SE Asian property market downturn is cyclical: Expert
SE Asian property market downturn is cyclical: Expert
SINGAPORE (AFP): A downturn on property markets in parts of Southeast Asia is a cyclical phenomenon that will pass when balance is restored between demand and supply, a regional real- estate expert said yesterday.
"I think that every real estate market actually undergoes a cycle," said Christine Lam, director of sales for a regional property market show to be staged in Singapore by the France- based Reed Midem Organization.
"It would be unrealistic to expect every real-estate market to forever appreciate," Lam told reporters, adding that past experience showed an eventual return to an "appreciating trend" in property values.
Worries about the property sector, and by implication the banking sector, have plagued Thailand as well as the Philippines and Malaysia amid a real-estate glut.
Thailand is battling a financial crisis caused by non- performing loans extended by finance firms to the property sector and there have been fears that similar problems could surface elsewhere in the region.
"In any of the markets in which you see oversupply at the moment, I don't think you would be able to purchase a piece of property today for what you paid 10 years ago," Lam said.
"Every market is always going to be a supply and demand market, and when there is oversupply, housing starts will go down and the market will eventually balance out," she said.
Analysts blame a long period of high economic growth across the region which boosted property sector profits and encouraged developers to take up over-ambitious projects.
The glut resulted because of too much supply coming into the market at the same time, while demand takes a longer time to materialize. Oversupply leads to asset price deflation and lowers rentals.
Banks, meanwhile, have in many cases increased their exposure to the property sector to high levels.
Property consultancy Jones Lang Wootton said in a recent report that the outlook for the Southeast Asian markets this year was "one of caution as they come under the influence of increasing supply."
Lam said part of the problem may be that the price of new developments had exceeded the "affording power" of residents.
But she said there was "a lot of potential" in the region, citing moves to liberalize and deregulate real-estate markets to attract foreign investments, while stopping short of predicting when an upturn would begin.
There were "lots of vultures circling around Thailand, looking at the market," she said.
"There are a lot of investment dollars out there, but buyers will only go in when they think it is the right timing," Lam said.
More than 100 companies involved in real-estate are expected to attend the regional property market show which will be staged here from September 16 to 18, the organizers said.
Potential investors will meet developers, insurance companies, pension funds, banks, architects and corporate end-users in the Asia-Pacific market at the event which will showcase major new developments.
Projects on show include the new Pudong business development area in Shanghai, the Bumi Serpong Damai, a new city in Indonesia near Jakarta, Fort Bonifacio on the outskirts of Manila and the Taiwan high-speed train project.