Singapore, 5 December 2008 – Singapore retains its second place rating in the top five Asia Pacific cities in terms of real estate investment prospects, according to Emerging Trends in Real Estate® Asia Pacific 2009, recently released by the Urban Land Institute (ULI) and PricewaterhouseCoopers (PwC).
The 2009 edition of Emerging Trends in Real Estate® Asia Pacific features investment and development prospects for 20 metropolitan markets in the Asia Pacific region. Now in its third year, this highly regarded and widely anticipated report is based on surveys and interviews with hundreds of the industry’s leading authorities, including investors, developers, property company representatives, lenders, brokers and consultants. In addition to the outlook for markets, Emerging Trends contains investment and development prospects for individual property sectors, including office, retail, industrial/distribution space, hotels and residential.
“Asia shares the same liquidity crises that the balance of the world is facing,” said Stephen Blank, ULI Senior Resident Fellow for Finance. “Financial institutions – whether international or national, regional or local – are reluctant to extend credit as de-leveraging reduces balance sheet lending capacity. While fundamentals in most markets and property sectors will be impacted by the prospects for a global recession, financing will be the single biggest issue facing the industry in 2009.” Blank presented the report today at the Asia Pacific Real Estate conference organised by PwC in Singapore.
The report acknowledges that the “credit squeeze became a chokehold… culminating in the near-paralysis of regional debt markets.” The “moment of truth” has yet to arrive in the Asia Pacific (with the exception of China and Japan where the credit squeeze began earlier). “Refinancing may be the catalyst that brings the crisis home to regional real estate markets… during 2009 and into 2010 as short-term and construction loans mature,” states the report. However, as one fund manager noted, “Banks are being very accommodating because they know that if they start foreclosing on these rollovers, it’s just going to force values to fall further.”
But, the report cautions, “One potentially major problem is that the credit freeze will cause economies to seize up. That’s the big risk for the entire industry.”
Asian property sales plunged 68 percent in the third quarter of 2008 compared with 18 percent year over year through August, according to Real Capital Analytics.
Investment prospects in Singapore
In terms of investment prospects, Singapore’s strategic position as a central gateway for the Asia Pacific region ensures its number two rating for investment opportunities. The city ranks seventh overall for development prospects, and has to reconcile itself to slower growth and less demand, according to the report. However, the city has the second best risk rating after Tokyo.
“The biggest threat to Singapore other than the squeeze on credit, is the seemingly generous pipeline of development projects which may be completed during a period of sagging interest from foreign business investors,” said David Sandison, Tax Partner, PricewaterhouseCoopers. “Apart from this, local players in the retail and office space are also seeking to cut costs by downsizing and relocating to more affordable parts of the island. Acceleration of government infrastructure projects and other measures aimed at buoying the economy should however be sufficient to stabilise the market and see it relatively safely through these troubled times.”
The strongest buy and hold recommendations for Singapore are in the hotel sector, where 65 percent of respondents advised holding, 24 percent recommended buying, and only 9 percent suggested selling. The residential (rental) sector was also a strong hold at 65 percent, 23 percent recommended selling and only 11 percent advised buying.
The office sector rated a hold by 54 percent of respondents, while 23 percent advised buying and 21 percent recommended selling. The industrial/distribution property sector showed 52 percent of respondents with hold recommendations, 34 percent with buy and 13 percent with sell.
Markets to watch in Asia
The Asia Pacific cities included in Emerging Trends fall into different categories based on each market’s investment and development prospects, and on respondents’ opinions about buying,
holding or selling specific property types within each market. Joining Singapore in the top five investment cities are: Tokyo, Hong Kong, Bangalore and Shanghai. All of these cities reflect a sentiment to hold or buy most property types. In the top five development markets, Bangalore is ranked first, followed by Ho Chi Minh City, Mumbai, New Delhi and Taipei.
Among property sectors most promising, offices take top ranking for both investment and development. Ho Chi Minh City is ranked the best market for buying office properties, followed by Tokyo, Mumbai, Shanghai and Bangalore. The industrial/distribution sector ranks second for favoured property types. Shanghai gets the top buy rating, followed by Ho Chi Minh City, Bangalore, Mumbai and Guangzhou. Retail ranks third in property sectors, with Ho Chi Minh City garnering the top buy rating, followed by Mumbai, Shanghai, Bangalore and Beijing. Residential (rental) apartments rank fourth in property sectors with Ho Chi Minh City, Mumbai, Bangalore, Tokyo and Taipei the top five buy markets. Hotels witness a major drop from last year, when it was the favoured property type. Top five markets are: Mumbai, Bangalore, Ho Chi Minh City, New Delhi and Shanghai.
A complete copy of Emerging Trends in Real Estate® Asia Pacific 2009 is available at www.uli.org.