Federal Reserve Bank of St Louis President James Bullard said it is difficult to identify asset- price bubbles, and it’s not ‘practical’ to adjust US monetary policy to account for surging Asian markets.

‘It is very hard to identify a bubble,’ Mr Bullard said today in answer to a question after a speech in St Louis.

‘If there are problems in real estate markets in Asia, it is not very practical to say you should raise interest rates in the US.’ Mr Bullard was asked to respond to comments by officials in Japan, Hong Kong and China, who have said the Fed’s policy of keeping interest rates near zero may inflate asset prices and derail the global economic recovery.

Emerging economies ‘might overheat and experience financial turmoil,’ Bank of Japan Governor Masaaki Shirakawa said in Tokyo on Nov 16. Low rates and the dollar’s depreciation present ‘new, real and insurmountable risks to the recovery of the global economy,’ Liu Mingkang, China’s top banking regulator, said a day earlier.

MSCI’s emerging-markets stock index has risen 73 per cent this year, and Asian countries from Singapore to South Korea are trying to rein in surging real-estate prices.

Fed officials are debating how and whether to respond to rising asset prices in the US, where the Standard & Poor’s 500 Index has jumped 63 per cent from its 2009 low on March 9.

‘I think the issue is, where there are bubbles in the US – there was a tech bubble in the US and a housing bubble – should we react to that? That is what we are rethinking,’ Mr Bullard said. ‘But to extend that and say you are going to look at house prices somewhere else, that would be a step beyond.’

Fed chairman Ben S. Bernanke has said it’s hard to identify asset-price bubbles, and he suggested that the best safeguard may be for the central bank to use its supervisory authority to strengthen the financial system.

‘It is inherently extraordinarily difficult to know whether an asset’s price is in line with its fundamental value,’ Mr Bernanke said after a speech in New York on Nov. 16. ‘It’s not obvious to me in any case that there’s any large misalignments currently in the US financial system.’

‘As long as we can’t detect bubbles with great confidence, it seems unwise to adopt fighting them as a policy objective,’ Chicago Fed Bank President Charles Evans said in a speech in Paris on Nov. 13.

Source: Business Times, 20 Nov 2009

DEMAND for residential property is seen picking up in key Asian cities but economic recession will continue to depress the region’s office markets, pushing Grade A rents in Singapore and Tokyo down nearly 40 per cent in the next 18 months, a Reuters poll shows.

‘The office market is driven more by headcount and employment issues,’ said Aaron Fischer, head of property research at CLSA. ‘On the residential side, liquidity in the market place is affecting property, in Hong Kong and Singapore, particularly at a time when interest rates are low.’

Hong Kong looks to be the healthiest of the three markets covered in the poll as apartment prices have rebounded 15 per cent this year from a slump.

Analysts, however, warn that the rally is driven mostly by liquidity and is losing steam as the economy could shrink up to 6.5 per cent this year based on the government’s forecast. The poll showed Hong Kong home prices will be flat for the rest of this year but rise 10-15 per cent in 2010.

In Singapore, demand is picking up but strong supply means apartment prices are poised to decline 6.8 per cent between now and the end of the year before recovering 4 per cent in 2010.
Tokyo residential prices are forecast to drop 10 per cent between now and the end of the year and fall 6.3 per cent in 2010.

House prices in Hong Kong, Singapore and Japan have fallen so much that they are starting to look attractive given the added incentive of very low interest rates, analysts say.

In Singapore, monthly flat sales have tripled since February as apartment prices are down 20 per cent since the middle of 2008.

Developers including City Developments and UOL have stopped discounting new projects and in some cases are raising prices slightly although overall prices remain weak.

Tokyo residential prices are only 10 per cent off last year’s peak, but have more downside than the other markets as falling wages and rising unemployment will dampen demand.

Economic recession will continue to depress office rents although in Hong Kong they are poised to stabilise next year amid dwindling new supply.

The city’s biggest new project, International Commerce Centre – a 118-floor skyscraper in Kowloon – has lured Morgan Stanley, Credit Suisse and other multinationals across the water from Hong Kong Island, and is 80 per cent leased.

The poll forecasts Hong Kong Grade A office rents will drop 10 per cent by the end of this year and then be flat next year.

Singapore, on the contrary, faces a rush of new supply and prime rents, already 40 per cent off their peak, will skid 20 per cent by the end of this year and 18.8 per cent in 2010.

