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Investment up in Asia Pacific, but too soon to call bottom

In DTZ’s first Money into Property report for Asia, the firm notes a rise in transaction volumes across the continent but warns the market cannot assume the bottom of the market has been reached.

The volume of real estate bought and sold across the Asia Pacific region has risen for the first time since the second quarter of 2007, according to a report.

DTZ’s Money into Property for Asia said $6.8 billion was bought and sold in the first quarter of the year, up from $4.2 billion in the preceding quarter. This, says DTZ, is the first time volumes have increased since before the credit crunch.

However, the firm warned that there was still a “mismatch” in expectations between buyer and seller together with tighter lending conditions and that longer would be needed in order to determine whether the market had bottomed out.

“We need to see a few more quarters’ worth of data before we can call the bottom of the market,” said David Green-Morgan, head of Asia Pacific research at DTZ.

In the report, DTZ also said that cross border capital flows had declined by 65 percent and that the region had become a “net importer of capital” compared with a holding a “neutral position” in 2007. The firm also reported that as a result of falling values, debt had risen to 50 percent of “stock value” as equity has been wiped away.

“Broad value will gradually return to markets across Asia Pacific, though for the most part, not before 2010,” the report said. “This picture will start changing in the second half of 2009 with Sydney reaching fair value, followed by Shanghai in early 2010 and other key markets to follow later in the year.”

Green-Morgan added: “While we start to see value returning to the markets in Asia Pacific, funding remains a concern, and may become a bottleneck for the recovery of activity in the commercial property markets both in Asia Pacific and worldwide.”

“Opportunistic deals are, however, continuing to occur across Asia Pacific and a broad ‘hunting season’ should emerge within Asia Pacific over the next 12 to 18 months,” he said.