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BEIJING-Real estate markets in Asia are set for another busy year as investors continue to target the region, according to a new report by Standard & Poor's Rating Services.The report, "Asia Property: Risks and Awards," says most of the key property markets in Asia are likely to be active over the near term on the back of solid economic growth, with Asia again expected to be one of the fastest-growing regions in the world.
Asia's real estate markets are changing quickly with the emergence of REITs, growing urbanization, the increasing presence of foreign institution investors, and the opening-up of the real estate sector in the Chinese mainland, the report explains.
While long-term fundamentals look encouraging, with plenty of development opportunities to meet rising demand, there is inherent volatility and structural deficiencies in the sector, says S&P's head of corporate ratings in Asia John Balley. He adds that conditions can be extremely cyclical, with political risk, evolving market practices, and a danger of speculative excess in some markets.
As for the Hong Kong property sector, the report says, the credit ratings of Hong Kong property companies are unlikely to change significantly over the near term, residential property prices should stay relatively flat for the rest of 2006 while investors are likely to shy away from REITs in the short term due to waning market interest. However, the report adds, in the longer term, REITs are expected to become an important investment tool in Hong Kong.
In mainland China, the commercial and residential property markets "remain strong although fragmented. Last year "nearly a quarter of all investment went to real estate development."
Regional hub Singapore saw a rebound in its property market last year after years of underperformance, the report adds. "The big growth story in the property sector in Singapore has been the development of the REIT market. The government has been very active in promoting this sector and several new REITs have listed," it says.
Japan is recovering after many years of decline; South Korea has "started to come off the boil" as the government tries to cool property prices and rising interest rates. Malaysia's REIT market is growing; while Indonesia and India offer great potential but are still at an early stage of development.
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