Published December 6, 2008

Best Asia-Pac property bets


TOKYO, Singapore and Hong Kong have emerged tops in the Asia-Pacific in a recent ranking of cities with the best property investment prospects for 2009.

They were placed first, second and third respectively as investors shifted their attention from emerging cities to mature markets, the survey by America's Urban Land Institute (ULI) and PricewaterhouseCoopers (PwC) showed. Shanghai, which was ranked first in last year's survey, fell to fifth place this time around. Beijing fell from sixth to 12th place and Ho Chi Minh City from eighth to 13th.

Survey respondents said 2009 is the time to be 'picky about markets and partners', ULI and PwC said in the report, which was released here yesterday.

In recent years, many investors who had been elbowed out of deals in major Asian cities by core funds or highly leveraged private equity players sought refuge in secondary locations or products in an effort to find value. In today's environment, however, investors are again focusing on prime assets in major locations.

At the same time, projects in secondary markets or even in less well-positioned prime areas are more likely to run into problems, especially as slowing growth lowers demand for commercial properties.

Respondents were also asked to rate cities according to their riskiness. Tokyo, Singapore and Sydney were the three markets seen as least risky.

But Singapore was ranked seventh for development prospects and has to reconcile itself to slower growth and less demand, the report said. Bangalore, Ho Chi Minh City and Mumbai were ranked the top three cities for development prospects.

In Singapore, the strongest buy and hold recommendations were for the hotel sector - 65 per cent of respondents advised holding, 24 per cent recommended buying and only 9 per cent suggested selling. The residential rental sector was also a strong 'hold' (65 per cent). But 23 per cent recommended selling and only 11 per cent advised buying.

Singapore's office sector was rated a 'hold' by 54 per cent of respondents, while 23 per cent advised buying and 21 per cent recommended selling. For the industrial/distribution property sector, 52 per cent of respondents gave 'hold' recommendations, 34 per cent advised buying and 13 per cent said 'sell'.

The survey, based on 180 respondents ranging from global investors, property developers and brokers, looked at the investment and development prospects of 20 metropolitan markets in the Asia-Pacific region.

'Asia shares the same liquidity crisis that the rest of the world is facing,' said Stephen Blank, ULI's senior resident fellow for finance. 'Financial institutions - whether international or national, regional or local - are reluctant to extend credit as deleveraging reduces balance sheet lending capacity.'

And for Singapore, besides the credit squeeze, another problem is the seemingly generous pipeline of development projects which may be completed during a period of sagging interest from foreign business investors, said PwC tax partner David Sandison.