Opportunities in Asia-Pacific real estate remain despite weak sentiment

Source : Channel NewsAsia - 25 Aug 2008

The global real estate capital market grew last year to hit US$12 trillion, but the subprime crisis has thrown a spanner in the works.

Investors are finding it tough, with liquidity drying up, yields compressing, and valuations in the US and UK dipping.

However, some analysts said that opportunities do remain and may even grow, as markets approach fair value.

They noted that demographics in emerging Asia also support long-term investment horizons.

Property prices around the world have suffered as investors attempt to ride out the current uncertainty in the market by holding back funds.

Ong Choon Fah, executive director and head, SEA Consulting and Research, DTZ, said: “Because there is so much uncertainty around the markets - financial markets, capital markets, equity markets - people don’t really know what to think, and when one is confused, people don’t want to make major decisions.”

Property watchers said that yields and prices are expected to correct further on the downside in the year ahead - with some sectors hit more than others.

David Green-Morgan, Asia-Pacific Research Director, DTZ, said: “Potentially, industrial and retail sectors may correct more than the commercial office sectors, which tends to be more resilient…the down side tends to be less in those areas.”

DTZ said that the one bright spot in the real estate market lies in Asia-Pacific, where economies have held up comparably well so far.

Mr Green-Morgan said: “At the moment, it is holding up quite well and that is due to the fact that there is a much bigger domestic market in Asia-Pacific than in previous slowdowns, and also because there is much more wealth in Asia-Pacific, than historically.”

And DTZ said this has kept overall property prices reasonably firm as prospects for capital growth dry up.

The focus is now on occupier fundamentals.

And for this, DTZ’s top picks currently include resorts in Thailand’s leisure sector, and its serviced residences.

It also likes emerging markets such as Vietnam - where demographics are a key factor.

Ms Ong said: “Although Vietnam has its own set of problems, if you look beyond the immediate future, it has a huge population…it has one of the longest coastlines in Asia. So again there are opportunities there.”

DTZ said that another area of interest is Indonesia, where residential prices have come off highs, coupled with a growth in infrastructure projects.