Emerging markets that were relatively unscathed by the financial crisis are experiencing faster growth than developed economies such as the UK, Eurozone and US. Property markets in China, Hong Kong, Singapore and Brazil are performing strongly with India witnessing the fastest pick up in investment transaction activity of any of the major economies during the third quarter.
This is the first time in six years that India has topped the global ranking tables for investment transaction activity across major world property markets.
The quarterly report reveals that occupier markets in Asia have picked up for the second consecutive quarter, with visible improvements in Thailand and Vietnam which were lagging the regional recovery. In the Indian occupier market, growth in tenant demand continues to be most visible in the office sector with the retail and industrial areas seeing only modest improvements in activity for the second consecutive quarter. However rental expectations have failed to pick up with 25 per cent more surveyors expecting rents to rise than fall in comparison to 27 per cent in the second quarter. The key factor holding back a stronger rise in rental expectations appears to be an oversupply of available property to occupy.
On the investment front, India is behind only Singapore and Poland in terms of growth in transaction activity when compared to the previous quarter.
Despite investor enthusiasm, India continues to lag behind China on several forward looking indicators such as rental and capital value expectations, predominantly due to less supply constraints.
Indeed India ranks third in the occupier availability tally behind the Netherlands and UAE.
This feature of the market continues to temper sentiment towards the likelihood for robust rental advance. Confidence towards commercial rents in India slipped six places to 12th. A similar dip has also been seen in capital value expectations, now ranked 18 in the overall tally.
Expectations may have been tempered somewhat by recent interest rate hikes by the RBI with more in the pipeline for 2011. According to Simon Rubinsohn, RICS chief economist, “The more heavily indebted countries in Western Europe, Japan and the US face increasing problems with deleveraging and potential new regulation. This is likely to continue to be a drag on their performance for some time to come. Meanwhile, capital flows are likely to be increasingly directed towards real estate opportunities in the emerging world.”
Highlights of the survey
Investor activity has risen at the fastest pace since 2006, especially in the office and industrial property space.
Rental expectations remain modest due to respondents reporting a large supply of available property to occupy across all segments.
Capital values continue to rise, albeit marginally for the fifth consecutive quarter despite the notable increase in transaction volumes.
Commercial project development starts rose across all three sectors in Q3 for the first time since Q1 2008.