‘Next year, the new supply will hit and rents will start falling again,’ said David Lum, Singapore property analyst at Daiwa Institute of Research.

Tokyo Grade A rents – already down 29 per cent from a peak in late 2007 – are poised to fall 10 per cent between now and the end of the year and drop 15 per cent in 2010, according to the poll.
New supply, however, is relatively limited and analysts expect companies to take advantage of the weak market and upgrade to better quality office space at little or no increase in rent.

Source: Business Times, 13 Jun 2009

Speaking at Cityscape Asia 2009, Mr Stuart Labrooy, chief executive of Malaysia-based Axis Reit Management, said the full effects of the credit crisis ‘have not yet reached Asia’.

Property valuations in Asia, he said, will probably bottom out in the second half of the year, but there was no telling when the recovery will come.

Also speaking during a panel discussion on the impact of the downturn on Asian real estate, Mr Blake Olafson, Arcapita’s head of Asia real estate group, said the industry was now focusing on the basics.

He added: ‘If you’re a pension fund manager, that’s what you’ll do – not suddenly try to become a real estate developer in some Tier 3 city in China. There’s a greater sense of realism in the market, and a return to looking at fundamental cash flows, not just internal rate of return deals.’

Invista Real Estate chief executive Duncan Owen said Singapore, Hong Kong and Tokyo are attractive over the medium to long term as they have ‘quite large commercial markets’, sustainable economies and increasing market transparency.

The fact that the Singapore market is now badly affected like other markets is an opportunity for them, he added.

Invista, Britain’s largest-listed property fund manager, recently bought the Asian real estate business of Babcock & Brown, which gave it offices in Singapore and Hong Kong.

In his keynote address, Singapore’s Urban Redevelopment Authority group director (strategic planning) Richard Hoo acknowledged that the economic climate was now more challenging than during last year’s Cityscape Asia.

Today’s focus, he said, was on ‘enhancing our readiness’ when the economy improves.

Yesterday’s Cityscape Asia exhibition was quieter than previous events. Just 40 exhibitors have set up booths this year, and the organiser is expecting more than 3,000 people to visit over its three-day period ending tomorrow.

Last year, it attracted 5,520 real estate professionals and 70 exhibitors.

The 2007 event – inaugurated by National Development Minister Mah Bow Tan – drew 4,689 participants and 125 exhibitors.

Source: Straits Times, 20 May 2009

Speaking at Cityscape Asia 2009, Mr Stuart Labrooy, chief executive of Malaysia-based Axis Reit Management, said the full effects of the credit crisis ‘have not yet reached Asia’.

Property valuations in Asia, he said, will probably bottom out in the second half of the year, but there was no telling when the recovery will come.

Also speaking during a panel discussion on the impact of the downturn on Asian real estate, Mr Blake Olafson, Arcapita’s head of Asia real estate group, said the industry was now focusing on the basics.

He added: ‘If you’re a pension fund manager, that’s what you’ll do – not suddenly try to become a real estate developer in some Tier 3 city in China. There’s a greater sense of realism in the market, and a return to looking at fundamental cash flows, not just internal rate of return deals.’

Invista Real Estate chief executive Duncan Owen said Singapore, Hong Kong and Tokyo are attractive over the medium to long term as they have ‘quite large commercial markets’, sustainable economies and increasing market transparency.

The fact that the Singapore market is now badly affected like other markets is an opportunity for them, he added.

Invista, Britain’s largest-listed property fund manager, recently bought the Asian real estate business of Babcock & Brown, which gave it offices in Singapore and Hong Kong.

In his keynote address, Singapore’s Urban Redevelopment Authority group director (strategic planning) Richard Hoo acknowledged that the economic climate was now more challenging than during last year’s Cityscape Asia.

Today’s focus, he said, was on ‘enhancing our readiness’ when the economy improves.

Yesterday’s Cityscape Asia exhibition was quieter than previous events. Just 40 exhibitors have set up booths this year, and the organiser is expecting more than 3,000 people to visit over its three-day period ending tomorrow.

Last year, it attracted 5,520 real estate professionals and 70 exhibitors.

The 2007 event – inaugurated by National Development Minister Mah Bow Tan – drew 4,689 participants and 125 exhibitors.

Source: Straits Times, 20 May 2009