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Asian governments have imposed a raft of measures aimed at preventing their property markets from taking off too quickly, but the region still offers investors some of the most prospective real estate globally.
House prices in Asia have doubled in many cases in the past two years. So after various measures to take the heat out of markets, especially in China and Hong Kong, it is almost inevitable that returns will cool next year.
But beyond that, price growth should pick up once again off the back of Asia's traditional attractions for real estate investors; enviable economic growth, a steady rise in currency values and importantly, increasing urbanisation in several countries.
Analysts see prices rising again between 5% and 10% in 2012.
Still, there is no sign yet of a slowdown in capital coming into the Asia property markets. Indeed, investment is speeding up, figures from property services firm CB Richard Ellis (CBRE) show.
That in part reflects the surge in capital flooding into the region as investors turn their backs on the uncertainties of developed countries to lock in gains from fast-growing Asia.
In the first three quarters of 2010, direct real estate investments in Asia totalled USD 46 billion, double the amount in the same period in 2009, CBRE, which has an extensive network in the region, said.
In the third quarter alone, investment jumped 53% from the second quarter, a stark contrast to Europe, where investment fell 6%. About 17% of Asia's total investment in the third quarter came from outside the domestic markets, up from 14% in the previous quarter.
CBRE's Executive Director Andrew Ness reckons full-year investments will exceed USD 60 billion, up sharply from USD 37.8 billion last year.
"It's still a very much Asian-led rebound. The Americans and Europeans are beginning to come in and enquiring more," Ness said.
However, with regulators increasingly clamping down on property markets to prevent bubbles forming, such as with tighter lending requirements for property purchases, the 2011 investment climate looks less certain.
Reflecting this, property stocks in Asia have come off their peaks and Ness declined to forecast any investment flows for next year.
But over the longer term, Asian markets offer less uncertainty than the United States or Europe, which will support the market, many analysts say.
US home prices, which have plunged by a third since their 2006 peak, will only inch up in 2011 due to a stream of foreclosures and high joblessness, a Reuters poll shows.
Beyond next year, the economies of developed nations are expected to grow only sluggishly in coming years as they deal with the heavy debt loads built up during the financial crisis.
So even with tightening regulations, Asia offers brighter prospects over a three to five year horizon, some investors say.
"We tend to still like residential as an asset class, it's just a matter of time," said an industry source who invests in property in Asia.
"We're looking at a lot of deals and we're deciding that now it's not the right time. We may monitor the situation for the next three to six months," he said, declining to be identified as he was not authorised to speak to the media.
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