Urbanisation to drive Asian property market
Wednesday, 14 November 2007
Urbanisation along with the emergence of Real Estate Investment Trusts (REITS) will drive Asia's long-term property market, the credit ratings agency Standard and Poor's said recently.
"Growth in urbanisation will be one of the defining characteristics of the property sector in Asia over the long term," S and P said in its 2006 Asia property review. "Migration to the traditional urban areas and newly established regional economic centers will lead to a significant expansion of the urban population and create very strong demand for housing."
It said that in China, urban dwellers account for only about 40% of the total population, substantially lower than in more developed economies.
"Another key long-term driver of real estate in the region is the development of the REIT market. This market has grown rapidly in Japan, Singapore and Malaysia, and is also beginning to take off in Taiwan, Thailand and Hong Kong," S and P said.
A REIT is typically an equity-oriented, tax-efficient investment vehicle that allows smaller investors to pool funds for indirect participation in real estate ownership or financing, S and P said.
"In parallel, the CMBS sector in Asia is also evolving. This market is less developed than in Europe or the US, but the emergence of REITs has increased investors awareness of this capital market alternative," the agency said. CMBS refers to commercial mortgage-backed securities.
S and P said property markets in Asia attracted a lot of investor interest in 2005 and are set to remain busy through 2007 with most of the region's key property markets likely to be active on the back of strong economic growth.
"Asia is home to half the worlds population, but real estate per capita is among the lowest globally. Demand for office space is strong in almost all the main commercial centres throughout Asia. Vacancy rates are trending down and rents are increasing, especially in Hong Kong, said S and P.
The southern Chinese enclave has seen a "significant recovery" in its property sector since the economic downturn in 2003, the agency said.
The upward trend in overall office rents will likely stabilise when supply starts to increase in 2008. "In the residential sector, buyers sentiment has weakened in recent months, after strong gains in 2004-2005."
Rents at Hong Kong's prime shopping malls now exceed the previous peak in 1997, driven primarily by the influx of mainland China tourists over the past two years, although retail rents are unlikely to increase significantly from the current level over the near term, S and P said.
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"Growth in urbanisation will be one of the defining characteristics of the property sector in Asia over the long term," S and P said in its 2006 Asia property review. "Migration to the traditional urban areas and newly established regional economic centers will lead to a significant expansion of the urban population and create very strong demand for housing."
It said that in China, urban dwellers account for only about 40% of the total population, substantially lower than in more developed economies.
"Another key long-term driver of real estate in the region is the development of the REIT market. This market has grown rapidly in Japan, Singapore and Malaysia, and is also beginning to take off in Taiwan, Thailand and Hong Kong," S and P said.
A REIT is typically an equity-oriented, tax-efficient investment vehicle that allows smaller investors to pool funds for indirect participation in real estate ownership or financing, S and P said.
"In parallel, the CMBS sector in Asia is also evolving. This market is less developed than in Europe or the US, but the emergence of REITs has increased investors awareness of this capital market alternative," the agency said. CMBS refers to commercial mortgage-backed securities.
S and P said property markets in Asia attracted a lot of investor interest in 2005 and are set to remain busy through 2007 with most of the region's key property markets likely to be active on the back of strong economic growth.
"Asia is home to half the worlds population, but real estate per capita is among the lowest globally. Demand for office space is strong in almost all the main commercial centres throughout Asia. Vacancy rates are trending down and rents are increasing, especially in Hong Kong, said S and P.
The southern Chinese enclave has seen a "significant recovery" in its property sector since the economic downturn in 2003, the agency said.
The upward trend in overall office rents will likely stabilise when supply starts to increase in 2008. "In the residential sector, buyers sentiment has weakened in recent months, after strong gains in 2004-2005."
Rents at Hong Kong's prime shopping malls now exceed the previous peak in 1997, driven primarily by the influx of mainland China tourists over the past two years, although retail rents are unlikely to increase significantly from the current level over the near term, S and P said.
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Internet