C&W poll sees downturn in Israeli trading volumes
Global real estate firm Cushman & Wakefield says income generating real estate sales plummeted by half in 2011 as compared with previous year
Activity volumes on Israel's income generating property market is likely to drop in 2012, global real estate firm Cushman & Wakefield (C&W) predicted Monday.
The C&W report presents an overview of global real estate markets and reviews the income generating property market which includes mainly industrial, commercial and office buildings.
In 2011, trade volume in Israel's income generating market was €520 million – a staggering 50.2% nosedive from 2010. The local income generating property market had low investment volumes last year largely due to a shortage of prime property for investment and a decline in vacancy rates in several markets.
Most investors sought Class A (premium) property hence demand was low on the secondary market and sales declined measurably.
C&W estimated that the gap between the prime and secondary markets will further increase in 2012.
Cautious purchasers and low-risk deals are expected to remain a key component of Israel's income generating property market.
Buyers will hold off for appropriate opportunities and mostly seek low-risk long-term deals. "Property buyers in Israel seek assets that can be easily leased in prime locations," Ofek Gabai of Inter Israel Real Estate Consultants, explained.
"The times when you could sell anything are gone and purchasers are much more particular; whereas until two years ago high yield property was grabbed off the shelve, today's purchasers are much more wary and they wish to ascertain what the reasons are for the high yields and whether there's any fault with the property."
Gabai's remarks and the decrease in funding indicate that trading volumes in 2012 will decrease against 2011.
Still, in 2012 the market is likely be fueled by developers seeking to raise capital by selling their own property or land they had previously purchased.
C&W's poll said that key buyers will be institutions seeking investment opportunities.
Inter Israel Real Estate Consultants, which is C&W's partner in Israel, added that Israeli buyers will choose to invest in familiar markets in 2012, such as the US, Germany and Britain; and will allocate new resources for investments in the Brazilian market prompted by the 2016 Rio Olympics.
Furthermore, the Brazilian market is considered attractive due to the decrease in government debt, low unemployment and a growing middle class.
Institutional investors, namely insurance firms and providence funds, will continue to be Israel's key investors in overseas markets.
The volume of overseas real estate investments is expected to grow since local alternatives are becoming few and far apart. Nonetheless, securing funding for real estate investments in Brazil still remains challenging.
Insofar as the European market, Gabai says that "Germany is emerging as the strongest euro zone country and many investors are channeling their investments in residential and trade property to the country.
"As for the UK, it always was and will always remain the hub of global real estate investment market; however, financial gaps between yields and funding expenses have narrowed and investors are in no hurry to sign new deals in the country."
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