Credit crunch sends property prices falling worldwide

Economics Editor,Sean O'Grady
Sunday 23 October 2011 04:08

The housing slump is going global, with the adverse effects of the credit crunch on property values spreading from Europe and the US to the rest of the world.

Financial turmoil has sent demand for retail and industrial sites almost everywhere into decline, according to the first global commercial property survey by the Royal Institution of Chartered Surveyors (Rics). The number of transactions is down in eastern Europe and South America, while the pace of growth has stagnated in emerging Asian markets, even China, as investors "reassess their appetite for risk", the Rics warned in a report yesterday. Demand from commercial tenants, while also falling, has not been so badly affected.

Oliver Gilmartin, the chief economist at the Rics, said: "Few markets have escaped the credit malaise which has engulfed commercial property activity since last summer. What started in the developed world has spilt into investment activity across several emerging markets."

"In Britain, the outlook for the coming quarter remains subdued, with 23 per cent more surveyors expecting rents to fall than rise." The Rics predictions were borne out yesterday when Shaftesbury became the latest British property company to report difficulties, blaming a fall in the value of its portfolio.

The group, which owns shops and restaurants in and around London's Carnaby Street, posted a net loss of £91.2m for the six months to March 31 – its first since 1992. Shaftesbury made net earnings of £212m during the same period a year ago. The net value of its assets has fallen by almost 11 per cent this year.

Mr Gilmartin said that demand for rental property had fallen globally for the first time in four years, with an especially marked fall in capital values in Japan and Australasia. Commercial offices in Japan had the worst rental expectations, followed closely by retail outlets in North America. While China and other emerging Asian economies were a "beacon of resilience" during the second half of 2007, the Rics said, "investors are now less sure of the potential higher returns on offer".

The most serious collapse in confidence had occurred in western nations, it added. More than half the property companies contacted by the Rics in western Europe said industrial property prices had fallen, while the downturn in the US residential market was likely to be strongly reflected in the shops and malls sector.

However, Rics analysts found some parts of the world where commercial property was still doing well. They expect values to continue to rise in parts of Africa and the Middle East.

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