According to the new property market study 'Global Values' from DEGI Research, the volume of worldwide property transactions will in 2007 again reach a new record level of around $800 bln., following a 38% rise in 2006 to $682 bln.; in particular, the volume of cross-border transactions is up by 73.5% to a current $288 bln. Against the background of further globalisation of the property markets, investments are being driven by a continuingly buoyant worldwide economy coupled with high investment pressure and a double-figure total return in all investment regions, influenced primarily by value change yields.
Turnaround in the USA
This market environment has meant that the purchase prices for office properties have recently been rising more steeply than the rentals. Consequently, the net initial yields have fallen (yield compression) and in some markets, such as London, New York or also to a lesser extent, Frankfurt, below the level of 10-year government bonds. Competition with other investment categories, rising interest rates and the circumstance that rental increase potentials are already being very largely reflected in the current price level, says the DEGI study, mean that in the upcoming twelve months prices on most office property markets will tend to stagnate or even fall. Worldwide, however, due not least to high net area absorption, on a broad front further rental increases can be anticipated, so that rental yields will pick up again. In the USA, there are already initial indications of a turnaround in this direction; for 2008/2009, the analysts at property investment manager DEGI Deutsche Gesellschaft für Immobilienfonds mbH are predicting a positive yield trend in Europe and Asia as well.
Equity capital investors on the advance
The current situation on the financial markets indicates that the group of investors with a high level of debt leverage are tending to downsize their activities and that more security-conscious investors with a higher level of proprietary capital will be gaining in importance on the international property markets. "This doesn't change the fact that the capital and property markets are becoming ever more closely interwoven, it's just that the dominance of the capital market players is declining in favour of classical instruments of property portfolio and asset management", says Dr. Thomas Beyerle, Head of Research and Strategy at DEGI. Nevertheless, DEGI's senior analyst predicts that property investors will enlarge their radius of action still further towards more exotic locations, and that property type selection is becoming perceptibly more segmented.
DEGI location scoring reveals dynamism of the global property markets
'Global Values', the international property market report from DEGI Research, systematically analyses 75 office property locations worldwide from 50 countries, including for the first time locations from the Gulf states, South American and the African continent. On the basis of their own scoring procedure, the analysts classified the various locations involved for risk against macro-economic and property-sectoral criteria. As in the previous year, the list was headed by New York, followed by London, up one place. The two German investment centres, Munich (6th place) and Frankfurt/Main (9th place) have also found their way into the top ten of the premier international office locations from last year's mid-field placings.
Risk rewards for relatively inaccessible markets
In addition, for the first time, the study uses DEGI's market entry model to subdivide the 50 markets into countries with very secure, countries with secure, and countries with risk-heavy market entry conditions, against various criteria like the legal framework conditions for protecting ownership rights and for formulating property transactions, plus market transparency or corruption. The different degrees of difficulty in investing in these markets are correspondingly reflected by the average top yields in the groupings concerned, running at 4.67% in the