According to a recent study of an international property agency called Jones Lang LaSalle Asia, the Asia-Pacific real estate market will continue to go down in the next 12-24 months. The rental and capital values will continue furthermore to decline across most of the region mainly because of the slower occupational and investor demand together with the rapid recession seen in recent years. Although many regional markets are most likely to see a big correction in values, underlying long-term drivers and economic growth prospects should ensure that most real estate markets in the Asia-Pacific region will return to the growth phase some time in 2010-2011.



The research conducted noted that due to the recent job losses, the demand for office space in major financial centers has greatly diminished and will continue to do so in 2009. Even worse than that, the retail and residential sectors are very vulnerable to faltering retail spending and rising unemployment, while the industrial sector will be most likely impacted by the slowdown in the international trade. Globally speaking, the much reduced amount of debt available for funding new transactions caused an important fall in real estate transaction volumes in 2008 and will most likely continue in 2009. Another hit taken by the Asian real estate market was when the German open-ended funds stopped from making new purchases but have yet to feel pressured to sell.

In the Asian-Pacific region, the number of new investments is reduced as the debt availability continues to be very tight and the bid/ask spread between buyers and sellers is inhibiting deal flow. In Tokyo, capital values of many Grade A offices have declined continuously for several quarters and this situation started to occur also in Hong Kong, Singapore and Pudong, from the third quarter of 2008. Office rentals in Hong Kong, Sydney, Tokyo and Bangkok have already started to move to the downward phase of the cycle. The biggest and most important rental declines are yet to come in 2009-2010 and will make a direct impact in the mature markets which had a very important rental increases over the last few years.

As far as the retail sector is concerned, the vacancy rates in Hong Kong as well as Singapore generally held firm in the third quarter of last year although vacancy risks are rising in Hong Kong mainly because more retailers are expected to close their businesses in 2009. After a quite solid sustained period of powerful rental rises, most of the high-end residential markets have now moved past the top of their cycle. Rentals in Hong Kong, Singapore, Beijing and Shanghai are contracted quarter on quarter. The residential requests will continue to be very soft because of the freezes and retrenchments, particularly among the financial firms, and most of the markets are likely to see rental contraction through this year.

All things considered, the world-wide economical crisis has a major impact on the Asian real estate market and this situation will most likely continue throughout 2009. Hopefully, the situation will straighten starting with 2010.