Colliers International Global Investor Sentiment Survey
Middle East respondents to Colliers International’s Q3 2010 Global Investor Sentiment Survey view the market as still approaching the bottom, putting the recovery at 4o’clock on the “Global Property Clock.” In addition, 38 percent of Middle East investor respondents expect to either expand or maintain their current level of real estate holdings over the next 12 months, against 25 percent seeking to actively contract their portfolios. This represents a massive reduction in expansion plans compared to six months ago and implies an overall degree of risk management.
The Global Property Clock equates market cycles to specific times, with 12 o’clock representing the top of the market and six o’clock representing the bottom. Each six-hour period in between designates rising (after 6 o’clock, to 12 o’clock) or declining (after 12 o’clock, to 6 o’clock) cycles.
“The results of this survey suggest the Middle East real estate market has not moved at all over the last six months, but on the plus side, investors do believe the market is set to find its floor over the next year,” said John Davis, Regional CEO and Director of Colliers International Global Investment Services. “In addition, the results of Colliers 2010 Cityscape Survey also reflect this sentiment, with the majority of exhibitors interpreting the deceleration in the decline of prices and rents as a signal that the market may bottom out in the next year.”
Investors in the Middle East appear to have less expansionary strategies than six months previously, where 67 percent of investors had said they were seeking to adopt expansionary strategies. A total of 63 percent of those surveyed now say they would be looking to actively reduce risk levels and 25 percent said that they would look to increase the diversification of their portfolio. The principal investment targets for respondents were a combination of major western cities such as London, New York, Paris and emerging markets such as China and India.
In terms of selling strategies, 50 percent of Middle East investors intend to sell out of some of their domestic holdings over the next year compared to none with plans to sell any of their foreign real estate holdings. This further reinforces the view that investors from this region plan to grow their overseas holdings at the expense of their domestic ones as part of a risk-reduction strategy.
Middle East investors are also split on the future outlook, with 50 percent believing that a double-dip recession is likely. Those investors expecting a dip attribute this to high levels of property debt and general over-supply of property in their region, but it should be noted that not all of the sub-regions are afflicted by these factors and this likely explains the split in opinion.
The Colliers International Cityscape Survey 2010, which reflects the views of exhibitors at the region’s leading industry event, indicates that prices are expected to fall further before making a slow recovery in 2011. One in four developers declined to give their forecast on the future of the market, a rise on the previous year, and developers generally were refusing to offer discounts in the wake of significant price declines. However, a number of new financing mechanisms, such as 0% mortgage repayments for three years for those with a 50 percent deposit, offered some hope of enticing buyers back into the market.
Globally, the largest group of survey respondents, which included real estate investors in every region of the world, put the Global Property Clock for their particular regions at eight o’clock, with the second and third largest groups at six and seven o’clock, respectively. These responses indicate that most markets globally are on the upswing and are characterized by rising demand, falling availability and vacancy and rising headline rents. This marks a significant move from Colliers International’s last Investor Sentiment Survey conducted in Q1 2010, when most respondents placed their markets at between five and six o’clock.
“Most of the survey’s top line findings demonstrate a growing optimism in the global real estate market,” said Davis “While current sentiment varies by region, the large majority of respondents felt the market would still be on the upswing one year from now. Optimism in the market is reinforced by the nearly three-quarters of respondents saying a double dip recession is unlikely.”
Some additional key global findings of Colliers International’s Q3 2010 Global Investor Sentiment Survey include:
•Ninety percent of respondents said they planned to expand their current level of real estate holdings within a year or maintain them at current levels.
•New York, Chicago, San Francisco, Washington, London, Sydney, Singapore and Hong Kong were listed as key cross-border investment destinations. Emerging markets mentioned include Poland, Ukraine and Brazil.
•Nearly 80 percent think debt will be easier to access in the next 12 months. Respondents who said they believe the cost of debt would rise in the next 12 months fell slightly from the first quarter of 2010, with 44 percent predicting an increase versus 52 percent six months ago.
Some of the key regional findings of Colliers International’s Q3 2010 Global Investor Sentiment Survey include:
· In Western Europe, 62 percent of respondents now intend to make cross-border investments, a notable increase from the figure of 30 percent for Q1 2010.
· A significantly greater proportion of US investors (65 percent) indicated they are considering selling property over the next 12 months versus the Q1 2010 response of 23 percent.
· 73 percent of Asian investors expect to expand their property portfolio in the next 12 months, up from 65 percent in Q1 2010.
· Looking ahead to the next 12 months, fewer Pacific (Australia and New Zealand) investors (46 percent) expect to expand their property portfolio compared to the 68 percent who expected to expand in Q1 2010.
· Across Central and Eastern Europe, the range of locations being targeted by investors was quite diverse, although Warsaw remains the most popular destination, notably for office product. Other popular targets quoted were Kiev, Prague, Moscow and Bucharest.
· Among Latin American investors, 69 percent of those surveyed reported they will not reduce their risk levels.
· 67 percent of the Canadian Investors surveyed think that prime effective rents for the office market will either hit bottom by Q2 2011 or have already hit bottom. In the industrial market, 78 percent of investors think the bottom has either been reached or will be reached by Q2 2011 and that percentage jumps to 83 percent for retail.