International Real Estate Report

Global Resources for Local Markets
  • Asia Viewed as Top Global Prospect for Hospitality Investment
  • Japan On Track to Meet Ambitous FDI Goal
  • How Well Do You Know Your World?
  • U.S. Voters Wary of FDI`
  • European Market Forecasts Made at MIPIM Property Market Show
  • Immigration Will be Driver for Dubai's Real Estate Market
  • NAR's Market-to-Market Goes Live
  • E&Y's 2008 Real Estate Market Outlook


FOREIGN INVESTMENT

Asia Viewed as Top Global Prospect for Hospitality Investment
Emerging markets in Asia are surpassing Europe as the epicenter of new hospitality investment and development while investors in the U.S. are switching their focus from acquisition of existing hotels to developing new properties, according to a survey conducted by Ernst & Young. According to E&Y's Hospitality Investment Survey, capitalization rates for hotel properties are expected to stabilize and possibly even increase over the short- to mid-term in the U.S. Asia far surpassed all other regions as having the greatest potential for hospitality investment. With both China and India opening their markets to foreign investment, a scarcity of higher quality facilities in the region and double-digit returns, the stage is set for Asia to become a major investment center. Latin America also edged out Europe in the investor popularity poll, although respondents believe the biggest downside for investment globally remains the potential for political instability in developing markets. Closer to home, Washington D.C. is the U.S. city in which respondents are most inclined to invest in 2008, followed closely by New York City and Los Angeles. The three lowest ranking cities on the list were Dallas, Orlando and New Orleans. E&Y reports that there is a general perception among those surveyed that hospitality real estate in the U.S. is overvalued.


Japan On Track to Meet Ambitous FDI Goal
A proposal by the Japanese government to restrict foreign ownership of airports was shelved last month over concerns that such action would undermine wider efforts to attract investment. Japan is looking to foreign investment as a key driver of economic growth. In June 2006, the Japanese government announced plans to accelerate efforts to achieve its goal of doubling Japan's total foreign direct investment (FDI) to the level of 5% of GDP by 2010, an ambitious goal given that Japan's cumulative FDI is a fraction of that of most major developed countries, according to JETRO, Japan's External Trade Organization (a government-related organization). JETRO provides would-be investors free market reports including on real estate. JETRO has offices in six cities throughout the U.S. FDI into Japan during in 2007 puts the country well on track to achieve its goal. Preliminary reports show FDI reaching 15 trillion yen through the end of September. Investments from the United States accounted for 57.3% of the total, followed by the Cayman Islands, Singapore, Switzerland, and Germany. According to a 2006 JETRO survey of 864 foreign companies in Japan, a higher-than-ever 63.1% said they plan to expand their business in Japan. On the flip side, the survey notes the barriers to investing in Japan to include acquisition of human resources, the cost of doing business, the demand for high product standards, and the closed and special nature of the Japanese market. Compared to a similar 1995 survey, however, the percentage of companies citing business costs as a barrier declined by 9.9 points and the percentage mentioning the closed and special nature of the Japanese market fell by 6.1 points, suggesting investing in Japan is getting easier for foreign companies. JETRO publishes an annual White Paper on International Trade and FDI, which includes JETRO's estimates for world trade and FDI figures, as well as in-depth analysis of the world economy and Japan's place in it.


CULTURALLY CORRECT

How Well Do You Know Your World?
Test your own knowledge of world geography with the Traveler IQ Challenge. The travel blog site offers several fun and easy games that test your knowledge of such things as world capital, flags of the world and more. Includes regional challenges as well. Embed the quizes to add an international element to your website.


U.S. Voters Wary of FDI
A majority of American voters think investment by foreign governments in U.S. companies harms U.S. national security interests and nearly half believe such investments harm the American economy, according to a new survey of the attitudes of U.S. voters toward sovereign-wealth funds. The survey, conducted by Public Strategies, Inc., reveals that American voters are especially wary of U.S. investment by governments in the Middle East, Russia and China, although survey strategists believe voters are drawing these conclusions in a vacuum. The group finds that Americans are not informed on this issue but their initial reaction is negative. The poll of registered voters nationwide finds that 55% think sovereign-wealth fund investments will hurt national security and 49% feel the investments will have a negative effect on the U.S. economy. Read the press release from Public Strategies, or view the full survey results.


