2% growth while Russia raked in a 26.5% growth. Nevertheless, notwithstanding these mild yet encouraging signs, outlook for the short-to-medium term is poised to deteriorate with UK, Ireland, Sweden, Netherlands, Germany and France expected to post drastic declines. As funding gaps increase, property value plunge, and uncertainties heighten among existing real estate loans, European real estate market is in for its toughest challenge ever.

Although Tempered, Developing Economies Offer a Ray of Hope

Economic activity in developing regions of Asia and Latin America although decelerating, are placed better than the mature, developed countries. These regions are just beginning to feel the impact of the prolonged global financial crises. Fears of a further financial deterioration are resulting in tighter credits, and reduced capital flow. However, support of the local governments in ensuring mortgage availability is expected to cushion the negative impact, especially on entry-level housing. Argentina, Brazil, Chile and Mexico have continued to post increases in GDP growth on a quarterly scale. However, deceleration of growth emerges as inevitable over the horizon. The property market, both commercial and residential is facing challenges in the form of temporary lull in lending, higher costs of financing, and rising vacancies. A slowdown in financing is considered inevitable despite the strong year-to date statistics. For instance, banks in Brazil recorded US$10 billion in lending in the 1st three quarters of 2008, representing a spectacular growth in comparison with the year 2007. However, falling consumer sentiment, and constrained spending, will lead to declines in the short-to-medium term, and the real estate market will largely witness challenges limited to just restrictive credit, and risk aversion.

In Asia, transactions relating to real estate, which is already weakening is expected to slide further during the year. This is primarily because of the repercussions of the US financial crises manifested through the Asian capital markets in the form of reducing flow of foreign capital into the region. Putting the gravity of the scenario into perspective is the fact that global direct real estate investment into Asia receded by 42% during the first six months of 2008. Tightening lending norms is expected to further aggravate the already declining investment activity. Decline in property values and rent is forecast to gather momentum in the short-term. Although not severe, weakening business confidence is expected to put into limbo expansion plans in the commercial property market.

Rising office vacancies, especially in case of large enterprises, are pushing rentals down. In case of the residential housing market, rising levels of unemployment, reduced household wealth and spending, fears over an impending recession, and weakening consumer sentiments are expected to result in slower sales and lower home prices. Singapore, Korea, and Japan, have all recorded a rise in unsold homes. In China, despite a possible stagnation, a strong 9% projected economic growth coupled with the urbanization trend, is expected to make the residential housing market relatively resilient in comparison with other Asian countries.

In conclusion, the inherent economic resilience of developing countries to cushion the external shocks of the global crisis will help ensure an although depressed yet positive growth. In short, developing economies are witnessing signs of a slowdown, unlike the complete meltdown being witnessed in the developed economies. Although this period of turbulence is not expected to result in an acute level of distressed sales as witnessed in the US, the Asian property investment market will nevertheless turn into a buyer’s market.

