As world economic growth stalls and financial markets wrestle with falling demand, the generally cautious outlook for global property markets is likely to persist. But the mainland and Hong Kong could still provide a silver lining to the sector, industry experts say.
Indeed, high-quality commercial real estate assets in prime spots in the city and the mainland could continue to perform well, compared to the secondary real estate market, and be competitive relative to other asset classes, says CB Richard Ellis (CBRE), a global property consultancy.
'When the macroeconomic and political landscape is so uncertain, it is inevitable that the outlook for real estate will in many ways be equally unclear,' CBRE said in its Global ViewPoint report for this year.
'The slowdown in global growth should further increase investor risk aversion in 2012. That said, the more aggressive among us will test the risk frontiers.' According to the report, growth in the United States may be slightly better this year than last year, but will not show enough of an improvement to reduce unemployment significantly.
The euro zone is poised at least for a mild recession, similarly for Britain, South America, the Middle East, and northern Africa.
In Asia, the region's economic fundamentals remain sound, thanks to stronger regional trade ties and the benefits from China's continued strong economic growth.
But Nick Axford, CBRE's head of Asia Pacific research, warns that investors will become more cautious, given the odds of slower economic growth in China this year and the economic woes of Europe and North America.
Weakening global demand and China's restrictive domestic policies mean that China will be a less-supportive growth engine in Asia than in the past, says CBRE.
Greg Penn, CBRE's executive director of investment properties in Asia, said: 'However, on the commercial side despite a slowing down in the economy, the market continues to show resilience as GDP [gross domestic product] growth remains positive ... local and international investors are still looking at mainland China for its long-term potential, and will continue to place capital on the right property at the right price.
'In Hong Kong, despite the undoubted caution in the market, we are still seeing interest in quality assets, as over the medium and the long term, investors have positive expectations for Hong Kong growth.
'The key right now is being able to meet the pricing expectations of both investors and vendors, as the higher cost of debt is also being passed onto the latter as yields increase.'
Taking a long-term approach, Jones Lang LaSalle (JLL) said it had been raising its view of China as among the top cities for global real estate investors.
In its latest report entitled A New World of Cities, JLL identified 50 secondary and tertiary cities in China that are expected to drive 12 per cent of global economic growth in the next decade, as these cities reap the gains of unprecedented development and modernisation.
Peter Roberts, the firm's chief executive for the Americas, notes that China has the 10 fastest-growing new cities in the world in terms of GDP, with Chongqing, Tianjin and Chengdu topping the list.
However, Adam Fisher, co-founder of US-based asset management firm CommonWealth Opportunity Capital, said Asian real estate prices were 'very expensive'.
'The market is potentially prone to bubbles, particularly China,' he said, adding he preferred the US market where properties were cheap and the market was well supported.
Property investment in China last month rose this much from a year ago, down from an annual rise of 20.2 per cent in November