No vertigo for hungry Asia property investors
SINGAPORE (Reuters) - It's a decade since an asset bubble fed the Asian economic crisis and fears swirl over the U.S. housing market and interest rates, but investors still believe the only way for Asia's soaring property markets is up -- at least for a couple of years.
Asian economies are booming, and property is once again the hot subject of dinner conversations from Tokyo to Mumbai, fuelled by cheap credit, cross-border investment and rising incomes.
Policy makers fear a boom-and-bust cycle, where rising real estate prices fuel inflation and force interest rates higher, leaving households and companies loaded with debt and dragging on economic activity.
But at the Reuters Real Estate Summit this week in Singapore, where some residents are seeing their rents jump 50 percent overnight, property executives effused about India, despite a doubling in urban land prices since foreign property investment was ushered in two years ago.
Japan also appears to be still hugely popular, although average Tokyo office prices have leapt 25 pct in last two years.
And investors believe government cooling measures will bring order to China's market, while failing to stem a hunger for homes among the expanding and increasingly affluent middle class.
Justin Chiu, executive director of Hong Kong property giant Cheung Kong (Holdings)(0001.HK), said the prospect of ever higher prices was driving Asia's notoriously sentiment-driven markets.
"If there are no bubbles, you don't drink beer. It's just plain water and there's no incentive to invest," he said. "Of course, if you see too many bubbles, you stop pouring."
Cheung Kong expects mainland China to account for a third of its property earnings by 2010 from about 18 percent now.
The Asian continent saw some $94 billion of property investment in 2006, up 43 percent on the previous year, but barely one seventh of the global total. And investors show no sign they will stop the flow.
Morgan Stanley (MS.N) said last week it had earmarked for 60 percent of a new $8 billion fund for Asia and Goldman Sachs (GS.N) has raised about the same amount in a couple of funds, according to a source familiar with the matter.
ING Real Estate is raising two $1 billion funds for Asia, and private equity firm Blackstone (BX.N) is raising $10 billion to spend globally.
ANYTHING LEFT TO BUY?
But some market watchers wonder where all the money will be spent, and if rising values will curb investment returns. Asian commercial property is tightly held by families and private companies, so Peter Barge, Asia chief executive of property consultants Jones Lang LaSalle, believes many investors will have to take on risky development projects.
"There's a lot of money on the books, but people are scratching their heads about what to do with it," Barge said. Continued...
