Both centres poised to become Asian market hubs, says UBS Singapore has the edge over Hong Kong in the real estate investment trust (reit) market, although both centres have the capacity to become Asian hubs for the competitive Asian market, according to investment bank UBS. 'Malaysia and Taiwan have jumped into reit development. But only Hong Kong and Singapore could evolve as Asian reit hubs. Singapore has a lower cost of capital while Hong Kong has a closer relationship with China, which is attractive to investors,' said Charles Neo, UBS co-head of Asian real estate research. However, he said Hong Kong faced more difficulties than Singapore in developing the reit market. 'The property investment market in Hong Kong is more active, which means the city has greater liquidity in real estate. This is a disincentive for developers to inject their properties into a trust,' Mr Neo added. 'I believe Hong Kong could attract owners of mainland properties to package their assets into reits. Most of the reits in Hong Kong would include mainland properties rather than local properties,' said Eric Wong Chun-yu, UBS co-head of Asia property research. 'The cost of raising capital in Hong Kong is higher than Singapore, which would make the yield of any reit in Hong Kong lower than in Singapore.' The bank said the capitalisation of the Asian reit market had the potential to increase from US$11 billion to US$81 billion by 2010. 'We expect the price of residential and office space to rise 50 per cent over the next two years,' Mr Wong said. 'The levels of pay, inflation, savings rates, peaking interest rate and record high marriage numbers would contribute to an increase in confidence in Hong Kong and demand for housing. These factors will drive flat prices to increase significantly.' He called on the government to adjust its policies to release more land for development. 'With three consecutive years of record-low completions at 16,000 units, housing supply is below its previous low of 18,000 units in 1997 and 40 per cent short of the historic average of 28,000 units. 'The land policy and rail project delays could extend the shortfall into 2009 ... The government does not have to resume regular land auctions, but it should consider offering more discounts on the reserve price or decreasing the land premium amount.'