Aug. 4--With the global economy expected to recover by the second quarter of 2010, activity has resumed in residential real estate in key Asian markets including Singapore, Hong Kong, Shanghai and Beijing, according to the international property consultant Jones Lang LaSalle.

Signs of a pickup began emerging in May as low interest rates triggered the investments by cash-rich individuals, said Alastair Hughes, JLL's chief executive for Asia Pacific.

He said very low deposit interest rates had attracted wealthy people to shift from savings to investment in real estate as low mortgage rates were also a draw.

"Residential prices in the four cities are bouncing back due to resuming demand," he said.

Residential property was the first segment to pick up, signalling the beginning of the cycle of economic recovery. Within 12 to 18 months after that, JLL believes other property segments will follow suit.

Mr Hughes said the bottom of the residential market was in February.

In Singapore, buyers who made deals were mostly Singaporeans. In Shanghai and Beijing, they were local buyers and some were expatriates while in Hong Kong, buyers were local Chinese and expatriates.

Discussing buying behaviour, he said: "When the offering price is supposedly 20 and the market price is 15, property buyers in Hong Kong will bargain at 10, but Japanese buyers will ask when the price will reach 20 again."

Mr Hughes recalled that in 2007, there was a lot of cheap money that attracted investors to the market, pulling more equity into the market, so real estate prices climbed up.

As businesses grew and people needed more space for expansion, office rents that year went up, except for Thailand where politics hurt sentiment.

But a year later, everything turned upside down.

In the first quarter of 2009, office rents tumbled by 20-60 percent year-on-year, depending on the country. Capital values were down by 20-50 percent. The take-up rate of new office space dropped by 90 percent while property deals were dramatically low or 70 percent fewer than a year before.

In Singapore, the office space market shrank sharply due to decreasing demand from shipping, financial and real estate businesses. Shrinking demand and more new supply resulted in a 60 percent drop in rents in the first quarter of 2009, compared to the same period last year, said Mr Hughes.

The situation was quite different in Bangkok as little new office space supply had entered the market in the previous few years.

According to JLL's research on additional office supply between 2009 and 2011 over eight cities in seven countries, the top three markets likely to face falling rents will be Shanghai, Beijing and Singapore where 50.8 percent, 40.2 percent and 32.6 percent more supply will be added respectively.

"There's too much supply in those markets," he said.

In Bangkok, there will be an additional 4.7 percent and in Hong Kong 5.9 percent.

In Mumbai, the supply would almost double with 93.7 percent more office space added but the total amount in square metres would not be so high as Mumbai had very few quality spaces, he said.

"In terms of investment opportunity, I think offices are the most attractive as it is going to the bottom," he said.

Mr Hughes admitted the recession had hurt JLL's business in the first quarter of the year. Its two traditional income earners, leasing and investment, dropped but the other three major sectors did well. They are property management, facilities management and property advisory. For the Thai market, "economic growth, political and legal sustainability, predictability and transparency are the keys," said Mr Hughes.

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