Singapore’s distressed property assets will possibly flood the markets in the succeeding two years, said Dr. Seek Ngee Huat, president of GIC Real Estate.
In a public seminar conducted by the Institute of Real Estate of the National University of Singapore, Dr. Seek said a flood may emerge once the credit markets remain tight as huge amounts of loans become matured. Though distressed sales are not yet fully evident in the UK and US, foreclosed properties are likely to flood the property market in the near future, said Seek.
Joseph Gyourko, University of Pennsylvania professor also said about US$1.2 trillion of commercial property debt in the US would mature from 2009 to 2011. Given the demise of the mortgage-backed securities market, Gyourko anticipates more defaults and foreclosures. He observed that the sales of distressed property assets are looming in the US and would soon surge over the succeeding years. Distressed assets may come from any sector depending upon the ability of owners to roll over debt.
But unlike the developed markets which are likely to push for opportunistic deals, most property markets in emerging Asian countries are more inclined to go for long-term acquisitions, Dr. Seek has added.
Real estate investment trusts (REITs) also open attractive investment opportunities. The financial crisis undervalued a number of REITs with sound asset bases and manageable debts. As the sector undergoes more consolidation, undervalued REITs have a good chance of getting through the downturn and even becoming more profitable in the end.