Associations & Other Links


Trade & Industry Associations

Association Name URL Country
 AIR Commercial Real Estate Association USA
 American Real Estate and Urban Economics Association USA
 Anderson Real Estate Association (AREA) USA
 Arizona Real Estate Investors Association USA
 Asian American Real Estate Association (AAREA) USA
 Asian Real Estate Association of America (AREAA) USA
 Association of Commercial Real Estate USA
 Association of Foreign Investors in Real Estate (AFIRE) USA
 Association of Real Estate Women USA
 California Association of Realtors USA
 California Real Estate Inspection Association USA
 Center for Real Estate Enterprise Management (Centerprise) USA
 Chinese American Real Estate Association USA
 Chinese American Real Estate Professionals Association USA
 Chinese Real Estate Association of America (CREAA) USA
 Coeur d'Alene Association of Realtors USA
 Commercial Investment Real Estate Institute (CIREI) USA
 Commercial Real Estate Women (CREW) USA
 Counselors of Real Estate (CRE) USA
 DePaul Real Estate Alumni Association USA
 Fall River Association of Realtors USA
 Filipino American Real Estate Profession Association (FAREPA) USA
 Houston Real Estate Association USA
 Idaho Association Of Realtors USA
 Idaho Real Estate Commission USA
 Institute of Real Estate Management (IREM) USA
 Journal of Real Estate Research USA
 Lewis Clark Association of Realtors USA
 Mainstreet Organization of Realtors® USA
 Maryland Association of Realtors USA
 Missoula Organization of Realtors® USA
 Nampa Association of Realtors® USA
 National Association of Corporate Real Estate (NACORE) USA
 National Association of Hispanic Real Estate Professionals (NAHREP) USA
 National Association of Real Estate USA
 National Council of Real Estate Investment Fiduciaries (NCREIF) USA
 National Real Estate Investors Association USA
 New England Real Estate Organization USA
 Northorn Indiana Real Estate Association USA
 Organization of Real Estate Professionals USA
 Pension Real Estate Association (PREA) USA
 Ramona Real Estate Association USA
 Rancho Southeast Association of Realtors (RSAOR) USA
 Real Estate Association of Puget Sound (REAPS) USA
 Real Estate Educators Association (REEA) USA
 Real Estate Information Professionals Association USA
 Real Estate Staging Association RESA USA
 Realtors Association of New Mexico USA
 Santa Clara County Association of Realtors USA
 Society of Industrial and Office Realtors® (SIOR) USA
 South Asian Real Estate Association of America (SAREAA) USA
 Southern Indiana Realtors® Association USA
 Southland Regional Association of Realtors USA
 The Commercial Real Estate Organization USA
 The Costa Rican Real Estate Association (CCCBR) USA
 TIC Real Estate Association USA
 University of Oregon Real Estate Organization USA
 Utah Creative Real Estate Association USA
 Washington Association of Realtors® USA
 Williamsburg Area Association of Real Estate USA
 Wisconsin Realtors® Association USA
 Women in Real Estate USA
Association Name URL Country
 Alberta Real Estate Association (AREA) Canada
 Alberta Real Estate Foundation (AREF) Canada
 All Japan Real Estate Association Japan
 Alliance for Canadian Real Estate Education (ACRE) Canada
 Asian Public Real Estate Association (APREA) Singapore
 Association des Courtiers et Agents Immobiliers du Quebec (ACAIQ) Canada
 Association of Regina Realtors® Canada
 Bahamas Real Estate Association Bahamas
 British Columbia Real Estate Association (BCREA) Canada
 Canadian Real Estate Association (CREA) Canada
 Central Alberta Realtors® Association Canada
 Central European Real Estate Associations Network Romania
 China Commercial Real Estate Association China
 Confédération des Immobiliers de Belgique (Website not in English) Belgium
 Confederation of Real Estate Developers Associations of India (CREDAI) India
 European Public Real Estate Association (EPRA) The Netherlands
 FIABCI International Real Estate Federation France
 Ghana Real Estate Developers Association (GREDA) United Kingdom
 India Institute Of Real Estate India
 Institutionele Beleggers in Vastgoed, Nederland (IVBN) The Netherlands
 Kamloops & District Real Estate Association Canada
 Kawartha Lakes Real Estate Association Canada
 Kingston Area Real Estate Association Canada
 London St Thomas Association of Realtors Canada
 Manitoba Real Estate Association (MREA) Canada
 New Brunswick Real Estate Association (NBREA) Canada
 Newfoundland and Labrador Association of Realtors® Canada
 Nova Scotia Association of Realtors® Canada
 Nova Scotia Real Estate Appraisers Association Canada
 Nova Scotia Real Estate Commission Canada
 Ontario Real Estate Association (OREA) Canada
 Ottawa Real Estate Investors Organization (OREIO) Canada
 Prince Edward Island Real Estate Association (PEIREA) Canada
 Real Estate And Housing Developers' Association Malaysia Malaysia
 Real Estate Companies Association in Japan (RECAJ) Japan
 Real Estate Developers Association of Orissa India
 Real Estate Developers' Association of Singapore (REDAS) Singapore
 Realtors® Association of Hamilton-Burlington Canada
 Saskatchewan Real Estate Association Canada
 The Real Estate Foundation of British Columbia Canada
 The Saskatchewan Real Estate Commission Canada
 The Saskatoon Region Association of Realtors® Canada
 Vietnamese American Real Estate Professionals Association (VAREPA) Vietnam

