Asian Prime Office Prices May Fall 10%

Source : The Business Times, August 7, 2008

Asian real estate prices may fall further and prime office values decline 10 per cent before year's end, Singapore-based property investor Pacific Star Group said.

'Most markets are peaking over the next 12 months, or even trending downwards,' said Frank Vaessen, president of fund management at Pacific Star, which manages US$3 billion of assets globally. 'Broadly speaking, the bottom could come sometime in late 2009 or early 2010.' Faltering economic growth and the global credit contraction may ease demand for office and retail space in Asia. Rising inflation and falling equity markets may also dampen sales of homes in the region.

The price declines will bring valuations to a more 'normal' level after markets rose rapidly the past year, Mr Vaessen said yesterday.

Japan and South Korea's office markets are expected to have the best performance in Asia as they benefit from a supply shortage, Mr Vaessen said. Both markets are set to offer property investors returns of as much as 13 per cent over the next five to seven years, he said.

Retail space in Beijing and Shanghai may also offer higher investment returns, Mr Vaessen said. Investors should stay away from Vietnam, Thailand and Malaysia, he added, citing Vietnam's accelerating inflation and volatile currency and political instability in Thailand and Malaysia. -- Bloomberg