High rewards as Asia bottoms out

Business Asia, March 3, 2000

Asian property markets have bottomed out and several offer potentially high rewards to investors, the Asia-Pacific head of property consultants Jones Lang LaSalle (JLL) says.

"Asia will once again be the fastest-growing emerging region," said Christopher Brown, JLL's Asia Pacific executive chairman.

But he said that although significant problems remained in several Asian economies, property in the region's major developed cities showed signs of strong growth with fairly low risk.

A recent study by LaSalle Investment Management Research showed property markets in Singapore, Hong Kong, Sydney, Melbourne and Seoul offered high potential growth as economic expansion fuelled consumer demand and investor appetite.

The assessment was based on a range of factors including likely economic growth, job prospects and property supply.

Brown said the regional picture was still patchy, with some cities lagging far behind the star performers.

The potential for higher property demand in cities such as Bangkok, Beijing, Ho Chi Minh City, Kuala Lumpur and Manila was far below that for Singapore and Hong Kong, the study showed.

On a scale where 1.00 represents the average for the region, Singapore scored 1.70 on the company's Asia-Pacific Real Estate Growth Index, with Hong Kong second on 1.56. Bangkok and Manila had the lowest scores with just 0.53 and 0.49 respectively.

"Singapore values fell 40 to 50 per cent from their peak in mid-1996 but are now back to 15 or 20 per cent below those (peak) levels with growth continuing," Brown said.

"On the other hand, Indonesia has nowhere near recovered yet, while Thailand hit bottom in the second quarter of 1999 and is recovering since the supply pipeline has been turned off."

Brown said there had been a "significant increase" in interest from foreigners for acquisitions in the region.

Brown said new financing initiatives across Asia offered smaller and more risk-averse investors the chance to enter the larger and more expensive property markets.

Real Estate Investment Trusts, which allow investors to take small stakes in large property projects, were beginning to take off in Singapore, for example, and elsewhere mortgage or asset-backed securitisation offered similar opportunities.

"It's complicated because there are different tax structures around the region, but there is a trend towards various types of investment vehicles, which offer investors the opportunity to come into investments with others," he said. "It is all about risk profile and allowing investors to manage that."

The property market was also becoming more fluid with a range of servicing industries opening up.

Brown said many Asian companies that had survived the Asian economic crisis of the last few years wanted to concentrate on their core activities and not be involved in the multitude of areas where they used to have interests.