Asian Property Withstands The Global Storm

[churchill]

Buying into office buildings and residential property across Asia now looks tempting, as analysts forecast a price growth of 20 per cent across the region before the end of next year.

Since January, there has been a rush of deals closing in Hong Kong, Sydney, Shanghai and Kuala Lumpur – with commercial property sales in this part of the world eclipsing those conducted in Europe, the Middle East and the Americas for the first time on record.

The figures suggest the sector is proving resilient in the wider downturn. As western economies combat the effects of the credit crisis, declines in exports across Asia are slowing, fiscal balances appear stronger than those of western countries, and banks have not been hit as badly by the wider lending crisis.

Interest in flats and offices is now set to gain further momentum, with the Asian property research team at UBS estimating a 20 per cent rise in Chinese house prices by December 2010, and a 30 per cent uplift in the price of Hong Kong homes and offices.

Hong Kong remains the easier market for property investors to access. Those looking to invest directly in mainland China must reside there for at least a year, while property in Singapore has been affected by higher supply levels and the city-state’s economic ties to the US.

By contrast, Hong Kong rental prices are nearing bottom and could rise as the economy picks up and Chinese companies rush to open offices on the island after listing on the Hong Kong stock exchange.

The improving liquidity of Chinese markets and Beijing’s decision to set its GDP growth target at an aggressive rate of 8 per cent this year are also encouraging.

Simon Smith, head of Asian research for Savills, says: “Hong Kong is still the best proxy for investors looking for exposure to mainland property markets.”

Apart from Australia and Hong Kong, it is fairly difficult for private investors to directly access Asian property markets. For those looking for indirect exposure, there are a handful of funds listed in Luxembourg, the UK and Ireland as well as investment companies such as China Real Estate Opportunities, Asian Growth Properties and Macau Properties Opportunities. But many of these trade at sharp discounts to their net asset value, and tend to be illiquid and with few holdings.

Two listed funds that have reported strong returns since January are Henderson Horizon’s Asian property investment fund, which is up 26 per cent, and First State’s Asian property fund, which has returned 17 per cent over the period. A small number of property companies are also listed on the Alternative Investment Market (Aim) but only risk-takers tend to seek them out.

While private investors looking to diversify are growing more intrigued by the region, the direction of the Asian property market is still driven by institutional investors. There has been a wave of fundraising among large property groups and private equity firms hoping to achieve rates of return that are still attractive compared with western countries.

Recent forays into the market include those by Carlyle, the US private equity group that is raising money for its second Asian property fund, and Axa REIM, the European property fund manager looking to invest in mid to high-end residential property in Shanghai and Beijing. Their moves follow fund raisings last year by Merrill Lynch, LaSalle Investment Management, Invista Real Estate and Grosvenor, the property company owned by the Duke of Westminster.

But while the economic reports being released from Beijing are rosier than those issued by the west, China’s property markets have not been immune from the downturn.

A recent report from CB Richard Ellis, the property group, claims that vacancy levels in Beijing offices were still high in the first three months of the year at 21 per cent, although they declined from the previous year. The state of the market has been similarly poor in Guanzhou and falling office rents in Hong Kong can be blamed on the surge in the number of companies looking to trim expenses by renegotiating leases and moving to cheaper locations.

A bright spot, however, is the hotel construction boom that has accompanied China’s growth. This year, more hotels are expected to be opened in the country than anywhere else, apart from the US.

http://www.ft.com/cms/s/0/39c7162a-8379-11...144feabdc0.html

[hhgz]

The Ritz Carlton has started construction of a 180 unit, 75-story condo, next to The Infinity condo. Starting at 250,000THB/sqm, the condo will be completed in 2013. The development will also include a hotel and shopping center.

[trogers]

These analysts are a year late

I made this forecast over a year ago when I acquired my first condo last Aug.

[churchill]

The Ritz Carlton has started construction of a 180 unit, 75-story condo, next to The Infinity condo. Starting at 250,000THB/sqm, the condo will be completed in 2013. The development will also include a hotel and shopping center.

Not next to The Infinity condo in Samui I assume - where the building limit is 12 metres ! Must be HK ?

[pavlovsdog]

Sounds about right. Beach side Condos in Switzerland are also a great investment at the moment

[hhgz]

"not next to The Infinity condo in Samui I assume - where the building limit is 12 metres ! Must be HK ?"

No, a lot closer to home. It's near the corner of Narathiwas and Sathorn, in Bangkok. After 3 weeks, it's already taller than the Ocean One in P'ya.