ASEAN's property markets unsteady

ASEAN's property markets unsteady

SINGAPORE (AFP): Southeast Asia's largely overheated property markets, a key source of the present financial turmoil in the region, have not bottomed out yet with banks expected to push their borrowers into selling, analysts said yesterday.

The regional stock market downturn coupled with the currency meltdown could force banks and other financial institutions to go after borrowers committed to property purchases, said Christopher Brown, Singapore chairman of global consultancy Jones Lang Wootton.

"I think that might occur somewhat sooner, may be towards the end of this year or next year," Brown said after the company's media briefing here on the Asian property market.

"You may see some institutions in Thailand, etcetera pushing for some direction, action, or pushing their borrowers into selling," he said, adding such action could also be possible in the Philippines and Malaysia.

Brown said as property cycles in Asia were shorter than those in developed markets, the region could move out of the bearish period within a short span of time, especially if investors took advantage of the lower prices offered.

"The markets here have not dropped to their lowest levels yet," he said, but added the recovery could be much sooner than the four years Australia took to see real recovery from the property downturn in 1990.

Property bubbles have appeared in most of the Southeast Asian economies, most of whose currencies have eroded sharply against the U.S. dollar leading to falls in the stock markets mainly after imposition of capital market controls.

Gaw Seng Suan, associate director with international property consultancy Richard Ellis Singapore, said the possibility of banks foreclosing on mortgage loans would arise if the financial crisis resulted in drastic economic slowdown and further dampens sentiment.

Gaw said property prices could drop further based on data collated by the consultancy.

"We do share the view that based on data coming through today, especially the high levels of unsold and unoccupied properties will put downward pressure on prices and rentals at a time when take-up is weakened and sidelined by poor sentiment," Gaw said.

However, he added that once the regional currency crisis blows over, foreign investors would be more willing to explore investing in the region's property market to take advantage of the weak currencies.

Southeast Asia's currency turmoil erupted with the effective devaluation of the Thai baht after Bangkok faced a plethora of economic problems, including overexposure of banks to the bloated property sector and a collapse of real estate prices.

Malaysia, the Philippines, Indonesia and Singapore have also imposed property curbs to thwart excessive speculation, restrict property financing and cool down overheated real estate sectors.

A hike in interest rates to check the steep slide in Southeast Asian currencies had also increased the mortgage repayment burden for borrowers, analysts said.

Brown said rental rates were falling in Kuala Lumpur, Singapore, Ho Chi Minh City, Bangkok and Manila, bottoming out in Tokyo and accelerating in Hong Kong.

He added that more mature markets like Hong Kong and Singapore would hold firm and remain safe havens for investment.

"Generally the region has sound fundamentals despite the short term financial market turmoil and weak sentiments," Brown said, adding it would in a way benefit from a "cooling off" period and reduction in supply overhang.