ST : Property market in Asia 'unlikely to crash'

Nov 24, 2010

Property market in Asia 'unlikely to crash'

By Cheryl Lim

THERE is little chance of a property market crash in Asia, says KPMG international real estate chairman Jonathan Thompson.

He also reckons that the recent move by the United States central bank to pump vast sums into the economy, in a policy known as quantitative easing, is likely to bode well for Asian commercial real estate.

Mr Thompson, who is based in London, was in Singapore recently as part of a visit to key markets in the region. His main interest is commercial real estate.

He observed that while there is a more obvious bubble in Asia's residential property sector, the region will probably not see a property crash.

Citing property collapses in the US and Europe as examples, Mr Thompson said either an economic crash or a withdrawal of credit by banks would be needed to trigger a similar situation in Asia.

He said that Asia has what it takes to sustain a stable and steadily growing real estate market.

This is thanks to the region's growing economies, financially strong banking sector and broadly balanced supply and demand of property.

'You have to be careful with it (real estate), when it gets over-enthusiastic. Because there's so much money involved, when you have a crash, people lose a lot of savings. If the banks overlend, you get a financial crisis.'

Mr Thompson added: 'It's really on the regulators' minds, they really don't want to have a real estate bubble cause another financial crash.'

He said real estate is now increasingly seen as a different asset class, with different diversification features as compared with equities and bonds.

He also predicted that more institutions and individuals will buy into both domestic and international residential and commercial property.

Quantitative easing will directly affect property in Asia, Mr Thompson added. '(The weak dollar) will add inflationary pressure in markets like Singapore and Hong Kong...This is very positive for commercial real estate, because it is perceived to be a quite good hedge against inflation.'