Slide in Asian property to continue
SINGAPORE: Asian property values may keep sliding this year as the global credit crisis and economic slowdown undermine investor confidence, investors and analysts said.
"It's going to be another year of pain," Stuart Labrooy, chief executive at real estate investment trust Axis-REIT in Kuala Lumpur, said Tuesday at an industry conference in Singapore. "Asia is in for a fairly lean spell." Markets such as Hong Kong, Shanghai, and Singapore have already seen large price drops since last year after years of cheap credit lured a flood of foreign money into the region's real estate, especially high-end residential and office space.
As credit conditions tightened last year and the global appetite for risk waned, speculative money fled the region's stock and property markets.
Investors who chased hot markets last year have absorbed big losses, and new buyers now shouldn't expect to make a quick profit, said Blake Olafson, head of the Asia real estate group for Bahrain-based investment firm Arcapita.
"Those who made investments last year have had significant writedowns," Olafson said. "You can't have a trading mentality, but rather a five- to seven-year view." Markets that soared the most during the years leading up to 2008 have subsequently plunged and may not have bottomed yet, analysts said.
Singapore, for example, has seen private residential property prices fall about 20 percent from their peak in the second quarter last year after jumping 31 percent in 2007.
Along with the broader global downturn, each Asian market may face its own particular challenges.
In Thailand, the prospect of renewed violent anti-government street protests paired with overbuilding in Bangkok could send property prices lower, said John Evens, managing director of Bangkok-based consultancy Tractus Asia.
"I expect to see a considerable drop in the value of residential prices," Evens said. "Thailand hasn't yet fully realised the impact of the global economic crisis or political instability." In Singapore, the city-state's growing status as a regional finance and wealth management hub left it vulnerable as banks and investment firms shed workers amid the credit crisis. Offices here that rented for $3,000 a square foot last year are now available for $1,800, Olafson said.
Asian property values will probably bottom by the end of this year but may not start to rise again until the economies of U.S. and Europe have consistent growth and boost investor confidence, Labrooy said.
"In Japan, the real estate industry depended on foreign money coming in to sustain growth," Labrooy said. "A lot of that money is gone and won't return for a long time. We all have to get back to reality."