Property No Longer A Safe Asset

Source : The Business Times, December 2, 2008

(LONDON) Real estate used to be the ultimate all- weather asset class, with low correlation to volatile stocks and unexciting bonds. But in today's debt-starved market, property is not the safe haven it once was.

Trusted property market tenets have been deformed by an acute shortage of debt and a worldwide souring in economic fundamentals, leaving the sector in a deep rut - awash with equity and rich with discounts but bereft of buyers.

Before, property rental income could rise even if values fell and as one regional market sagged, another flourished. But now, property market misery is universal and many of the world's biggest investors are standing on the sidelines.

'Things are going to be a difficult for quite a while,' Robert Houston, chairman and chief executive of of ING Real Estate Investment Management, told Reuters.

'Everyone wants to know when the bottom of the market is. I have a good record at calling these things and all I'm prepared to say is that we haven't reached it yet.'

Like the majority of its peers, ING has slowed the pace of its real estate investments in recent months, refusing to gamble capital when the only thing it feels sure of is that property prices worldwide will continue to fall.

The EPRA/NAREIT Global property index has slumped to a lifetime low of 861 points at market close on Nov 21 from an all-time high of 2,897 on Feb 23, 2007, but bargain hunters have yet to be spurred into action. -- Reuters