Despite the strength of the upper echelons of the property markets, concerns about the spreading effects of the US sub-prime mortgage crisis are having effects further and further afield.
Asian bond spreads widened in Hong Kong this week, with the popular iTRAXX Asia ex-Japan high-yield index widened by 20 basis points, in turn raising the costs of protecting investors against defaults or restructuring.
Dilip Parameswaran, credit analyst at Calyon Corporate and Investment Bank said, “Spreads will continue to widen for a while at least. You have all these concerns about sub-prime mortgages – Until the sub-prime losses and all the other numbers are out, it’s going to take a while for a recovery.”
Chinese property developer Country Garden has just postponed a bond sale that was expected to attract up to $1 billion because o deteriorating market conditions, a source close to the deal said, after some had said the deal could be priced as early as this week. Some traders had already cast doubt on when the Country Garden deal would price, noting that a glut of debt deals from the Chinese property sector would make attracting investors a hard sell.
In sharp contrast, the domestic property market seems as robust as ever. Supported by surging demand and tight supply, housing prices are expected to increase 20-30 percent in 2008 and 2009, according to analysts.
Two brokerage houses have put out reports saying that property prices are likely to rise 50 percent over the next two years.
Meanwhile Singapore is fast becoming a property investment regional hub and this presents big opportunities for investors who can identify the right deals.
“There is more foreign capital than ever coming into Singapore. The Singaporean government has decided to keep a core portfolio but to sell off excess land and developments, freeing up capital to invest overseas.” Land reclamation adds an even more dynamic layer to these opportunities,” said Peter Wittendorp, managing director of AEW Asia.