Forecast: 2010

Global Property Experts Offer Their Predictions for What is Sure to be a Tumultuous Year 

We asked an array of industry leaders: What will be the big news in international property in 2010?

James Wyatt, partner, Barton Wyatt International
I believe that Florida sales to U.K. buyers will increase dramatically as buyers continue to shun Euroland. However I can see Euro purchases on the increase late in 2010 as U.K. interest rates start to rise, leading to a weaker Euro. Looking further afield, destinations such as Brazil, Panama, Middle East and the Far East will be all but unsalable.

Mark Stucklin, analyst, SpanishPropertyInsight.com
Well, the big news won’t be a big rebound in the Spanish property market, because that’s not going to happen. However there will be some great deals on prime Spanish property to be had during 2010, for those who can be bothered to do their homework and have funds in place. It will go largely unnoticed but some people will do very well.

Google Real Estate might be big news in 2010. As this functionality grows in popularity it is going to create threats and opportunities in international real estate marketing. At some point it will be popular enough to shake up the business, and that might happen in 2010.

Liam Bailey, head of residential research, Knight Frank

Liam Bailey

The re-emergence of the Asian buyer will be significant factor in the prime European and North American markets. Russian, Indian and Middle Eastern buyers have been active through 2009 in locations like London and the south of France. But the next wave of money coming to take advantage of lower prices--and in the UK's case a weak currency--will be Chinese, Malaysian, Hong Kong and Singaporean buyers.

The other big trend to emerge will be the restarting of the resort development sector. It has been on hold across 2008 and 2009, but from Europe, the Caribbean and other hotspots the research and investigation stages are just beginning again and the market is beginning to move towards thinking about how to restart schemes rather than thinking how they can get out of them.

Bruce Hiatt, broker/owner, Luxury Realty Group, Las Vegas/Toronto
I believe that luxury high rise residential condo supply in Las Vegas will be much smaller than originally thought; excluding hotel condos.  Once the current heavily distressed-priced residential condos are gone there will be little incentive to build new high rise luxury condos near or on the Strip for many years. Already we are experiencing buyers waiting to buy in certain high rise residential condo towers and cannot find the specific inventory identified at the price point desired. By price point we mean at current comparable levels including foreclosures, not unrealistic price points.

In the Toronto marketplace, I believe the Canadian market will continue to experience a strong loonie (dollar), high demand for luxury residential condos in the prime locations and supply challenges in the best located luxury high rise condo towers.  In one example, a luxury high rise condo building of nearly 80 units only has 3 units for resale at this time with prices starting over $1.3 million and buyer traffic is strong. I’m not yet licensed in Canada so this is from conversations with my future luxury real estate brokerage. Some luxury condos continue to sell north of $1,300 a sq foot in Toronto.

Stuart Law, c.e.o., Assetz, U.K.
Severe limitations in supply of property will continue in 2010 as the house building industry struggles to increase output to any meaningful level, which will underpin prices in the face of very substantial demand.

Mounting government pressure on lenders to reduce margins and increase lending, combined with continuing lender competition now the major annual house price indices are turning positive, will be the catalysts for maintaining affordability for new buyers and further reducing the costs of new borrowing. Base rates will eventually start to rise, possibly at the end of 2010, but payable mortgage rates will remain low for the next two years at the very least.

Other negative factors (not expected to outweigh positive): Repossessions will be modest again in 2010 as they were in 2009 at 50,000. Unemployment probably peaked around the end of 2009 and will have little effect on prices. Tax increases will also hold back sentiment and affordability somewhat.

Eugenia C. Foxworth, Foxworth Realty, New York
I believe that there will be risks takers who will continue to invest, but for one-third the cost. Given what I am experiencing with my European investors and customers (residential, resort & multi-use properties), which is the majority of my business, 2010 is not going to be the year for speculative dealings and financial risks. Of course, there will be some successful stories but it will be a disaster for the sellers. Hotels, resorts and commercial spaces are being offered but there are no takers. I believe that 2010 will be a very dramatic time in international real estate. Monte Carlo is feeling it now!

Martin Dell, director, Kyero.com, Spain
The differing pace of economic recovery between nations will create opportunities for buyers and sellers.

In Europe, the stronger German, French and Dutch economies will enable buyers from those nations to seek and aggressively negotiate property deals in the slower-to-recover European countries--Portugal, Italy, Ireland, Greece and Spain.

Even though there is no currency exchange advantage for these buyers, the Euro will buy a lot more property in these PIIGS countries in 2010 compared to 2009.

If the U.S. economy continues to improve and the U.S. dollar increases in strength against the Euro, we could also see opportunistic U.S. buyers sniffing out deals in those slower-to-recover countries.

This buyer activity is already happening at the top end of the market in the U.K. where foreign buyers are taking advantage of the devalued pound, a slow moving property market (tipped to get slower in 2010) and a stalled economy. Expect more of the same for the U.K. and the phenomenon to extend to more countries in 2010.

Stuart Johnson, product sourcing manager, Experience International, U.K.
Quality property, with unique luxury architecture in prime locations in the established Aegean resorts of Turkey priced £100k to £250k will be big news in 2010. U.K., Scandinavians and Middle Eastern buyers will be investing in these locations. These developments will attract established tour operators and hence provide secure incentives like long term leasebacks.

