Coming months will be a challenging mixture of positive surprises tempered by continuing caution in the market, says global realty research firm Jones Lang LaSalle (JLL) in a report, "Global Market Perspective". As economic recovery gathers strength, the report says that globally, realty market may rebound earlier than previously anticipated. The appetite to invest in realty market is also on the rise globally. With India emerging as one of the most attractive investment destinations in the world, a recovery in global market will benefit Indian realty sectors in a big way.
However, recovery in global real estate market will depend on the rise in policy interest rates in various markets, which will affect cost of borrowings. "The pace of recovery in property markets around the world will be affected by the timing of central banks' withdrawal of financial interventions,".
Australia and Asia Pacific are likely to withdraw the stimulus packages including low interest rate money market policy, in light of the vigor of economic recovery in the region, combined with asset prices showing some initial signs of froth. In fact, India may lead the pack in withdrawing the package due to rising inflation.
Interestingly, global realty markets, particularly in the developed world, may face stock shortage to invest funds in 2010, the report says. "There will be an imbalance in volumes of available capital to invest and the numbers of desirable assets on the market," it said. This may lead to rise in capital value of real estate and lower yield on investment in the sectors.
The report feels companies may look to acquire office space instead of taking them on rent to exploit the present condition of their availability at discounted prices. The global report says that larger emerging markets like China, India and Brazil are being looked up to for speedy recovery and for new opportunities as the rest of the world regains its confidence.
Year 2010 has brought some cautious optimism in global realty market as economy has started looking up. According to World Bank, global economy is likely to expand by 2.7 in 2009. Even rich economies, which faced a tough time in 2009 and declined by 3.3 in 2010.
At the start of 2010, global economic recovery remains fragile as there are persistent risks to progress, including ongoing bank failures, impact of new governmental regulation, rise in interest rate, and the possibility of future asset bubbles. Yet, in the final months of 2009, a number of data points suggested that global economy was improving at a better-than-expected pace.
Another encouraging factor is improving corporate profits in 2010. As many corporations enter 2010 with strong cash positions, the report says, stage is set for better-than-anticipated business investment levels, with benefits for capital spending, and, possibly hiring.
Author: Kamaldeep Chandel
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