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GLOBAL PROPERTY MARKET HOTSPOTS
Intellectual Property's Review of 2007 & Predictions for 2008

2007 has been a rollercoaster year for property investors. The sub prime situation and subsequent credit crunch has left America witnessing falling house prices whilst the second half of 2007 has seen the UK market plateau. The rest of the world has emerged relatively unscathed from the crisis and investors in Asia, Eastern Europe and South America have seen double digit growth in the value of their capital investments and strong rental yields.

2007 has proved that property is a key aspect of a balanced investment portfolio, especially when so much uncertainty surrounds many of the global stock markets.

We at Intellectual Property believe that there are great investment opportunities available in 2008 as long as the correct due diligence and research takes place. Most of Asia still looks cheap, particularly those markets with declining interest rates and US dollar driven currencies, making property affordable to the investor. We also favour economies that are commodity centric and will be less affected by declining stock markets. In Australia and New Zealand, increases in interest rates with record high currency levels have made this region a less attractive investment proposition.

Sub-prime has become a common language in the second half of 2007 and what started as a US phenomenon is beginning to have impact across the globe. Property prices in the United States have at best stagnated and in many areas declined significantly. This also, of course, provides us with opportunities; don't be surprised to see Intellectual Property involved in the US within the next 12 months.

Commodity rich Canada is experiencing steady growth and will be a ripe market for investment in the coming year. This expected growth will be driven by the energy sector, inward migration, resilient consumer confidence and interest rates projected to remain at 4.5% through to 2009. Intellectual Property will be reviewing opportunities in Alberta for 2008.

Most promising in South America are Brazil and Argentina. Throughout Brazil an additional seven million units, equivalent to 15% of the current housing stock, is required to meet current and future demand. Currently 38% of all properties purchased are mortgaged, this is expected to increase to 60% in 2010. Argentina's economy has risen by 8.5% in 2006 and predicted to increase by 7.5% in 2007, combined with its government backed tourism industry which has grown 10% year on year since 2003, this market has become very attractive.

2007 has seen significant gains in several Eastern Europe property markets with Bulgaria coming out on top with 30.6% growth in Q3 of 2007 and Latvia and Romania close behind.

We also like the look of Macedonia with 95% of the population owning their homes, translating to a large amount of existing equity and EU and NATO memberships on the horizons, Macedonia promises to be an attractive market for the coming years.

With large scale private investment in the primary cities, easier loan approvals, improving economy and rising consumer confidence it is no surprise property prices are on the increase in Germany. Being Europe's largest economy and showing signs of recovery with decreasing unemployment and impending increases in incomes Germany is an attractive market to watch, especially within the economic centres such as Frankfurt.

A number of factors make Turkey a market full of potential. Amongst these are the strong inflows of FDI, high levels of GDP (averaging 7% between 2002 - 2006) and the lack of supply versus demand; Turkey has seen increased urbanization and current housing stock is of poor quality.

As stated we see lots of value in Asia. With strong affordability and currencies that are mostly likely to strengthen over the medium term.

Malaysia has been a huge success story in 2007. The suspension of capital gains tax coupled with low prices has steadily driven the property market. For many investors looking to get a foothold in Asia, Malaysia is viewed as less risky compared to less developed countries such as Vietnam. Intellectual Property's clients have witnessed between 30-100% gains in 2007 and we predict that Malaysia will continue to be a strong investment choice into 2008.

Vietnam's stock market growth coupled with a lack of luxury urban developments in Ho Chi Minh City has meant that early bird investors have seen rapid growth in 2007. With the likelihood of increasing mortgage accessibility to most locals and foreigners we believe growth will continue in the market although not at the same rate.

Thailand has had a tough year and Bangkok has seen sub 2% growth. This has been due to wavering consumer confidence following the military coup earlier this year and the looming elections. As the market settles in 2008 we expect to see Bangkok bounce back.

Mongolia is a commodity rich country, with enormous copper, coal and gold resources, an average GDP of 7% over the past five years and a booming tourism market Mongolia promises to be an interesting market to watch. Especially now oil exploration is underway. Rental yields in Ulaanbaatar, its economic and financial centre, average 13%.

Singapore had an amazing 2007 culminating in price increases of 27.3% in the third quarter. This rapid growth has led the government to take measures to artificially cool the market which has now been put into effect. We think there are more profitable places to invest in 2008.

China and Hong Kong - China's growth is starting to slow in Beijing and Shanghai and affordability is tight not withstanding the luxury end which seems to have no barriers to growth. We believe that increased urbanization (for instance Chongqing is urbanizing 400,000 people per year) and wage inflation will make second and third tier cities a strong investment opportunity. Markets such as Qingdao and Chongqing look to offer great value and due to foreign purchasing laws, we will be looking at opportunities for service apartment blocks in these markets.

We are bullish about Hong Kong in 2008. It's no secret that the local market is flourishing and with interest rates having recently gone down, there is no reason to suspect this will stop.

Japan finally saw positive growth in 2007, in some cases up to 10% on capital prices in Tokyo. With low interest rates and good yields we see Japan as a strong market. Look out for more secondary property in tertiary cities and hopefully a new-build, bank financed, Tokyo project.

The South African property market continues to be buoyant, while residential property growth slowed in 2007 to 13.6% off the back of 6 years of growth averaging 20% per annum. Nominal growth in house prices is expected to decrease to 9% in 2008, due to the tightening monetary policy and marginally slower pace of economic expansion. Analysts are predicting that between 2009-2011 the property market will see greater levels of activity and price growth as result of declining interest rates; improving economic growth and rising domestic demand.

Abu Dhabi - With a forecasted investment of US$175 billion scheduled over the next 5 years and a shortage in residential and commercial property, it is expected to experience similar growth to that of Dubai in the coming years.

The regression equation suggests that for the current level of GDP per capita, relative to other global cities, housing prices in Abu Dhabi should stand at around $9,385psm; currently the average city house price is $3,060psm. While in Dubai they should stand at around $7,772psm, with the current average city house price at $3.371psm.

For further information on any of these property markets contact us.

The above commentary has been provided independently by Intellectual Property Ltd and is for reference only. As with any market, conditions do change and of course personal circumstances vary from client to client. You are therefore advised not to rely on the information above, but instead to meet with one of IP's team before deciding to follow any course of action. The Henley Group Limited shall not be responsible or liable for any damage or loss caused by the use or reliance on the information provided.