Asia Continues to Lead the Way

Steady improvements have been made in the Asian real estate investment market during the first half of 2010, a new report shows.

Direct real estate investment in the first six months of the year grew by 136 per cent year-on-year to an estimated USD 30 billion....

Steady improvements have been made in the Asian real estate investment market during the first half of 2010, a new report shows.

Direct real estate investment in the first six months of the year grew by 136 per cent year-on-year to an estimated USD 30 billion.

This is according to the CB Richard Ellis's (CBRE) Asia Investment MarketView report, which also noted that despite investment levels rising in most Asian markets, investment volume fell by 22 per cent quarter-on-quarter. The report noted that this decline in activity in the second three months of the year was likely to be a result of investors turning more cautious following the implementation of various government cooling measures.

Furthermore, concerns about the fragility of the global economic recovery and the eurozone sovereign debt crisis also negatively impacted investor sentiment in the second quarter. Many markets turned to state controls earlier in the year in an attempt to curb speculative activity.

Government Measures Leading to Falling Sales

The report comes just as a leading Chinese real estate association called for the government to end property cooling measures after sales began to fall. According to Zhu Zhongyi, vice chairman of the China Real Estate Association, the real estate market tightening measures should be postponed in order to stabilise the market. His call comes as the latest official figures show that property prices in China rose at the slowest pace in six months in July and the value of sales fell 19.3 per cent from a year earlier.

Zhu fears that the crackdown on real estate speculation is likely to have a negative effect on the health of the market. He claims that property companies are concerned that cooling sales may prompt developers to slow land purchases and new projects and harm the industry's growth over the next two years. It may be wise to heed his call, with his association representing in excess of 2,000 real estate developers and intermediaries across the nation.

Uneven Recovery

Looking back at the CBRE report, Japan was the most active market in the region accounting for 29 per cent of all sales and posting a 62 per cent year-on-year rise.

Also performing strongly were Hong Kong, South Korea and Taiwan which all posted quarter-on-quarter increases in transactions, rising by 33 per cent, 81 per cent and 79 per cent respectively. However, it was not all good news for the region as the aforementioned China reported a sizeable decline in transactions compared to the first quarter. "The region is experiencing an uneven recovery and the persisting mismatch between sellers' expectations and buyers' risk tolerance will continue to restrict market activity in the second half of 2010," said Andrew Ness, executive director of CBRE Research Asia. "However, the relatively steady level of activity witnessed in the first half could potentially be matched in the second half and total investment volume in Asia for 2010 could therefore reach around USD 60 billion."

Growing Importance in Commerce

Many investors may be drawn to the Asian markets as a result of their growing importance in terms of commerce. The recently published list of top 50 cities from across the world, by the Foreign Policy magazine, found that momentum is shifting towards the east. The list encompasses a combination of rising and upcoming cities and the "continuing dominance of the great capitals of old-school commerce".

Although topped by New York and London, four of the world's top ten most global cities are in Asia, with Tokyo, Hong Kong, Singapore and Seoul all named. "There's no question which way the momentum is headed: Just as more people will continue to migrate from farms to cities, more global clout will move from west to east," the magazine said in its analysis. The list, which is compiled in collaboration with AT Kearney and The Chicago Council on Global Affairs, takes into account "how much sway a city has over what happens beyond its own borders - its influence on and integration with global markets, culture, and innovation".

Government Debt

However, Mr Ness highlighted the high level of corporate and government debt currently outstanding in Asia as a potential stumbling block for real estate recovery. He pointed out that this continues to be viewed within the region as a potential risk; although overall the Asian real estate investment market remains generally buoyant but is expanding at a slower pace than originally forecast.ADNFCR-3415-ID-800030412-ADNFCR

- Thursday 19 August 2010

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