Asia developers eye new projects

Asian property firms are beginning to see light at the end of the tunnel and several are positioning for an upturn even as the world economy struggles to recover from its worst recession in decades.

The mood among US and European executives at this week’s Reuters Global Real Estate Summit is glum, but Asian counterparts are more upbeat with some revealing plans for new projects in anticipation of an upturn later this year.

For instance, Chinese commercial property developer SOHO said it has built up a war chest of US$1.9 billion to replenish its land bank and intends to start new projects in Shanghai and Beijing in coming months.

Indiabulls, India’s third-largest listed property developer, aims to launch six to seven residential projects in the financial year ending in March 2010 on the back of an expected recovery in demand.

‘The general mood has been cautious, but there is also optimism. Asian companies in general are in much better shape compared to their peers in other regions,’ said Ayala Land chief financial officer and Asian Public Real Estate Association president Jaime Ysmael.

Spurring the optimism in Asia is a recovery in residential markets, with price cuts drawing buyers in China, Hong Kong and Singapore, where saving rates are high and banks are prepared to lend.

The volume of transactions in these places are close to levels seen during the bull market of 2007 and residential property values have begun to edge upwards as developers such as Singapore’s City Developments raise prices.

Asian property values did not rise as much as in the US and parts of Europe this decade. In dollar terms, property in countries such as the Philippines are cheaper than before the onset of the Asian crisis in late 1997.

Interest rate cuts and government stimulus plans are also helping regional property markets recover.

Singapore residential prices were supported by mortgage rates that were below rental yields, a Bank of America Merrill Lynch report said this week.

‘At the current mortgage rate of around 2.75 per cent, our net cost of carry model implies that prices can rise by 30 per cent before home buyers enter negative carry,’ it said. The bank predicts Singapore home prices will rise 20 per cent next year.

Singapore’s housing market has been hit hard by the downturn, with home prices plunging nearly 14 per cent in the first quarter of this year, the steepest drop in over 30 years, according to government data.

Separately, Nomura said unemployment was stabilising in Hong Kong and forecasts home prices and rents in the Chinese territory will rise by 22 per cent and 11 per cent, respectively, this year.
A poll of 10 analysts conducted in conjunction with the Reuters Global Real Estate Summit showed China home prices are expected to gain an average of 10 per cent between now and the end of 2010.

The outlook for Asia’s office market remained negative but most developers said rents have stabilised after falling sharply in the fourth quarter of 2008 and earlier this year.

Some investors said any pick-up may not be sustainable.

Source: Business Times, 25 June 2009

Investors expect Asian real estate market recovery to start in 2010

Investors are optimistic that the Asian real estate market will bounce back soon after being battered by the global financial crisis.

A survey by the Asian Real Estate Association (AREA) showed that more than half of the investors polled expect signs of improvements in the market by 2010.

This optimism has prompted investors to allocate more funds into all real estate investment categories in the next three to five years.

The optimism is due to continued growth in emerging Asian economies like China and India, as well as increasing levels of professionalism and transparency in markets like Singapore.

Observers said this is expected to fuel investor interest in the regional property market.

There has also been a shift in the perception of investors in favour of Asia.

Robert T. Lie, managing director of Redevco Asia, said: “When we look back a couple of years, Asia was seen as a very risky market so investors who are allocating funds to Asia are also demanding high returns. A lot of fund managers did what investors asked and developed a lot of opportunistic products.

“What we see now, more and more, is that Asia becomes part of the normal investment world, with room for opportunistic and value-added products, but increasingly for qua-type products – that’s definitely a development that we see.”

A survey by AREA also highlighted China, Australia and Japan as the top three countries for investments. China’s residential and retail, and Australia’s and Japan’s office markets were the preferred sectors in the region.

Among the three types of investors polled, institutional investors favoured residential and retail sectors in China.

Fund managers focused their investments on China’s retail sector as well as Australia’s and Japan’s office sectors, with Japan office investments the favourite among fund managers.

Interestingly, compared to last year’s survey results, Australia posted a huge leap in terms of investors’ preferences. AREA attributed this surge to possible property prices and currency effects, as well as a change of sentiments among investors.

The annual survey, which is into its second year, aims to provide a global view on the trends in Asia’s non-listed property market.

A total of 73 organisations in Europe, Asia and the US, including institutional investors and fund managers, participated in the online survey this year.

Source: Channel News Asia, 24 June 2009