ING real estate shuns speculative middle east
News Article Date: Thursday 22nd of October 2009
ING Groep NV’s $150 billion real estate fund has no interest in the Middle East because of overdevelopment, the head of the Dutch bank’s Asian property unit said.
“We are not looking to invest in the Middle East,” Richard Price, chief of Asian real estate for the Netherlands’ biggest financial services company. “There is an awful lot of speculative development that remains unsold or unused and I don’t personally understand where the demand is going to come from.”
The Middle East has the world’s worst-performing real estate market, with property prices in Dubai down about 50 percent from their peak and heading lower, Deutsche Bank AG said in June. Price spoke at the Cityscape conference in Dubai earlier this month. He spoke by telephone from Hong Kong.
“We don’t see demand for investment into the Middle East from our institutional clients,” said Price. “Our Middle East clients are obviously invested there, but they typically do it themselves or through different entities.”
Price, who manages $4.5 billion in Asian assets, said Hong Kong’s property market, which rallied this year on record-low interest rates and Chinese investment, “certainly looks like it got ahead of fundamentals,” though it isn’t in a bubble.
The Hong Kong Mortgage Corp. may stop offering mortgage insurance for investment properties to avert a real-estate bubble. Hong Kong Chief Executive Donald Tsang signaled Oct. 14 that his government may release more land for developers after sales of luxury homes worth more than HK$10 million ($1.3 million) almost tripled in September.
“If you started to see much higher levels of leverage coming into the system and prices continuing to go up, then you might start to get concerned that pricing has really gone too far,” Price said.
China and Hong Kong comprise the biggest part of the ING Real Estate’s Asia business, with 40 percent, and Japan is the next largest at about 35 percent, Price said in June.
“There is a finite amount of high-quality modern residential stock in Hong Kong and an awful lot of cash in the system,” he said. “Real estate is sort of the favorite home for local investors to put their cash.”
Price aims to double the share of ING’s real estate investments in Asia to about 10 percent over the next three to five years “assuming no growth in the rest of the world,” he said. South Korea is attractive because it has a fast-growing economy and a “fairly immature” property market that lacks quality buildings.