Is now the time to invest in Asian property stocks?

Frederick Lim,

THE 20- to 30-per-cent rally in Asian property stocks in the past few months is not sustainable, say experts, who believe prices are likely to fall further for most markets in the months ahead.

Henderson Global Investors thinks the current rally in property counters is not being backed by fundamentals.

“In the physical property market, values are clearly falling in most, if not all, markets,” said Mr Patrick Sumner, head of Property Securities at Henderson Global Investors. He believes there is a strong chance property values in Asia could fall further if banks that have been holding back on forced-selling of distressed assets bring them onto the market.

“You have quite a large volume of properties which are not being sold. If the banks actually start forcing the sales of these properties, they would make their own balance sheets look rather shaky. I think it will take some time for the whole market to clear at a price that both sellers and buyers find satisfactory,” said Mr Sumner.

According to Henderson, the recent rally in property securities has been driven by positive sentiment in the equity markets.

But property developers suggest there are signs that the property market is turning positive, based on sales volumes, and that could provide some support for property stocks ahead.

Yanlord, a high-end property developer based in China, said certain segments of the Chinese real estate market are showing signs of recovery.

“We have seen our transaction volumes increase from about 200 million yuan in November and December last year to 1 billion yuan ($215 million) in March this year,” said Ms Michelle Sze, head of Investor Relations at Yanlord.

Mr Justin Chiu, executive director of Hong Kong developer Cheung Kong Holdings, said the time is ripe to look for opportunities in the real estate sector.

“As real estate fluctuates in tandem with economic cycles, the current downtrend in Asia has opened up opportunities for favourable entry,” he said.

He believes the best opportunities are likely to be found in markets like Hong Kong, Singapore and, in particular, China.

As for the Singapore property market, developer CapitaLand is seeing a medium-term rebound for the high-end segment, especially with Singapore trying to attract top foreign talent.

“Singapore aims to become a global city focusing on wealth management, high-end talent and lifestyle. Does this strategy have legs? I, for one, am very confident,” said Mr Olivier Lim, group chief financial officer at CapitaLand.

For more on this story and other investment-related topics, catch Money Mind this Sunday at 9.30pm on Channel NewsAsia.

From TODAY, Business; Friday, 15-May-2009

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