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However, it's difficult to compare US housing prices with those in Europe because of differences in quality levels, income levels and various social security systems. "Prices in the most desirable US areas may still seem very high to us, since the US middle class earns more on average than we do. Still, prices vary greatly from one area to another." According to the credit rating agency Standard & Poor's housing index, prices dropped by an average of 15 per cent from June 2007 to June 2008. "In Miami, prices sank by as much as 28 per cent compared to a year earlier," says Mörttinen. Along with Florida, home prices have also dropped sharply in Phoenix, Las Vegas and Detroit. Along with price declines, the weak dollar has also attracted foreign buyers to the US housing market. However the greenback has begun to recover in recent months. "According to our projections, the euro will come under increasing pressure as economic conditions weaken in the euro zone. The US Federal Reserve has made its interest rate cuts within a few months, whereas the European Central Bank will keep making them far into next year. This will reduce the difference in interest rates between the euro zone and the US, which in turn will bolster the dollar against the euro." EYES EASTWARD The commercial real estate market is naturally growing fastest in areas where the economy and population are rapidly increasingly, bringing speedy urbanisation. New office space, business properties and logistics centres are now sprouting up in Russia, Asia and Latin America. The Middle Eastern markets are now an interesting wild card. The sub-prime mortgage crisis that began to spread from the US last year has not so far, at least, shaken commercial real estate markets as much as housing markets, says Pertti Vanhanen, CEO of Aberdeen Property Investors Nordic and Eastern Europe. "The commercial real estate market has plunged in the US, while in Britain the sharpest drop was late last year and early this year, but in Germany they have remained steady. The office market in France has taken off a bit, but in the Nordic countries there has been a moderate correction, except in Norway." It is still hard to say how strongly the global finance crisis will affect the commercial real estate market in Finland and elsewhere. In the Helsinki region, there are about 200,000 square metres of new office space under construction, while the annual demand is only some 60,000 square metres. "Companies have grown, added staff and sought more workable office solutions. There has been a bit of overkill in the Helsinki area, but construction is now clearly calming down." Positive development has continued in Russia, elsewhere in Eastern Europe and particularly in Asia. "In these areas, economic growth remains rapid and urbanisation is progressing. This translates into more demand for new office space and logistics centres. The demand for new properties is also being accelerated by construction of infrastructure in various areas, although there have been signs of slowing growth recently," Vanhanen says. It's still hard to say how strongly the global finance crisis will affect real estate. DECEMBER 2008 BLUE WINGS 61
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