Asia's and the Pacific Rim's Real Estate Markets are Inflated

 

 The World Bank warns that the economy is on the verge of collapsing.

WASHINGTON, D.C. (AP) — The World Bank, which represents 186 nations, sees signs of a coming market collapse in the inflated real estate, stock, and currency prices currently being traded around the world. for sale apartments

The World Bank sees things like this:

A luxury condominium in Hong Kong's wealthy Midlevels district is expected to sell for $55.6 million, or $9,200 per square foot, according to reports.

Home prices in Singapore grew 15.8% in the third quarter, the fastest rate in 28 years.

South Korean regulators have tightened real-estate lending conditions in seven districts around Seoul where prices have risen dramatically.

The Australian dollar has increased by about 35 percent in the last year as investors borrow in US dollars to buy Australian currency.

Due to low interest rates around the world, rebounding economies from Beijing to London are drawing massive inflows of money.

This year, $53 billion was invested in emerging-market stock funds.

This year, the Emerging Markets Index has increased by 60.7 percent. Brazil had a 100% rise, and Indonesia had a 102.7 percent gain. The Dow Jones Industrial Average gained 11.5 percent over the same time span.

According to the bank, the crash is particularly likely in Asia and the Pacific Rim.

 

The bank warns that governments and central banks may be fueling the crash, which some foreign analysts believe is unprecedented for the 65-year-old organization.

They're doing it by working hard to get out of the current recession, according to the bank. They are also contributing to asset bubbles in real estate, stock, and currency markets, especially in China, Hong Kong, Singapore, and Vietnam.

"This is the start of another major and unsustainable run-up in asset prices," says Simon Johnson, a former IMF chief economist.

 

See also "SPECIAL REPORT: Hong Kong faces property bubble boom as home prices grow 28 percent this year, Nov. 1, 2000" and "GLOBAL REALTY CAPITAL MARKET: Nov. 2, 2009" on the Real Estate Channel.

Policymakers are first turning to legislation to combat bubbles. But it isn't enough to persuade anyone that the impending crash has been postponed. Some claim that rapidly rising prices aren't conclusive evidence.

Laurence H. Meyer, a former Federal Reserve Bank governor, says, "Even those who suggest we can answer directly [and deflate bubbles] have no idea how to do it." "It's easy to adopt a philosophical position, but it's far more difficult to put it into practice."

"This doesn't sound like a bubble," says Hugh Simon, CEO of Hamon Investment Group, a manager of Asia-focused funds. Among investors, there is "too much cynicism."

"One of the major two or three unanswered questions at the end of this crisis," says Adair Turner, chairman of the Financial Services Authority in the United Kingdom.

According to The Wall Street Journal, Bank of Korea Governor Lee Seong-tae hinted last month that if possible, he would lift interest rates to prevent Seoul's housing market from spiraling out of control.

According to the Wall Street Journal, Asian stock prices are surging, owing in part to low interest rates in the United States.

Investors seeking higher yields are borrowing in US dollars and then investing "into countries that are rising more rapidly," according to Stephen Cecchetti, chief economist at the Bank for International Settlements, which predicted the previous asset bubble and is now doing so again.

"This could lead to property and equity bubbles in those countries," Cecchetti warns.

In the traditional sense, the World Bank is not a bank. The International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) are two development institutions owned by 186 member countries that make up the bank (IDA).

The IBRD focuses on middle-income and creditworthy poor countries, while the IDA works with the world's poorest countries. The bank offers low-interest loans, interest-free credits, and grants to developing countries for a variety of projects, including education, health, public administration, infrastructure, financial and private sector growth, agriculture, and environmental and natural resource management.

Robert B. Zoellick, an American career diplomat, is the World Bank's new and 11th president. Since June 2007, he has held that job.

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