Asia's battered property markets are starting to attract strong interest from investors, with Japan, Australia, China, Hong Kong and Singapore among their top picks in the region.
Property fund manager LaSalle Investment Management, which raised a $3 billion fund in August, expects Hong Kong and Singapore to recover first from the financial turmoil, its regional director David Edwards said.
“We are seeing a decline in values throughout the region. There are properties that are being sold at much lower prices than the market's perception of their values,” Edwards said.
ING Real Estate plans to double its investments in Asia to $1 billion, with most of its investors in Europe wanting to diversity into the region, said the firm's Asia Pacific managing director Nicholas Wong.
ING invested mostly in China and Japan, he said, and was now marketing a $750 million fund to build Chinese housing.
Several Asian markets were already 30%-40% off their peaks, Wong said. And a Reuters poll last week found that analysts believe Hong Kong and Singapore prices are set to fall by at least a fifth in the next year.
“Most of our clients are from the UK and Europe and traditionally, they invest only at home,” Wong said. “Now, they want global exposure and most of them want to go to Asia for diversification.”
With Hong Kong, Japan and Singapore in recession, Asian developers are battling falling demand and tighter credit, even after efforts by central banks to encourage lending by slashing key rates.
In Hong Kong, the de facto central bank has lowered its base rate twice in the last month, while in China, monetary authorities have cut borrowing costs three times since mid-September.
“The risk of bankruptcies are still higher throughout Asia and most financial institutions are not out of the woods yet,” said Kelvin Lau, economist at Standard Chartered Bank in Hong Kong. “That's why overall lending conditions have not yet returned to normal.”
In Japan, more than 400 small and medium-sized developers have gone out of business this year as the residential market slowed and as credit dried up.
But the tough environment is not stopping property investors from prowling the region for bargains.
“The present environment is incredibly difficult. As a business, we are taking a cautious approach. But we are still looking,” said LaSalle's Edwards.
LaSalle had so far invested $10 billion in Asia and nearly half of the amount was in Japan, Edwards said. The company was also keen in Australia and China, he added.
Other investors were optimistic that some property segments would recover soon.
China's ailing housing market, for instance, may stabilize in about six months and recover in two years, before most other Asian countries, said Cheng Soon Lau, managing director at Invesco Real Estate Asia.
Invesco is planning to invest directly in China, Japan, Hong Kong and Singapore, buying office blocks and building housing.
Managers of securities funds are becoming less worried that investors will withdraw money, according to Chris Reilly, director of property for Asia at Henderson Global Investors.
“Right now, there is really not much redemption,” Reilly said. “The cycle of redemption was more severe in the last 2007 and early 2008, the period when retail investors are quite scared.” (Reuters)