Markets in Hong Kong, Shanghai and Singapore have already seen large price drops since last year after years of cheap credit lures a flood of foreign money into the region's real estate, a conference in Singapore heard.
High end residential and office markets boomed but now as credit conditions have tightened and the global appetite for risk has waned there is no more speculative money around and prices are falling.
'It's going to be another year of pain. Asia is in for a fairly lean spell,' said Stuart Labrooy, chief executive at real estate investment trust Axis-REIT in Kuala Lumpur. He predicts that Asian property values will probably bottom by the end of the year but may not start to rise again until the economies in the US and Europe have consistent growth.
Property investors who chased hot markets last year have absorbed big losses and new buyers now shouldn't expect to make a quick profit, according to Blake Olafson, head of the Asia real estate group for Bahrain-based investment firm Arcapita.
'Those who made investments last year have had significant writedowns. You can't have a trading mentality but rather a five to seven year view,' he said.
Singapore has seen private residential property prices fall about 20% from their peak in the second quarter last year after jumping 31% in 2007. Each Asian market may face its own particular challenges.
In some markets there are other factors to take into account. In Thailand, for example, the prospect of renewed violent anti-government street protests paired with overbuilding in Bangkok could send property prices lower, said John Evens, managing director of Bangkok based consultancy Tractus Asia.
'I expect to see a considerable drop in the value of residential prices. Thailand hasn't yet fully realized the impact of the global economic crisis or political instability,' he explained.
In Singapore, the city-state's growing status as a regional finance and wealth management hub left it vulnerable as banks and investment firms shed workers amid the credit crisis. Offices here that rented for $3,000 a square foot last year are now available for $1,800.
'In Japan, the real estate industry depended on foreign money coming in to sustain growth. A lot of that money is gone and won't return for a long time. We all have to get back to reality,' Labrooy concluded.
