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SINGAPORE: Market watchers have warned of a possible asset bubble in Asia's property market, due to hot money flowing into the region.
At the annual forum organised by Singapore developer CapitaLand, it was discussed that policymakers need to closely monitor leverage levels to prevent another US-style sub-prime crisis.
China's property sector is booming, growing about 35 per cent in August from about 20 per cent in July.
The Hong Kong and Singapore property markets have also rebounded strongly in recent months.
"It is a risk all over Asia that Asian real estate gets overbid and the prices begin to escalate well beyond the ability of the underlying rent in one form or another, to actually support returns and that store of value function that real estate has performed in Asia," said Gail Fosler, president, The Conference Board, Inc.
According to experts, policy makers may have to step in to cool the real estate market if necessary.
As a measure, asian central banks could raise interest rates to make it more expensive to borrow. On the other hand, some experts suggest that the banks should remain prudent in their lending practices.
Observers say Asia's property sector is likely to grow 2 to 3 times faster than in the US.
Overall, experts feel that Asia will see a higher proportion of investible funds, which may head towards the property sector.
But another view is that a potential US tax hike to offset its large budget deficit could shrink the capital pool.
"I think all markets are going to face some significant capital constraints in raising new debt and equity, which means that real rents and prices are going to rise," said Professor James Shilling, The Real Estate Centre, DePaul University.
On the rise too are Asian real estate investment trusts, seen as popular investment options.
Going forward, experts say Pan-Asian REITS will likely be specialist sector pure play REITs, focusing on hospitality, healthcare, retail and logistics.
- CNA/sc
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