Despite some improvement in the economic data and a moderation in the pace of decline in capital values in all world regions, rental expectations deteriorated further, says the latest RICS Global Property Survey published today (July 27, 2009).
In the second quarter of the year RICS reported the sharpest declines in global commercial property rents in the survey's five year history, with Singapore, Ukraine, Spain and Ireland leading the way. Surveyor sentiment in Spain and Ireland remained depressed with 97% more chartered surveyors in both countries reporting a fall than a rise in rents. Surveyors in Singapore and the Ukraine were unanimous that rents have fallen with the net balances in both countries reaching 100%.
Notwithstanding continuing attempts by agents to offer more attractive inducements, forward looking rental sentiment remains pessimistic. Chartered surveyors in Italy, Spain and Ireland remain particularly downbeat about the outlook for rents. 97% of surveyors in both Ireland and Spain expect rents to continue to fall rather than rise over the next quarter while Surveyors in Croatia and Singapore are unanimous that rents will fall.
The decline in capital values eased during the second quarter driven by more modest falls in some emerging markets with China and India out in front. 8% more surveyors reported a fall than a rise in capital values in China, up from 49% in the first quarter. However, the most stunning improvement was found in Hong Kong where the net balance actually turned positive. 57% more chartered surveyors reported a rise than a fall in capital values up from a negative balance of 81%. More generally, expectations for further price rises remain bleak with North America presenting the gloomiest picture.
While transaction activity continued to drop in most world markets, a few countries saw an increase in investment bidders per property. The UK was particularly notable in this regard reporting a positive balance of 46% more chartered surveyors seeing an increase in bidders.
RICS Chief Economist Simon Rubinsohn said: "Rental declines will weigh on property pricing across many developed economies into 2010 reflecting both rising availability and weaker labor markets.
"The dearth in global finance continues to impede investment activity with transactions in decline across more than 80% of countries surveyed. However, higher yields may be starting to attract interest particularly in economies such as the UK and Hong Kong where prices have already corrected significantly and borrowing and saving rates are at historic lows.
"In emerging markets, those countries tied into Chinese trade relationships appear to be weathering the storm better than most with parts of Latin America and Africa including Mauritius, Nigeria and Ghana holding up relatively well. Emerging Asia in particular stands out as the regional outperformer with a marked slowdown in the pace of rental declines and tenant demand in China and India rising for the first time since 2008."