Real estate downturn is not global in scope - FIABCI head

Julian Josephs, president of the FIABCI, is not surprised about the high price tag for development projects such as the 96 Hayarkon project.

By JOHN BENZAQUEN
Julian Josephs 88 224 (photo credit: Courtesy)
Julian Josephs 88 224
(photo credit: Courtesy)
During a visit to study the real estate market in Israel, Julian Josephs, President of the International Real Estate Federation (FIABCI), speaks to The Jerusalem Post in an exclusive interview about the housing crisis in the US and its implications for the global market. The FIABCI is a world wide organization representing real estate operators in all fields, brokerage, architects, builders property developers lawyers etc. What is the extent of the current real estate crisis? The present real estate crisis is not global and it will pass. Every crisis ends at some point in time. In a market economy there is no such thing as a permanent crisis. It is all a question of supply and demand and of the business cycle syndrome. It is true that in the current period it is also influenced by the subprime mortgage crisis but the financial problems of the industry are affecting supply and demand and this is what counts. At the moment supply is greater than demand and in consequence prices are falling. This situation is likely to resolve itself in the future but I do not know when exactly because the current evolving economic crisis will affect demand for real estate through 2009. I do not think prices will recover quickly but they will recover. Is the current downfall in real estate a global phenomenon or central to specific countries? The epicenter of the current real estate crisis is in the US. I cannot be sure if it will spread to other countries. That depends on how the current financial crisis develops. Demand and supply for real estate is not only influenced by nation wide or global influences it is also influenced by local developments Thus for example Paris had ten bad years. It was impossible to sell property, demand was lousy and prices dropped accordingly. In contrast in the past two years demand is higher than supply and it is practically impossible to find an apartment. The same holds true for Washington DC. Demand was weak in the past years but I have reason to believe that with the new administration demand will harden because there will be many new faces in Washington and they all need accommodation. In The US as a whole prices are falling but prices in New York are holding steady. But having said this I wish to stress that from an investment perspective real estate should be viewed as a long term proposition. Is it true that real estate price trends in various places in the world may be unconnected? what are the expected trends in the world? In the US prices are falling down the board with the exception of some isolated places. But in my opinion this was to be expected because prices had been rising for a number of years. The same holds true for London, prices in London have been falling for nearly three years after steadily rising earlier. From a global perspective I believe that the best investment opportunities are in China. In this vast country there are over 20 cities with a population of over 10 million people. There is a constant need for housing and if demand is strong prices are also strong. The same holds true for India. It has a growing population and an economy which is also growing strongly. The combination of both creates a potential win-win situation for real estate. I also believe that Panama offers good investment opportunities for real estate. But what about Israel? Demand for real estate is strong and classy development projects like the Fair Fund project " 96 Hayarkon Street" are fetching sky high prices? Like I said before it is all a question of supply and demand. Even in a small country like Israel demand is not uniform, prices are rising in places like Tel Aviv and Jerusalem but are stagnant in some of the cities in the south and north of the country. Demand for real estate in Tel Aviv and other coastal towns is very much influenced by demand from Jews in the diaspora. Overseas demand which is pushing up prices is common in other places. Overseas demand for real estate in Dubai is strong and this affects prices. The same holds true for cities such as Cannes, Monaco or Gibraltar. With regard to the high level of demand and consequently the high prices of the 96 Hayarkon project that is easily understandable. It is uniquely designed with a Bauhaus façade housing ultra-modern apartments in an excellent location. Its location alone in the center of a large city opposite the sea would have ensured premium prices. If on top of this excellent location you have a reconstructed historic Bauhaus building - price is not an issue.