Russia: The number of high-net worth individuals continues to soar, generating buyers for the priciest homes. There has been little new construction, placing a premium on the top properties. Prices may go up 10 per cent in the next year, Knight Frank says. Andrey Rudakov/Bloomberg *** Local Caption *** 836850.jpg
Russia: The number of high-net worth individuals continues to soar, generating buyers for the priciest homes. There has been little new construction, placing a premium on the top properties. Prices maShow more

Little to build on for property market



Matthew Green, the head of research at CB Richard Ellis, has inadvertently coined a new phrase that may turn out to be the slogan for the global property industry this year.

Location, location, location:

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After struggling last year, the best the housing industry can anticipate is "pockets of positiveness", he says.

Mr Green is referring to Dubai, but he might as well be talking about the global picture.

With the euro-zone economy in turmoil and stock markets on a roller coaster, few analysts envision the next 12 months as a bounce-back year for property markets. Housing tends to be a trailing industry, showing strength only after jobs and economies show growth and stabilisation.

"Global economic calm down is an absolute prerequisite," says Ian Albert, the regional director of Colliers International.

The global scene is further complicated by the uncertainty in Asia, the one region where property prices have rocketed in recent years, despite the global slowdown.

In China, double-digit price increases have been the norm in recent years. Hong Kong prices are up 75 per cent since 2009.

But there are already signs that the market is slowing. Prices fell 4 per cent in Hong Kong from July to October, and the number of transactions in November was down 64 per cent from a year earlier, according to Land Registry statistics.

Government measures to reduce speculators and let some air out of the rapidly forming bubble are clearly having an impact throughout the region. Knight Frank, a property company, expects prices to drop anywhere from 10 to 20 per cent in Hong Kong and Shanghai in this year.

"Growing global uncertainty and government intervention in the property market, especially in Asia, will weigh on prices in some areas," says Liam Bailey, the head of research for Knight Frank.

Prices in Singapore are expected to drop 30 per cent in the next three years as about 100,000 new homes are rolled out.

"Rising levels of unsold inventory due to robust launch schedules coupled with a formidable pipeline of completions will continue to depress rents and capital markets," said David Lum, an analyst for Daiwa Capital Markets,in a recent report.

The continued economic issues in the euro zone will also cast a pall on the world's property markets.

In the UK, prices were up a scant 1 per cent in November compared to a year earlier, with little sign that activity will pick up this year - outside London's super-high end luxury market, where international buyers continue to drive up prices.

"[This] year isn't shaping up much better than 2011 for the UK economy or the housing market," says Robert Gardner, the chief economist at Nationwide. "The housing market in 2012 looks likely to be characterised by low levels of activity once again, with prices moving sideways or modestly lower over the course of the year."

Economic uncertainty is poison for second-home markets such as Spain, where hundreds of thousands of homes built during the boom years sit empty. A recent report by the Spanish Mortgage Association said improvement in the fundamentals of the market are "not foreseeable" this year.

Yet, despite the doom and gloom, there will be "pockets of positiveness" around the globe.

Cities such as Moscow, Bangkok and Paris should see prices rise 5 to 10 per cent in the next year, Knight Frank predicts. And prime central London prices should continue to surge, thanks to the continued interest from wealthy buyers from Asia, Russia and the Middle East.

"Positive price movements this year can largely be attributed to rising cross-border demand from wealthy individual investors, a lack of new supply and strong growth in domestic wealth," says Kate Everett-Allen, the head of international residential research for Knight Frank.

The wealthy continue to grow wealthier, which should fuel continued sales activity in luxury markets. The total wealth of millionaire households globally is likely to grow from US$92 trillion (Dh337.92tn) last year to $202tn in 2020, according to a report from Deloitte.

This year should also reveal growing signs of stability in the US, after years of steady declines. Last month, the index of pending homes sales hit the highest level since April 2010.

"Housing affordability conditions are at a record high and there is a pent-up demand from buyers who've been on the sidelines," says Lawrence Yun,the chief economist for the National Association of Realtors.

The housing industry in the UAE and the Middle East should also benefit from pent-up demand, as well as increased government spending on infrastructure.

Declines in prices for second properties and luxury homes in the region should help make resort areas more competitive and keep Middle East buyers closer to home.

"There is significant demand in the region and there is money here," Mr Albert says.

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