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GLOBAL PROPERTY REVIEW 24th June 2019

June 24, 2019

 

Costa Del Sol

 

Few destinations evoke such a hard-boiled image of the property and buyer as this Spanish southern region: villas, beaches, craggy mountain ranges and European expatriates grilling in the sun. 

 

This is all still present, and the region continues its steady popularity. Indeed, Spanish property generally is on the upturn, with 65,000 of transactions nationally exceeding those of the previous peak of 2007, according to the Ministry of Public Works. Prices last year rose 8 per cent against 2017, Idealista found.

 

Costa Del Sol comprises the city of Malaga and a scattering of towns and seaside resorts that have long attracted retirees and the second-home buyers. The region is leading the country - prices rose 11 per cent last year, with Malaga, Estepona and Benahavis rising between 9 per cent and 15 per cent (Idealista).

 

Researchers Panorama estimate that upmarket Marbella is around two years ahead of the country, with sales last year higher than the peak boom of 2006, even as sales fell 4.8 per cent last year compared to 2017 and the local government deals with planning approval issues.

 

Outside demand remains robust. The Land Registry’s Annual report shows that 13.12 per cent of total purchasers last year in Andalusia were foreign, higher than the 12.6 per cent national average. 

 

But the profile of those outside buyers is changing. The 22 per cent of buyers last year who were British is a declining proportion, with Scandinavians more prevalent. Brokers Lucas Fox told Financial Times of a decline in sales to those over 50 years of age coming for the golf, with entrepreneurs from around Europe attracted by the broadband, flight connectivity and good schools.

 

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Tallinn

 

The Estonian capital may have reached a plateau of price rises for now, after seven years of growth, poised perhaps at an interesting crossroads of supply and demand.

Apartment prices in the city rose just 3.48 per cent last year, skirting around zero when adjusted for inflation, according to OberHaus. Prices by then averaged around €1,843 per square metre. Fourth quarter growth last year was less than 1 per cent, against the same period in 2017. 

 

The number of purchase-sale contracts in Tallinn fell 6.4 per cent last year, higher than the 5.5 per cent national figure, according to the Estonian Land Board. It compares starkly with the first seven years of this century, when Tallinn prices rose more than 400 per cent.

 

It reflects a cooling market nationwide, albeit in a context of robust growth compared to larger economies in the region and further south. House prices of all types averaged just a 4.15 per cent rise in last year’s fourth quarter, the lowest quarterly rise in two-and-a-half years. 

 

Declining economic growth is one factor cited for a reduction in buying activity. The country this year is expected to increase just 2.7 per cent this year, compare to 3.5 per cent last year and 4.9 per cent in 2017.

 

Nevertheless, the city is extraordinary for hosting more tech start ups per capita than any other European destination. Improving infrastructure connectivity and a government committed to Blockchain bolster its credentials. Foreigners can purchase at will. Prime city centre rental yields are between 5.3 per cent and 6.3 per cent, according to Global Property Guide.

 

A big issue this year and next is supply. Another 6,773 units completed last year, continuing multi-year growth.

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Shanghai

 

Slower growth in one of Asia’s biggest city has satisfied neither investor landlords nor would-be buyers.

 

In January, news arose that the strong, year on year growth of prices in the city, driven by upward rental demand, appears to have plateaued. Suspicions of potential oversupply came to a head last October when developer Country Garden Holdings slashed the price on its remaining units from around 35,000 yuan per square metre to around 28,000 yuan.

Not bad reading if you’re looking to get onto the property market in a city with high construction levels and even higher demand, though buyers protested at this undercut to their asset value.

 

Yet prices have been growing on a monthly basis this year. New-house prices in March were up 4.2 per cent among the Tier One cities in China against March 2018, according to the National Bureau of Statistics, with monthly rises this year of around 0.2 per cent.

Pre-owned homes have also risen by around 0.3 per cent. Indeed, the secondary market in the city seems more buoyant than ever, even if the extra supply indicates that it’s a buyers’ market to negotiate prices. Shanghai registered 25,932 home sales in the 12 months up to March, up 50 per cent on the same period last year. 

 

Fiscal and regulatory issues continue to be of concern to outside investors, however. The State Council’s plan to encourage renting among its populous by incentivizing developers to become freehold landlords doesn’t seem to wash. In particular, Shanghai’s rental yield of under 2 per cent won’t help developers’ debt repayments of around 7-8 per cent bond yields, commentators on Nasdaq.com have pointed out, and even the upfront payment of five-years rent from tenants won’t cover unsold inventory.

 

 

 

 

 

 

 

 

 

 

 

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