GLOBAL MARKETS

European Market Forecasts Made at MIPIM Property Market Show
The UK market is predicted to be down, the German market is deemed the largest economy, and Russia the biggest growth opportunity, according to Jones Lang LaSalle (JLL), which outlined expectations for Europe's commercial markets during the MIPIM property marketing show in Cannes last week. JLLs forecasts UK investment turnover to be down 30-40% in 2008, but is seeing increased interest from both domestic and overseas investors. Germany is predicted to have the strongest rental growth in Western Europe this year and JLL predicted that interest in single asset and single sector portfolios will increase as large scale mixed portfolios become scarce. JLL also projects that retail will begin to challenge offices as the most popular asset class. Russia will maintain dynamic growth in 2008. Construction is expected to remain one of the fastest growing sectors in the economy throughout 2008, and JLL predicts the "birth" of business parks in Moscow and further growth of the country's regional cities. Bottom line for Europe: JLL predicts uncertain market conditions throughout 2008 and investment transaction volumes for the full year to be down 25% on 2007, but to fall only to 2005 levels--a level of activity that, at the time, was viewed as cause for great optimism. Read a full press release on the MIPIM reports.


Immigration Will be Driver for Dubai's Real Estate Market
Dubai's real estate market is looking at substantial growth in the coming years but the growth will largely be fueled by immigration, according to analysts at CB Richard Ellis. Dubai has a total office market stock of approximately 32 million sq. feet. It is difficult to get an actual figure as residential stock is still being used as office space, reflective of the market's 0% vacancy rate for commercial space. International requirements are not being met, leading to an significant imbalance between demand and supply. This has substantially pushed up rents in Dubai, with rentals nearing $150 per sq. foot per year. CB Richard Ellis forecasts that Dubai will see an additional 80 million sq. feet of office space added between 2008 and 2011, but only a limited portion of this will meet the demands of multinational companies. By 2015, Dubai will have 110 million sq. feet of office space and an estimated 4.1 million population. Availability of residential space will be key factor in the office market in the coming years. Residential prices have increased, but are still far below international standards. According to CB Richard Ellis, 170,000 new residential units are expected to built between 2008-2010 with a minimum demand of 70,000 units annually (up from the current annual new builds of 57,000). Two sectors have been identified as significantly undersupplied--affordable housing and middle-income villa developments. A look at the source in real estate investment shows that 55% comes from outside the UAE or the other five countries that comprise the Gulf Cooperation Council. The downturn in the U.S. and European markets will result in institutions looking to new markets for international expansion and Dubai is a likely target. CB Richard Ellis offers free market information for Dubai and other UAE markets. Read a regional business information website's commentary on "10 Reasons to Invest in Dubai."  


BUSINESS RESOURCES

NAR's Market-to-Market Goes Live
It's a big world and REALTORS® looking to add an international component to their business plan may not be sure how to begin. Help has arrived. NAR's new "Market-to-Market" (M2M) program is designed to increase international business opportunities for members, such as transnational referrals and serving inbound/outbound clients and investors, through market alliances based on NAR's 75+ relationships with leading broker association partners around the world. These partnerships provide the foundation for members to develop strategic business connections with foreign markets and conduct business with confidence in a safe and ethical environment. NAR's role in the M2M program is to facilitate introductions, provide targeted resources, and validate the local effort through national recognition and tracking. State and local REALTOR® associations (as well as individual REALTORS®) can identify and independently research the foreign markets most closely tied to their state/region through foreign direct investment, immigration and/or where their members seek to develop business connections. Once a commitment has been made by the state or local REALTOR® association to develop a M2M relationship, NAR will officially recognize the effort and provide resources/updates to the association on an ongoing basis. The M2M site is now live, although will continue to be enhanced in the coming months.


E&Y's 2008 Real Estate Market Outlook
For U.S. REALTORS®, there's not been a lot of good market news lately; a sentiment is reflected in Ernst & Young’s annual report on the state of the global real estate market. "The situation isn’t likely to ease in 2008," writes Dale Anne Reiss, global real estate director for the consulting firm. A possible recession, job losses and continuing bad news from the mortgage industry in the U.S. suggest we won't see a quick turnaround. The Outlook offers key global trends in real estate and insight into how these trends might impact real estate development, investment, financing and use in the year ahead. Within the Outlook there are some positive signs. E&Y forecasts that capital will continue to flow around the world, and the one market likely to attract the bulk of the international cash will be the U.S., given its weakness against the euro and other global currencies, making U.S. real estate a relatively good value. Also, E&Y projects that sovereign funds investing on behalf of national governments will continue to pour money in to the markets, ranging from luxury properties in major markets such as New York and San Francisco, to distressed U.S. assets and emerging market properties. The report also suggests knowledgeable, patient investors holding cash are likely to find some bargains, especially in residential land and lots which they can hold for the recovery. Read highlights of the Outlook, or download the full 20-page report.

Report compiled by NAR International Operations, narglobe@realtors.org.


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