Sub-prime crisis to lower investment in Asia’s property sector

The global sub-prime crisis will this year have the greatest impact on “mature” property markets in the Asia-Pacific region, leading to an overall decline in investments, international property consultant Jones Lang LaSalle predicted Tuesday. Direct commercial real estate investment in Asia Pacific reached a new high of 121 billion dollars in 2007, up 27 per cent on 2006, but prospects for 2008 are less rosy, said Jones Lang LaSalle.
Fallout from the sub-prime crisis, which started in the US, has been most evident during the first quarter of 2008 in more mature markets in the Asia-Pacific, such as Tokyo, Singapore, Sydney and Melbourne, where office capital values appear to have peaked, while a slowing in price growth is also likely for Hong Kong.
“As these markets account for the lion’s share of investment activity, we expect a decline in overall transaction volumes in Asia Pacific this year following the record result in 2007,” said Jane Murray, Head of Research – Asia Pacific at Jones Lang LaSalle.
But the sub-prime crisis will have a varied impact on the region’s property sector this year, said the real estate consultant.
In the office sector, a sharp slowing in rental growth is under way in Tokyo, while Singapore is seeing the beginnings of a softening in pre-let rates, and Shanghai has begun to brace itself for slowing demand in Pudong amongst its vital financial services tenants, said Jones Lang LaSalle.
But on the other end of the spectrum, the Manila office market has seen strong growth in business process outsourcing due to the increased emphasis by multinational corporations (MNCs) on lowering operational costs, it noted.
Another trend noted was that of MNCs moving their offices from central business locations to “cheaper peripheral sites.”
Singapore, for example, is seeing strong enquiry levels for built-to-suit options in business park locations, driving up rental levels in these districts.

One Comment

  1. Posted May 30, 2008 at 5:13 am | Permalink

    The turmoil in the global financial markets has cast its shadow on India’s largest real estate deal. India’s real estate developers, especially the mid-sized ones, have been facing a liquidity crunch since last year. Developers can no longer tap the external commercial borrowing route, while domestic borrowing costs have gone up on account of tight-fisted monetary policy, which is likely to harden further in days to come. In addition, the stock market has taken a beating with real estate stocks falling off their recent highs. Other sources of funding for instance, the London Stock Exchange’s Alternate Investment Market or listing real estate investment trusts abroad are also not feasible in current market conditions.
    The tender that BPTP won, beating bigger players like DLF and Omaxe, has an allowed the company to seek an extension to pay the first tranche.Failure to make the payment within the extended deadline would result in the award being scrapped and a fresh tender being announced.What impact will it have on the Indian economy in general and Indian real estate sector in particular???For more view-

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