Ireland in recession as real estate boom fades
A 10-year real estate boom in Ireland has faded away with a steep drop in new home construction as the country becomes the first in the euro-zone to fall into a recession.
New home construction declined by 30 percent in the second quarter. That decline and a decrease in investment spending in general will probably continue to slow the Irish economy in 2009, economists told the International Herald Tribune.
Economic activity in Ireland is now the weakest it has been in 25 years, and the country has recorded two successive quarters of economic decline, the common definition of a recession.
Other countries in the euro zone will likely join Ireland in a recession as financial turmoil continues to swamp Europe. According to a September Reuters poll, economists believe there is a 40 percent chance that the entire 15-country euro zone will fall into a recession in the next 12 months.
Dubai gets taste of global meltdown
The ripples from the global meltdown are reaching Dubai, even as a $1.5 billion resort opens on an artificial island shaped like a palm tree and more new projects dot the skyline.
In the first signs of trouble for the region, banks have decreased lending, slowing construction plans. The United Arab Emirates recently committed $13.6 billion to help fix the country’s credit problems, according to the International Herald Tribune.
But given Dubai’s superheated economy, some analysts said a slowdown could be healthy, as long as it doesn’t become too prolonged, and could prompt a shift away from speculative building.
Speculation has made up a significant portion of market activity, with speculators borrowing money to put down 10 percent on unbuilt properties and then flipping them for huge profits, a strategy that worked when housing prices were leaping as much as 10 times over the course of a few years.
Property values will likely fall in Asian financial hubs
Office rents will likely fall and vacancy rates could rise in Tokyo, Singapore and Hong Kong, Asia’s financial centers, as banks slow their hiring and expansion plans.
Rents in Hong Kong’s Central District are expected to fall 25 percent by the end of 2009 as cheaper office space comes onto the market across the harbor, according to the International Herald Tribune. The vacancy rate in the Kowloon East District is 15 percent and may increase to 40 percent within two years.
While so far, major banks haven’t announced job cuts, layoffs could take their toll in areas that have been fueled by the growth of hedge funds and banks.
Job losses could cause rents to fall by an estimated 47 percent at Singapore’s Marina Bay Financial Center, an office project under construction, according to one projection. Tenants who have pre-leased space may end up subleasing it out.
Tokyo banks have hit the pause button on lending, hurting office rents. One Credit Suisse analyst predicted more bad news with the likelihood that Morgan Stanley and Goldman Sachs would be a smaller presence in the city in the future. He predicted that office rents may fall by 5 percent for prime buildings and by 10 percent for Class B buildings.
Compiled by Sara Polsky