Rental expectations remain negative; Capital value expectations turn positive for first time in over a year; Yields fall although at a slower pace than in Q2
— The latest RICS Indian Commercial Property Survey published today (11th November) suggests that sentiment in India is still fairly subdued although there are noticeable improvements compared to the second quarter report. Importantly, the turnaround in commercial property is relatively evenly spread across the three major sectors (office, industrial and retail).
Confidence in the outlook for lettings activity over the next three months has edged up although rents are still expected to decline, albeit more modestly. A net balance of 15% more surveyors are reporting negative rather than positive rental expectations. This was also a significant improvement from expectations in the previous quarter when the net balance was 44%. In addition, the survey also shows that sentiment in India is less downbeat than other major economies, such as the US, UK and Japan.
Highlights of RICS Indian Commercial Property Survey Q3 2009:
- Rental expectations remain negative
- Capital value expectations turn positive for first time in over a year
- Yields fall although at a slower pace than in Q2
Moreover, RICS Global Property Survey Q3 2009 is noticeably more upbeat than the second quarter report both in terms of the lettings environment and investment activity. Confidence in the outlook for tenant demand over the next three months is either less negative or more positive than was previously the case in every region of the world. This better tone has, significantly, also begun to filter through into rental expectations. Latin American and Asian countries have the most favourable readings when it comes to the outlook for rents with Hong Kong enjoying a particularly big swing in sentiment. In the second quarter of the year, a net balance of 67% of respondents from Hong Kong expected rents to fall further; by contrast in the latest survey, a net balance of 16% of respondents suggest rents are likely to rise over the next three months
Peru, Columbia and Brazil also reported positive net balances on rental expectations while South Korea, China, Thailand and India were only moderately negative. Australia, UAE and the UK also saw rental expectations become less negative over the quarter but the weak results from the US and Japan were not far from the lows touched in the second quarter report. Interestingly, a number of European countries including Ireland, France and Spain have the worst readings on the rental outlook.
The mood amongst real estate investors also appears to have perked up according to the survey with capital values expected to increase in a number of countries including Brazil, Hong Kong, South Korea, China and India. This more positive mood has also been reflected in activity indicators with number of investment bidders per property picking up sharply not just in Asia and Latin America but also in a number of European countries. This is consistent with the latest data from Real Capital Analytics (see page 2 of the RICS survey) which shows either a steadying or a modest increase in transaction levels around the globe.
Sentiment towards capital values in the US is, however, still very negative with 53% more surveyors expecting further declines (rather than increases) in the run-up to Christmas. In the UK, the net balance on capital values expectations is still in negative territory although only marginally so and there has been a noticeable increase in transaction activity.
RICS chief economist Simon Rubinsohn said:
“The rebound in Asian economies is clearly being reflected in the more positive responses to both rental and capital value expectations throughout the region. By way of contrast, the relatively sluggish economic revival though much of Europe and the US is consistent with the more downbeat results for these regions.”
“This contrast could become even more pronounced through 2010 as any unwinding of the monetary and fiscal stimulus presents a further challenge to the tentative recoveries being experienced in most western economies.”
RICS India MD and Country Head Sachin Sandhir said:
“With this survey, RICS has endeavoured to provide a quarterly guide to developing trends for the Indian commercial property investment and occupier market. The results mirror market sentiments which are reflected in the improving outlook especially for the office sector as investment activity picks up to and tenant demand continues to strengthen.”
Source: Press release distribution via India PRwire
Notes to Editor
About the Global Property Commercial Survey
RICS’ Global Commercial Property Survey is a quarterly guide to the developing trends in the commercial property investment and occupier market. This edition details market conditions for the 2nd quarter of 2009 based on information collected from leading international real estate organisations and local firms.
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