Published April 29, 2008

Asia - some bright spots amid challenges

Asia expected to weather real estate downturn


THE mood was generally subdued at a property conference held by Citi yesterday although a few positive assessments of the market provided some bright spots.

Opening the event, Citi country officer Piyush Gupta said that 2007 was a strong year for property across Asia but the first quarter of this year had been challenging.

Property indices are under-performing the broad market in several regional cities, such as Hong Kong and Singapore, he said.

Amid this broad picture however, it is not all doom and gloom. Banyan Tree executive chairman Ho Kwon Ping pointed out that the US sub-prime crisis and the resulting credit crunch have so far had minimal impact on the high-end hospitality business.

In fact, having just returned from a roadshow in the Middle East to promote the group's Indochina hospitality fund, Mr Ho said that investors' reception was positive.

According to him, there has been no perceptible slowdown in the hotel business, though travel within the US has probably come down.

'Even the sale of branded residences by us this year has increased several-fold over the last year,' said Mr Ho, as buyers probably see them as a relatively attractive form of alternative investment.

Citi's real estate research team also reckoned that there are some worthwhile investment real estate plays, despite the market slowdown, in the form of real estate investment trusts (Reits).

An April 25 Citi report on Singapore property says: 'We believe news flow for developers will remain negative and are hence putting a cap on developers' performance. Suntec, Ascendas, Parkway Life and Capitamall Trust are our preferred buys among Reits.'

Ending yesterday's media session on a hopeful note, Citi's Asia-Pacific director of research Adrian Faure said that although Asia will not be immune from the sub-prime crisis, it is in good shape to weather the real estate downturn, underpinned by low loan-deposit ratios and strong liquidity.