The PricewaterhouseCoopers (PwC) and Urban Land Institute (ULI) released a report, The Emerging Trends in Real Estate Asia Pacific 2009, which depicted an apocalyptic scenario of the Asian property market – bankruptcies, falling asset prices, deteriorating debt markets, increasing foreclosures, rising capital rates, and the list goes on and on.
The report of ULI and PwC is based on surveys and interviews with investors, developers, lenders, brokers, and the rest of the industry authorities.
According to the report, the investing landscape has gone through changes – significant as well as possibly permanent – which resulted in the decline of property financing through high-leveraged borrowing.
ULI senior resident fellow for finance Stephen Blank said in the press release:
“Asia shares the same liquidity crisis that the rest of the world is facing. Financial institutions – whether international or national, regional or local – are reluctant to extend credit as deleveraging reduces balance sheet lending capacity. While fundamentals in most markets and property sectors will be impacted by the prospects for a global recession, financing will be the single biggest issue facing the industry in 2009.”
However, Mr. Blank pointed out a solution – refinancing. He explained, “Refinancing may be the catalyst that brings the crisis home to regional real estate markets” in 2009 and 2010 as construction and short-term loans mature.
Yet, a fund manager argued in the report that banks can only be as accommodating as they are right now since they know the contingency if they back out over these crises – the fall of the property value.