Investment in global property will fall by 30% to $500bn (£255bn) this year, according to DTZ’s 33rd Money into Property report.
The highly regarded report released this morning said investment activity worldwide was down by 50% in the first quarter of 2008 in comparison to the same time last year, although the value of transactions completed last year increased by 39% to $730bn (£372bn).
The report said: ‘DTZ believes that, at best the worst of the first phase of the sub-prime crisis (a serious liquidity squeeze on the banking sector) may be over, but that the credit crunch proper (i.e. tightening pricing and availability of debt has much further to go, and will continue will into 2009.’
DTZ said the total value of the global property market grew by 18% to $12 trillion (£6 trillion) in 2007. This represented a weakening in the growth of the US markets, but an increased growth in the Asia Pacific markets.
In the UK, DTZ said commercial property capital values fell by 18% since the summer 2007 and were expected to fall a further 7%-8% in the second half of this year. This is because rental growth in the UK is ‘turning more comprehensively negative’. The worst hit UK market in terms of rental growth is expected to be the City where DTZ said rents could fall by 25% over this year and in to next year.
The firm said yields in the UK will stabilise by 2009 with the exception of some retail and secondary assets. ‘There is unlikely to be a substantial revival in UK transactions before 2009 and no return to investment returns in the region of historical average until 2010.’