Published on Bangkok Post on 15 October 2008 by Deutsche Press Agentur
 

Lessons from 1997 protect markets

Having lived and learned from the 1997 crisis, Southeast Asia's property markets have so far proved resilient to the US sub-prime crisis and knock-on financial meltdown but they are far from immune to the global mess.
 

"No one can get off scot-free from what's happening because global liquidity has been reduced and also the feelgood factor has gone," said David Simister, chairman of the real estate company CB Richard Ellis Thailand.
 

"It will certainluy create a slowdown and a market where for the next 18 months it's a bad time to be selling something but I don't see a situation where there will be a big slide in prices here," he added.
 

Ironically, several negative factors have positioned Southeast Asian property markets well to weather the current downturn.
 

Firstly, the 1997 Asian crisis forced regional baks to tighten up their lending practices to the property sector.

Secondly, with the exception of Vietnam, most Southeast Asian countries have not experienced the same real estate booms witnessded in Asia's rising giants China and India.
 

Thsese two factors mean Southeast Asian banks,which were reeling with non-performingk loans to the property sector after 1997, are in relatively good shape.
 

"I think Southeast Asian banks are even less exposed to property the Northeast Asian banks," said Peter Tebutt, senior director of financial institutions at Fitch Ratings in Hong Kong.
 

And thirdly, many Southeast Asian countries are still offering competitive prices and even possible returns on investments.
 

Not everyone is suffering.
 

"We have just launched a new project this month and it was one of the most successful launches we have had in our history," said Dan Simmons, the director of sales and marketing for Laguna Phuket, a luxury hotel and residential complex.
 

In the wake of the US financial meltdown earlier this month, Laguna Phuket put 25 luxury homes with an average price of $412,000 on the market and sold 15 in a snap with full reservation deposits, Mr Summers claimed.
 

"A lot of people are seeing it as a safe haven," he said. Laguna Phuket, with six hotels and 700 residential units, guarantees a 6% annual return on all properties, which the listed company rents out to tourists when the owner is away.
 

Of course, Laguna is catering to the high-end market that is more recessionproof than most.
         
Not all resorts or market segments will be so lucky.
         
Property developers in Vietnam, which has been enjoyingl its first real property boom since sheddign somek socialist constraints in the late 1980s, are heading into a period of tight liquidity for projects and buyers.
         
"Even if a buyer can get a loan,you're looking at 80% interest, so you're talking about cash buyers," said David Blackhall of VinaCapital, a property manager in Vietnam.
 

Although pessimistic about residential properties, Mr Blackhall is still upbeat about Vietnam's office sector.
         
"There's a lot of Middle Eastern money that wants to spread into new emerging markets," Mr Blackhall said. "Vietnam is seen as less difficult than China, and less complex and frustrating than India."
         
Unlike Vietnam, the Philippines' residential property sector is expected to continue growing despite the financial turmoil in developed countries.
         
Real-estate developers are focusing on affordable housing and condominiums to address the demand for the CBRE Philippines.
 

Mr Mabutol is also optimistic about retirement vfillages, aiming at the US and European markets.
 

Thailand too has targeted the retirement and second-home markets for foreigners, but there are worries that many of these potential investors have seen their buying power reduced with declining property values at home.
        
"The sector of the market that is dependent on mortgaging the familuy residence and using the difference to buy a property in a resort is goign to be affected," said Simon Landy, managing director of Primo Company, a property agent in Thailand.
         
But even within this market there are exceptions, such as Scandinavians, who have been major investors in thai retirement homes.
         
"They are not so affected because they get government support to take off and die somewhere else," noted Mr Landy.
         
In Indonesia,where the government is actively supporting the property sector, developers have joined with local banks to offer interest-rate subsidies to buyers.
         
"With credit interest rates subsidy to consumers, it's expected to help improve buyer power and property market can be maintained," said Teguh Satria, chairman of the Indonesian Real Estate Association.