Jones Lang LaSalles September Global real estate capital report notes how property markets in the Americas, particularly in the US, have stagnated thanks to a lack of transactions. Values have not dropped nearly as far there as they have in the UK. According to the Moodys Real Commercial Property Price Index, prices have only come down 9.4%, compared with the 20% drop in the UK.
"In the UK the pricing adjusted on the index quite quickly and that trickled down into property sales," says Dan Fasulo, managing director of research at Real Capital Analytics in New York. "Its allowed London to reset the market based on current reality, which we havent been able to in the US. Weve been hindered by the lack of market measures like an index to communicate to the market where values are right now."
One reason the US market has not been able to reprice as effectively as the UK is that property indices have not built up much traction there and apart from the Moodys index, most of them are appraisal-based. The Moodys index is based on transactions. Another reason why the US is slow to adjust to the new reality of the property market is that valuation firms tend to be small, independent operations that do not perform valuations more than once a year.
"One of the main reasons we got into this mess is the lack of transparency involved with all these indices," says Fasulo. "Its going to take years for this to play out and I hope we set up what we need to make our market function better."