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Asia’s property sector will see new pockets of opportunity and value emerge during 2009 ahead of a more concerted market improvement in 2010 – that was the prevailing view of a panel of Asian based property investment experts at the Cityscape Connect Business Breakfast in Singapore today.

This inaugural networking event in Singapore was held as a lead-up to Cityscape Asia 2009, an exhibition and conference taking place from 19 – 21 May at the Singapore International Convention and Exhibition Centre (Suntec Singapore). 

Speaking at this morning’s discussion, Mr Nick Crockett, Associate Director Structured Finance, Asia Capital Markets, Jones Lang LaSalle (JLL) said that although some individual players in Asia’s property sector are facing ‘tremendous pressure’ according to the region as a whole has greater liquidity and the prospect of more deals happening more quickly than either Europe or America the panelists said.

“The overall quality of lending has been higher in Asia than some of the things that have happened in Europe and the United States (US),” said Mr Alan Dalgleish, Executive Director, CBRE.

Generally higher equity ratios in Asia are also assisting to stabilize the market, compared to the United States where 95% or 100% debt finance had become the norm according to Mr Blake Olafson, Director, Head of Real Estate Asia, Arcapita.

One area of exception was the REIT sector, where debt refinancing is an issue for the region because of the shorter debt finance cycles, said Mr Peter Mitchell, Chief Executive Officer of the Asian Public Real Estate Association who noted that Asian REITs hold a greater proportion of short term debt finance than their Western counterparts and the Singapore market would see re-financing requirements of SGD$19-20 billion in 2009.

“REITS have been impacted like many other investment classes, but longer term, the model offers a number of attractions, including the greater liquidity they offer,” Mr Mitchell said.

Mr Olafson said property investors as a whole are becoming more discriminating and risk is being more realistically priced. “Over the past few years all of the categories of property got compressed in the feeding frenzy, but now it is separating out to a proper stratification of price and quality for A, B and C grade properties,” he said.

“There is a flight to quality – Singapore, Hong Kong and Japan have emerged as preferred investment locations ahead of more adventurous places,” said Mr  Dalgleish.

Investors and the developer community are working closer together than ever before. Arcapita’s Olafson said, “We are seeing a massive shift towards investors getting involved on the developer side,” while Mr Crockett concurred: “The number of developers approaching JLL to look for joint venture partners has increased remarkably in the last three months.”

Pointing to a possible more broad-based recovery in 2010, Mr Crockett said this would be led by large Asian private companies and conglomerates, who are relatively lowly geared, “although we are still seeing money come through from Europe and the Middle East”.

Another unexpected savior might be US Institutional Investors. “US Pension and Endowment funds are picking up a more global mandate and have orders to invest more of their portfolio globally, especially in Asia,” said Mr Mitchell.

“They will not see a lot of action in 2009, but will resume allocations in 2010 and re-weight their portfolios upwards to one third Asia, one third Europe and one third US.”

“The long term strength is definitely there, the demographic trends and long-term economic growth and it [the property markets] will all come back,” said Mr Dalgleish.