Asia-Pacific Property Markets Overview 2002: Government action makes up for uncertain prospects

While prospects of Asia-Pacific property markets are uncertain for the rest of this year, quick action by many governments has had a positive impact. DTZ Debenham Tie Leung expresses this view in its latest report Asia Pacific Property Markets Overview 2002.

From China to New Zealand, government action in priming the economies and lowering interest rates has lessened the impact that deteriorating economic environment has had on the real estate markets, DTZ says.

In Australia, the government’s first-home buyer incentives coupled with historically low interest rates has led to a surge in housing activity. In China, accession to the WTO and hosting of the 2008 Olympics are attracting large-scale development projects and investment by MNCs, which are expected to drive up demand in the real estate market. In Hong Kong, suspension of the Home Ownership Scheme helped by historically low mortgage rates has encouraged first-time buyers and boosted transactions in the residential market. In Indonesia, the government’s post-September 11 budget and economic reviews and Rupiah exchange rate revision, while not significantly helping real estate, have affirmed its pro-active approach to mend the economy. Japan, which is in a continuing recession, has responded by an increase in public spending. Malaysia and Singapore too have each adopted two Budget stimulus packages to inject RM7.2 billion and S$13.5 billion respectively into their economies. New Zealand’s central bank has cut the official cash rate by 50 basis points in response to the likely effects of September 11 on world economic growth. In Taiwan, restrictions on property investment by foreign entities were largely removed in October. And in Thailand, the government’s establishment of the Thai Asset Management Corp together with a THB58 billion stimulus package is expected to help the banking sector cut interest rates and to boost domestic spending.

“In this market, we expect both occupiers and investors to shift their interest increasingly towards prime property, resulting in a widening gap between performing and non-performing real estate assets,” says Mrs Ong Choon Fah, Executive Director and Regional Head, Research and Consultancy of DTZ Debenham Tie Leung (SEA).

Retail was the best performing sector in 2001 among Asia-Pacific real estate markets. Despite difficult trading conditions, retailers are expanding cautiously. Bangkok, Kuala Lumpur, Jakarta, Sydney and Melbourne are among cities which experienced increases in prime retail rents in 2001. Steady occupier demand and limited supply also helped to sustain the Tokyo retail property market.

In the office market, demand eased across the region in 2001, attributable to a rise in the number of corporate restructuring cases and mergers and acquisitions, as well as to a general oversupply situation. In Singapore and Hong Kong, difficult corporate trading conditions have resulted in office space being released, increasing availability. In Beijing and Shanghai, 2001 saw a fall in demand from MNCs but it was offset by increased space requirements by local companies. With the WTO accession and Olympics hosting now secured, office space demand by MNCs in Beijing is expected to grow. In Bangkok, Kuala Lumpur and Jakarta, relatively limited supply of prime office space has restrained the decline in prime rents despite the general oversupply situation. In Tokyo, strong new supply is expected to further lower rents this year. But in Australia, office outperformed other sectors, prime rents rising across main cities led by low vacancy and strong demand.

Residential markets in the region continued to be enhanced by sales of affordable housing boosted by attractive mortgages, a growing middle-class and household formation. Rebates for first-time homeowners in Australia, for example, have given demand a lift. In Shanghai, a structural change by the government collapsing the domestic and foreign segments of the market has created some excitement.

Industrial property markets across the Asia-Pacific have been affected b

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