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Residential property in Asia is predicted to struggle

Submitted by on Wednesday, 24 September 2008No Comment

A recent report was released that predicts that while hot Asian real estate markets will continue to do well in the Asian continent, residential property across the continent will struggle over the next five years.

One reason this might be true is the high cost of housing, which appears to be increasing in many of the hotter Asian real estate markets like Shanghai. In many places (such as in Shanghai), the increase is in spite of government regulation to keep prices down.

A recently released survey seems to indicate that many real estate, business, and finance experts believe that Vietnam, India, and China will be three of the hottest and most profitable property markets in all of Asia and the entire Pacific rim during the next five years. However this is not good news for all sectors of the property market. The belief is that commercial property will generally do quite well while a substantial of residential markets will have difficulties and face increasingly high prices.

Conducted among a considerable number of senior business, finance and property experts, the survey was ordered by Trust Company and law firm Allens Arthur Robins, a financial services provider. The general conclusion of the survey was indeed that the area’s real estate investment trust (REIT) markets will continue to remain quite healthy, there will obviously an uneven level of success among the different markets.

Amidst the survey results are recent reports by the South China Morning Post that the main focuses of real estate growth will be industrial property, commercial, and retail. This may come as surprising news to some property investors since all three sectors have relatively cooled over the past 12 months. Residential property markets will suffer difficult times in the next few months and following years due to several factors, one of which will be overall pricing that is beyond the buying power of many of the middle class residents within each region.

Looking to Shanghai as an example, the development firm Shanghai Forte Land recently announced plans to substantially increase prices on one of its newly finished residential projects. The planned price hike will be in the area of 20%. It appears as though this increase will occur in the face of specific measures put in place by the central government with the intention of controlling property prices which have skyrocketed in the past year.

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