Could 2009 Be A Vintage

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[Long-term property investors are already calling 2009 a special &quot;vintage&quot;, offering cheap assets that they hope will produce juicy returns when Asian economies rebound from the global financial crisis. Commercial property prices in financial centres Singapore and Hong Kong are tipped to fall 50-60 per cent over the next couple of years as banks and fund management firms slash jobs and rent less space. And with banks cutting their exposure to property, landlords in Japan, China, India, Australia and other countries could be forced into firesales if they fail to refinance loans, putting more properties on the market and driving values down further. Older firms with ample cash and limited debt are most likely to scour the market for bargains in coming months. But many of the 400-odd funds that have sprung up in the last decade to invest in Asia property will find it difficult to get cash from increasingly nervous investors. Competition for good properties is easing as hedge funds which dabbled in Asian property recoil from the market and funds run by ailing Wall Street banks struggle to get loans. &quot;For investors with money, this is a once-in-a-lifetime period,&quot; said Robert Lie, Asia managing director for Redevco, the unit that invests in property on behalf of Dutch firm COFRA Holdings. &quot;But for new funds, it'll be difficult to raise money because investors are much more careful.&quot; Redevco is looking to invest &quot;hundreds of millions&quot; of dollars in Chinese and Indian retail property, Lie said. Indian land prices, which have doubled since 2005, will probably fall by half in the coming year, he added. China will likely see a less severe price slide, although some troubled developers could still sell off assets cheaply. &quot;Some people say you shouldn't do anything in the next six months,&quot; Lie said. &quot;But when I hear that, I think I should do something in five months. It's not my job to wait until everyone steps into the market.&quot; Asia's economic health is rapidly worsening as the global downturn deepens, but many economists believe massive government stimulus packages and interest rate cuts will turn the tide, with signs of recovery possibly emerging by late 2009. Picky Banks LaSalle Investment Management, the property fund unit of Jones Lang LaSalle, counts itself fortunate that it raised a $3 billion &quot;opportunistic&quot; fund for Asia last year. Most of the fund is still unspent. But David Edwards, the firm's Asia-Pacific director, said investors were now expecting much higher returns to match higher perceived risk as the global financial crisis drags on. A deal offering an internal rate of return of 25 per cent a year ago would now need to yield 30 per cent, he said. Higher debt costs do not help. Spreads on loans in Asia have increased by 150 to 250 basis points in the last year, and banks offer only 40-50 per cent of an asset's value, compared to 70-80 per cent before the crisis broke. &quot;There's some debt (available) for some people, but for many people, there's nothing,&quot; said Edwards. To achieve high returns now expected by investors, LaSalle's fund is looking to buy companies to access their assets cheaply. It may also buy commercial mortgage-backed securities from cash-strapped hedge funds at what it hopes will be big discounts. Most investors and analysts predict Asia's property markets will rebound strongly because of the onward march of urbanisation, which has seen an average 8 million Chinese people move to cities annually in the last decade. While CLSA analyst Aaron Fischer believes markets will not bottom at least until late 2010, others are more optimistic. Asian banks are not hobbled by the type of toxic assets that have paralysed their Western counterparts, which may allow them to relax property lending more quickly, and China's $585 billion fiscal stimulus package gives hope to many investors. John Lim, chief executive of Singapore property fund manager ARA Asset Management, believes prices will bottom towards the end of 2009. He plans to launch country-focused funds worth at least $500 million each to bargain hunt in China, India and Japan -- markets where booms in the mid-2000s have ended in bust. &quot;The valuations are much more sensible versus six to eight months ago,&quot; Lim said. (Reuters)