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Asia more confident of property market recovery

The mood in US and European real estate markets is still gloomy but in Asia the attitude is more upbeat with some firms revealing plans for new projects in anticipation of an upturn later this year.

Chinese commercial property developer SOHO said it has built up a war chest of $1.9 billion to replenish its land bank and intends to start new projects in Shanghai and Beijing in coming months.

Indiabulls, India's third largest listed property developer, aims to launch six to seven residential projects in the financial year ending in March 2010 on the back of an expected recovery in demand.

'The general mood has been cautious, but there is also optimism. Asian companies in general are in much better shape compared to their peers in other regions,' said Ayala Land, Chief Financial Officer and Asian Public Real Estate Association President Jaime Ysmael.

Spurring the optimism in Asia is a recovery in residential markets, with price cuts drawing buyers in China, Hong Kong and Singapore, where saving rates are high and banks are prepared to lend.

The volume of transactions in these places are close to levels seen during the bull market of 2007 and residential property values have begun to edge upwards as developers such as Singapore's City Developments raise prices.

Asian property values did not rise as much as in the US and parts of Europe in the last decade. In dollar terms, property in countries such as the Philippines is cheaper than before the onset of the Asian crisis in late 1997. Interest rate cuts and government stimulus plans are also helping regional property markets recover.

Singapore residential prices were supported by mortgage rates that were below rental yields, a Bank of America Merrill Lynch report said this week. Separately, Nomura said unemployment was stabilising in Hong Kong and forecasts home prices and rents in the Chinese territory will rise by 22% and 11%, respectively, this year.

Analysts have also said that they expect prices in China to gain an average of 10% between now and the end of 2010.

In the commercial sector the outlook for Asia's office market remains negative but most developers said rents have stabilized after falling sharply in the fourth quarter of 2008 and earlier this year.

But some think the recovery will be fragile. 'There is a risk that this is a bear market rally and the situation could reverse when such liquidity leave the cities or country, or there is new shock to the economies,' said Kenneth Tsang, Asia Pacific head of research and strategy at LaSalle Investment Management.