Soaring property costs affect investors in Asia

Soaring property costs affect investors in Asia

SINGAPORE (AFP): Soaring property costs have eroded the
benefits of cheap labor in developing Asian countries and left
some banks dangerously reliant on real-estate lending, according
to a regional business consultancy.

"As soon as foreign direct investors start showing real
interest in a country, rents and prices for any property they
might want to use start going through the roof," the Political
and Economic Risk Consultancy Ltd. (PERC) said.

"The pattern has happened in China, Vietnam, India and, most
recently, in the Philippines. At some point in the future, it
will probably happen in Burma, Cambodia and North Korea," said
the report, received here Monday.

It added that whatever the political system, Asian businessmen
and officials seem to fall back on real estate as a "quick source
of cash," often resulting in two markets existing side by side --
one for locals, another for foreigners.

"High property rents and prices alone are enough to erode many
of the competitive advantages some of Asia's developing countries
hope to secure through their relatively low labor costs," the
report said.

"Real value for the dollar does not exist. The pace of
property development in emerging economies has been too slow to
satisfy the growth in demand from international companies," it
added.

PERC warned that many banks in Asia had grown "fat and lazy"
after relying too much on property-related businesses, and some
institutions had become "over-exposed and vulnerable to sharp
corrections in the market."

"A crunch period in Thailand could be imminent," it warned.
PERC also said a real-estate boom can inhibit growth in other
economic sectors, but "all indications are that this Asian love
affair with property will continue, if not intensify."

"The urban population of East Asian developing countries will
jump to more than 1.2 billion in the next 25 years from 500
million at present, necessitating huge additional expenditure on
housing," it said.

"Meeting such housing needs could emerge as one of the
region's most serious policy challenges," it added.

Regional property experts say rents and property prices have
escalated most sharply in emerging economies in Asia where supply
of office and factory space, as well as expatriate housing, has
not kept up with explosive demand.

A regional real estate conference held recently in Singapore
was told that Beijing overtook Tokyo this year as the most
expensive place to rent luxury housing, with Vietnam's Ho Chi
Minh City a close third.

Average monthly rent for luxury housing in Beijing averaged
US$80 per square meter (10.76 square feet) in May, according to
property consultants Brooke Hillier Parker.

This compared with $62 in Tokyo, $60 in Ho Chi Minh City, $55
in Hanoi, $52 in Bombay and $50 in New Delhi.

The least expensive cities for high-end housing rentals were
Bangkok at $13. 50, Kuala Lumpur at $13 and Colombo at $8 -- all
cheaper than Phnom Penh's $20.