Property markets are looking up
Property in the region has been hit badly by the financial crisis, but there have been signs of recovery since December 2008, says Jones Lang LaSalle.
March 24, 2009 10:14 by Dana El Baltaji
Due to the financial crisis, the region’s real estate markets are undergoing an investment overhaul, and will emerge more mature and sustainable, claims a report by property consultant Jones Lang LaSalle. The report, titled Mapping the Road to Recovery, argues that the markets have shown signs of recovery, although it is unclear if the signs will lead to viable changes in the markets’ performances.
The property consultant identified 17 factors that are most likely to influence investor confidence in the region’s real estate markets; these include recovery of equity markets, implementation of new investment paradigm, improved bran perception and improvement in corporate governance. Out of the 17 indicators the report identifies, 12 have improved since December 2008.
“During the transition period, the local markets will diverge with a more distinct pattern of winners and losers, with those properties that are well located, well maintained and well marketed retaining their value relative to the general market,” the report said.
One of the significant changes to the market will be the shift in investment paradigms, from the previous develop-and-sell models encouraged by rapid sales of off-plan properties, to a more calculated model based on long term income flows.
The changes will help weed out speculators in the real estate market, and replace them with long term investors and end-users; and consequently, transforms the markets’ reputation as real estate bazaars, to secure and developed industries suitable for cautious investors.
In spite of the signs of recovery, however, full-scale recovery is unlikely in the short-term: “There is little doubt that we remain in the downturn stage of the cycle, with most markets likely to experience a further downward correction in prices over the next six-twelve months.”
Low investor confidence continues to plague real estate projects in the region, resulting in credit defaults and plunging property prices.
The weakened real estate markets, however, have presented new opportunities to investors seeking to take advantage of the falling real estate prices. “The current market conditions create significant opportunities for equity only investors and those who still have access to debt finance,” the report said.
Ultimately, long term investment potential in the region remains positive, with real estate prices expected to stabilize in 2010 and recover in 2011.