The real estate industry is waiting with baited breath for the next round of quarterly market reports, when Manhattan will see the real effects of the mortgage crisis on home sales. But a new analysis by real estate appraiser Mitchell, Maxwell & Jackson offers a glimpse at the bleak picture that the reports will likely show.

Manhattan data compiled by the appraisal firm and released yesterday showed that the volume of signed contracts in September and October plummeted roughly 75 percent from the same period last year.

Deep price discounting and tumbling interest rates are luring some bargain hunters back to the property market. Among others, Grand Promenade and Kingswood Villas are cited as housing estates in which there is great interest.

Over the weekend, the number of potential buyers viewing flats rose by up to 50 per cent from a week earlier, agents said. The surge was largely fuelled by lower asking prices and a reduction in mortgage rates from Monday.

But the bargain hunters’ enthusiasm is not shared by many analysts, who do not agree with property agents that now is the time to buy.

Researchers at investment banks Credit Suisse and Morgan Stanley said prices might continue to tumble in the next 12 months, in view of rising unemployment and the weakening local economy.

Transaction prices at major housing estates had plummeted by between 20 and 35 percent, agents said, as credit-starved speculators were forced to dump their units.

The amateur buy-to-let investor has had his day. Deterred by falling property prices and hampered by a lack of mortgage credit as banks tighten their lending criteria, small players who want to buy one or two homes to supplement their income or bolster their pension are fast disappearing.

At the same time, however, professional investors with large property portfolios are cleaning up; many are sitting on substantial sums of equity built up throughout the housing boom. Unlike new investors, they can afford to meet lenders’ more stringent requirements for larger deposits. Figures from Hometrack, the property data company, indicate that 82 percent of rented property is in the hands of professional or semi-professional landlords who own at least ten homes. For these people, a weak housing market represents an opportunity to find a bargain property and take advantage of rents that have risen by 12 percent over the past six months, according to Paragon Mortgages. Investors know that fewer buyers in the market equates to a greater demand for rental homes.

At a time when many nations in the world are fearful of the credit crunch, it appears that Abu Dhabi is resisting the trend. One major local property developer is reporting Q3 profits three times more than a year ago and expectations are that the trend will continue next year, according to a recent Reuters survey.

Abu Dhabi is part of United Arab Emirates (UAE), a federation of seven Middle Eastern states on the Persian Gulf. Abu Dhabi city is the capital of the UAE. Although it is one of the world’s largest producers of oil, Abu Dhabi has recently been trying to diversify its economy into other sectors such as the property and tourism markets.

There are other reports which support the Reuters findings. In recent weeks, the government has pumped US$33 billion into the banking system. Fitch Ratings recently expressed its approval of the government’s moves to guarantee liquidity in the banking system and it believes it will be unnecessary to downgrade the emirate’s Long-term Issuer Default Rating.

“The risks of a UAE bank suffering a capital markets-driven liquidity crisis are limited as none of the banks are reliant on these markets. Their funding bases are predominantly based on retail and corporate deposits, with the balance as inter-bank borrowings and some limited debt capital market issuance,” says the Director of Fitch’s Banks team, Robert Thursfield.

According to James Gonzalez, Market Analyst at Obelisk, guaranteeing liquidity is an important issue for Abu Dhabi. “In contrast to Dubai, where the earliest off-plan investment opportunities saw completion in 2002, the first completed units in Abu Dhabi will only be delivered in late 2009. Abu Dhabi remains a relatively new option for foreign buyers and lacks the market saturation of Dubai. It still remains an emerging market.”

Once the favourite of property investors and home-seekers, Residence Bel-Air in Pok Fu Lam is being shunned as prices and sales plunge in the secondary market.

Prices fetched by sales at the Cyberport development last month were down more than 40 per cent from their peak in the first quarter, data shows.

Despite the big fall in prices, buyers remained in short supply and transaction volumes last month were 50 per cent lower than those recorded in September.

Recent events have led investors to overseas markets for the buy-to-let market. The United States, with its sub-prime crisis and teetering on the brink of a recession offer some great market corrected fair value opportunities to enter this market.

The recent bubble made it difficult for the average American to buy a home. This is especially true in the areas of prime real estate in metropolitan areas such as California, Orlando, New York and Dallas. Now with property prices dropping YOY as much as 30% in cities like Las Vegas, Miami, Phoenix and Los Angeles there is a tightening of the credit supply making it very difficult for buyers to obtain financing even with solid credit histories and high paying salaries.

Commenting on the figures Fionnuala Earley, Nationwide’s Chief Economist, said: “House prices in the UK fell for the twelfth consecutive month in October. The price of a typical house is now 14.6% lower than at this time last year, the peak of the market. The typical house price fell by 1.4% in October, around the same rate as the average monthly fall of 1.3% over the last year, but lower than the monthly falls recorded in each of the previous three months. The price of a typical house is now £158,872, almost £30,000 less than a year ago, but to put in context, still almost £30,000 more than five years ago.”

Given the past year’s housing market turmoil in the UK, there are many questions about how the recent global financial crisis will further impact current or future property investments. For insight into the 2009 market just around the corner, we look at extracts from the 2009 Knight Frank residential forecast:

• UK residential prices will fall 30% from their peak, taking values back to September 2003 levels
• Sales volumes will hit a low point in late 2008, at only around 30% of their long term average
• Sales volumes will recover to reach 60% of their long run average by the second half of 2009
• Development land values outside London are already down 33% from their peak, with a further 15% to go in 2009
• Equity rich investors and speculators are already in the market, targeting distressed land and property sales
• The top of the agricultural land market has been reached, we expect price falls of up to 10% from the 2008 peak

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