Magazines, Journals & Publications

Association Name URL Country
 California Real Estate Magazine USA
 Carolina Real Estate Magazine USA
 CIRE Magazine USA
 Colorado River Real Estate Magazine USA
 Creative Real Estate Magazine USA
 DataQuick USA
 Florida Real Estate Journal USA
 Home Traditions Real Estate Magazine USA
 Homes of Savannah Real Estate Magazine USA
 Institutional Real Estate Letter USA
 International Real Estate Review USA
 Journal of Real Estate Finance and Economics USA
 Kauai Real Estate Magazine USA
 Mendocino Coast Property Mendocino Real Estate Magazine USA
 National Journal Magazine USA
 National Real Estate Investor Magazine USA
 National Real Estate Investor Magazine USA
 New England Real Estate Journal USA
 New York Real Estate Journal USA
 NJPA Real Estate Journal USA
 Northern Illinois Real Estate Magazine USA
 Northwest Real Estate Magazine USA
 Panama Real Estate Magazine USA
 Personal Real Estate Investor Magazine USA
 R.E. Real Estate Magazine USA
 Real Estate - Boston Magazine USA
 Real Estate - New York Magazine USA
 Real Estate Economics USA
 Real Estate Industry Search Engine USA
 Real Estate Magazine (REM) Canada
 Realtor Magazine USA
 Realtor.com USA
 REALTOR® Magazine Online USA
 Residential Real Estate News Canada
 RISMedia Real Estate Magazine USA
 The Real Estate Journal USA
 The Real Estate Professional Magazine USA

Universities, Institutes & Colleges

Association Name URL Country
 American Real Estate College, LLC USA
 Cornell University Real Estate USA
 Dartmouth Real Estate Nova Scotia
 Harris Real Estate University USA
 Japan Real Estate Institute (JREI) Japan
 Kansas City Real Estate University USA
 North Idaho Real Estate Academy USA
 Real Estate Center - Depaul University USA
 Real Estate Institute of Australia Australia
 Real Estate Institute of Australian Capital Territory Australia
 Real Estate Institute of British Columbia (REIBC) Canada
 Real Estate Institute of Canada (REIC) Canada
 Real Estate Institute of New South Wales Australia
 Real Estate Institute of New Zealand Inc New Zealand
 Real Estate Institute of Northern Territory Australia
 Real Estate Institute of  Australia
 Real Estate Institute of South Australia (REISA) Australia
 Real Estate Institute of Tasmania Australia
 Real Estate Institute of Western Australia Australia
 Real Estate Organization of De Paul University USA
 Real Estate Research Institute (RERI) USA
 Tyler Real Estate College USA
 University of Georgia - Real Estate USA

Societies & Councils

Association Name URL Country
 African Real Estate Society (AfRES) USA
 American Real Estate Society (ARES) USA
 Chicago Real Estate Council USA
 European Real Estate Society The Netherlands
 Inland Valley Women's Council of Realtors USA
 International Real Estate Society USA
 Latin American Real Estate Society (LARES) USA
 Massachusetts Womens Council of Realtors USA
 Pacific Rim Real Estate Society (PRRES) USA
 Real Estate Council of Alberta (RECA) Canada
 Real Estate Council of British Columbia Canada
 Real Estate Council of Ontario (RECO) Canada
 Women's Council of Realtors USA
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