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Disparities in global property sector underline economic instability [25-02-2013]  
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AS property prices continue to spiral in some countries and fall in others, the disparities seen in the property sector on different continents underscore the instability and fragility of the global economy.

In Asia, particularly China, the nation’s property market rebounded starting in the second half of last year as demand from buyers concerned that prices were rising again defied the central government’s commitment to maintaining property controls. Home prices rose 1% last month from December, the most since January 2011, according to data from SouFun Holdings Ltd, the nation’s biggest property website.

In Spain and other periphery states, prices are falling while Germany’s property sector seems to be garnering strong interest.

The continuing vicissitudes is distressing at best, and confusing at most. The volatility on different markets and continents also underscores the role played by the sector and the importance of stable prices, which today seems elusive.

In certain cities considered as safe havens such as London, Hong Kong and New York, property prices continue to spiral as investors go in search for yield. On mainland Europe, value continues to erode five years after the global financial crisis.

AFP reports that London has overtaken Hong Kong to take the title of world’s priciest office market, followed by a surprise, fast-rising third place Rio de Janeiro.

The report quoting a survey by Cushman & Wakefield released on Tuesday which said that relatively scarce quality space in London has fuelled competition and driven up office rents, particularly in the West End. Cushman & Wakefield is the world’s largest private real estate services firm.

“As a truly global city, London’s appeal continues unabated. In conjunction with a scarcity of good quality stock, prime rents have increased over the year,” Digby Flower, head of London Markets says.

“Equally importantly, we expect rents to grow further as we get into recovery mode.”

Hong Kong’s CBD (central business district) slipped to second place, while the Zona Sul area of Rio de Janeiro leapt from 8th place to third on the back of a jaw-dropping 43% rental increase from 2011, it said.

“Safe havens or gateway cities such as London, Hong Kong and New York continue to command high rents despite uncertain economic conditions, as they remain key markets in which to do business,” said Glenn Rufrano, president and CEO of Cushman & Wakefield.

The interest in London as a safe haven brings into focus Mainland Europe’s properties, particularly Germany’s. In both the commercial and residential market, Berlin city has attracted the most attention while Germany’s economy is the strongest among eurozone countries.

As investors seek alternatives to lower-yielding fixed-income assets, property owners there are trying to profit from demand for German homes. Offer prices for existing German apartments rose 7.4% in 2012, according to data compiled by Berlin-based online broker ImmobilienScout24. Hamburg was one of the biggest gainers, with a 10% increase.

Earlier this week, Bloomberg reported that Deutsche Bank AG and Prelios SpA plan to sell German homes valued at about 1 billion euros (US$1.3bil).

Prelios is a real estate company formerly known as Pirelli RE. It bought DGAG in 2007.

The companies are seeking to sell the DGAG portfolio this year, quoting sources who asked not to be identified because the information is private. DGAG owns about 10,000 apartments in northern German cities including Hamburg and Luebeck, said one of the people.

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