We see France as a developing market. It already has a stable and robust real estate and mortgage market, and as well being the most visited country in the world. Developers are now leveraging these credentials to provide more and more tempting deals, mainly utilizing high loan to value mortgages--only the credit worthy need apply!

Debbie Maue, NAR liaison to Costa Rica, broker associate, Jameson Real Estate, Chicago

Debbie Maue

I think we will see a slow comeback, but not until the fourth quarter. The first year from U.S. markets is going to be hectic and chaotic as the lending laws continue to change, and buyers scramble to take advantage of the tax credits and REO/short sale opportunities.

As those markets get absorbed and the resale market in general "shifts back into place" a bit, those sellers looking to retire will now have the funds. Most of the investment in second homes will be for retirees as their funds had been locked up in their primary residences.  As well as, there are great deals to be made in the second home market and investors will be taking advantage.

Adam Blaskey, managing director, North Beach, U.K.

I believe that there will be a continued but more sustained ‘flight to quality’.  The exchange rate remains extremely favourable to foreign buyers acquiring property in the UK.  The recent upturn in prices signifies the bottom of the market, I expect demand from overseas buyers to support prices, particularly in Prime Central London. No one will be taking risks by either over-paying or buying in fringe areas hoping for a ‘ripple effect’, but they will continue to buy quality property, finished to a high specification located in the most desirable areas.

Dagmar Sands, former FIABCI-USA president, broker, Real Estate International, Inc.
My 2010 Prediction is that more banks will be closed in 2010 resulting in lot more properties foreclosing and driving our pricing down even more. My German clients told me they are waiting for the dollar to even go down to 2-1 ratio and then they will be purchasing.

Paul Brewbaker, economist, TZ Economics, Hawaii
I’m going to guess that the amazing rehabilitation of private-label commercial mortgage securitization will be the big story of the year. It will occur in an environment of evolved bank capitalization—presumably with regulatory reform to mitigate tax arbitrage and other incentives for excessive CDO-based leveraging. Its renaissance will come amidst further development of ideas regarding “macro-prudential regulation,” such as variable capital requirements designed to lean against the wind of incipient asset-pricing bubbles.  

Collateralized debt obligations themselves will be revived as plain-vanilla financial structures of the sort one sees in straight-up textbooks like Duffie and Singleton’s Credit Risk (chapter 11, on CDOs), parameterized to the newly populated “fat-tails” of the distribution facilitated by the financial crisis of 2007-2008, financial panic of 2008 (post-Lehman) and Great Depression of 2008-2009. Hell, even the rating agencies will have better math—indeed, maybe they will even publish default probabilities instead of letter grades (another “straight-up” reform).

In the course of the year 2010 the Federal Reserve will gradually take the training wheels off CMBS conduits and let the market ride the bicycle on its own.  Pointy-headed n00bs like certain professors (well, professor, singular) will be dumbfounded that, ultimately, there was not a glut of commercial real estate in the alpha quadrant and that—ZOUNDS—financial solutions to financial problems actual did exist, which fellow finance professors could have told him, if you know who I mean (rhymes with Martini).  The hordes and hordes of cash piled up in safe havens and global portfolios glutted with U.S. Treasury securities will find once again that commercial mortgage-backed securities offer compelling risk-adjusted returns under transparent design calibrated to jump-risk metrics informed by the recent crisis.

And, amidst all of this, the fear-mongering of Chicken Littles with their W-shaped alphabets and the Talking Heads on CNBC—even the dumb asses on Fox News—will have to find something new with which to terrorize viewers, since lately they’ve devolved to reporting on to the Scary Fad of the Week.  One day it’s CMBS that is the “ticking time bomb.”  This week it’s the threat Tiger Woods raises for global financial stability.  Next week it’s Dubai that is a cancer waiting to invade the economic recovery.  The week after that it will be the Las Vegas Strip that has the seismic potential to unravel the recovery.  Did you hear?  Nevada had to legalize prostitution and gaming, just to get people to build luxury condos in the desert!  I’m shocked, shocked to find that there is gambling going on in these premises!

Lucy Russell, managing director, Quintessentially Estates, London
1.) Change of buyers: Some international countries being more impacted by recession, i.e. Western countries. Stronger from Eastern and China.

2.) If U.K. emerges from the recovery and GBP strengthens then foreign investment may drop

3.) I think Dubai will continue to need financial support and capture headlines

4.) The Caribbean will see an improvement with islands like St. Lucia seeing high sales.

5.) Brazil is expected to see an increase in international buyers with the growth in the property market.

Sam Taliaferro, director/developer, Valle Escondido, Panama
Commercial property the world over will be in the headlines as it is the next bubble to pop. But not in Panama, due to the canal expansion and not having a lot of overhang.

Sam Taliaferro

Residential apartments on the other hand will not be so lucky. The bust has taken place over a year ago, but few involved in the market will even admit it. Prices have declined significantly, 15 to 25 percent, and have further to go as more product comes on the market over the next year with little demand.

Hotel occupancy rates and prices, which have been at an all time high in Panama City, will drop significantly as the economy declines and much more product comes online.

The second home market around the world and in Panama will continue to be lethargic and may get worse if the economy continues to decline. To be successful in this troubled market will require innovation in both development and marketing.

Recent bond activity for Panama sovereign debt may make plans for major infrastructure projects such as the canal expansion and metro considerably more expensive.

Have your own prediction? Leave a comment below.

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