A widening bid-ask spread has emerged in major real estate markets across Asia, as property owners, supported by solid market fundamentals, remain reluctant to lower their asking prices to meet the expectations of potential buyers, according to the CB Richard Ellis’ Asia Pacific Investment Market Report for the second quarter of 2008 titled, ‘Dampen Asia’s Real Estate Investment Market’.
Like most property markets around the world, Asian markets have been affected by slowing economic growth and unsettled capital markets. Many investors expect the ripple effect of the global credit crunch to continue unfolding in Asia. However, financially-sound institutional investors, including pension and sovereign wealth funds, remain active across major cities in Asia. Direct commercial property transactions in Asia were up moderately in H12008, as compared to the corresponding period last year.
In India, the investment market remained subdued. Anshuman Magazine, chairman and managing director, CB Richard Ellis, South Asia, comments, “Investors have been exercising restraint in launching new developments and projects intended to support new emerging commercial hubs. Developers’ profitability was also impacted by rising construction costs, escalating interest rates and tighter lending measures.”
Japan continued to attract the most investor interest, accounting for over 30% of Asia’s major investment transactions. Here, banks and FIs have been curbing lending activities this year. Highly leveraged investors therefore sought to reduce debt by bringing assets to the market and this resulted in a re-pricing of residential, suburban retail and fringe offices properties.
Singapore’s investment market turned quieter as compared with the preceding year. However, financially-sound investors remained fairly active and a total of S$13.4 billion worth of investment transactions were recorded in H12008. However, the Hong Kong property market saw a cooling of sentiments, with more subdued investment activity witnessed during H12008.
In China, H12008 continued to see central government policies designed to absorb excess market liquidity. In June, the People’s Bank of China (PBoC) raised the bank reserve ratio from 16.5% to a record high of 17.5%, making it increasingly difficult for developers to secure loans. Most developers have constructed only a small fraction of their 2008 budget, as a ‘wait-and-see’ atmosphere prevails across most cities in China.
Recent elections have improved the Taiwanese investment environment by ushering in a period of closer relations across the Taiwan straits. In H12008, all investment deals were transacted by local purchasers.
