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DEVELOPMENTS
in the global economy and currency markets will determine the performance of
property markets across developed and emerging markets alike for 2016.
FXTM
chief market analyst Jameel Ahmad shared that year 2015 saw emerging currencies
challenged by a resurgent US dollar rising alongside the US economic recovery.
There were additional concerns over how a slowing China economy would impact
general sentiment towards emerging markets. These developments added to
challenges faced by emerging economies linked to commodities amid a global
slowdown in oil and gold prices.
Ahmad
said, “The results were a clear downward trend for emerging currencies and we
continued to highlight emerging market currency weakness as a global phenomenon
throughout 2015. The emerging market currencies that were the most heavily
crushed during the year were those that belonged to economies dependent on
commodity exports.”
Ahmad
added that concerns surrounding the China economy entering a deep slowdown was
another contributor behind losses in emerging market currencies. “A slowing
down China economy was not a problem for China itself, but for all those
economies reliant on trade with China.”
Knight
Frank global head of research Liam Bailey and Knight Frank international
residential research Kate Everett-Allen shared that the scale of the slowdown
in China and the speed of further US interest rate rises will determine the
performance of property markets across developed and emerging markets alike
over the next 12-18 months.
They
expect the strongest and weakest performing prime markets to be separated by
around 20 percentage points by the end of 2015. They expect this figure to slip
to 15 points in 2016 as price growth converges. The pace
of price growth in Sydney is expected to slow from 15% year-on-year in 2015 to
10% in 2016. Australia’s economic slowdown, weaker stock market performance in
recent months and the introduction of foreign investment fees explain the lower
rate of growth in 2016.
Hong
Kong is forecast to overtake Singapore as the weakest performing luxury
residential market in 2016. A number of new developments are due to enter the
market in 2016. This new supply, together with a strengthening HK dollar, will
see prime property prices soften. The
price decline seen in Singapore’s prime residential market is expected to
persist at least until the end of 2016, following the government’s assertion
that it has no plans to relax its property market cooling measures.
Ahmad
commented that the major turning point for all the emerging currencies will in
some ways be in response to higher interest rates from the United States. While
falls in emerging market currencies were due to external factors, such factors
could transform into internal and domestic pressures, such as reduced spending
power and reduced budgets that might lead to jobs being lost. The continued
depression in commodity markets is also going to limit potential for a recovery
in fortunes.
Ahmad
said, “Slowing growth will continue to occur in China and will likely be a
threat to India, although it is possible that the proactive easing of monetary
policy from the Reserve Bank of India might encourage borrowing domestically
and help drive growth. It is worth remembering that the central banks in China
and India have been actively intervening to shore up their own economies
through monetary easing. There will be some hope that this could help drive
industry growth. As commodity importers, the lower import costs should help
create budget for investment elsewhere.”
Colliers
International head of UK research and forecasting Mark Charlton, Colliers
International senior research analyst EMEA (Europe, Middle East and Africa) and
forecasting EMEA Bruno Berretta, and Colliers International director of UK
research and forecasting Walter Boettcher cited in Colliers International’s
Global Investment Outlook (GIO) that investors, globally, still wish to invest
in real estate.
Transaction
volumes across regions are expected to increase, with fewer investors expecting
to be net buyers. Allocations to direct property by multi-asset funds will
continue to increase globally. The most liquid markets, found in gateway cities
such as London, New York and Tokyo, will continue to appeal to cross-border
investors. Increasingly, investors are looking to partner with local expertise
to provide greater confidence in overseas diversification.
Macroeconomic
and political threats, such as further interest rate hikes in the US, or
Chinese economic uncertainty, as well as geopolitical risks, will see investors
curb their risk appetite in some markets. More investment decisions will be
made on a long-term basis. Hence prices for matching assets will rise further,
especially in safe haven markets. They
concluded, “While the next 12 months will pose macro challenges for investors,
the overall positive mood shown by most respondents offers a compelling case
for supporting direct real estate investment’s continued growth.”
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