ASIA -The credit crunch and rising inflation have caused the real estate industry to question whether the rapid economic growth of Asia and double digit returns of its property markets can be sustained.

Speaking at the Real Estate Investment World conference this week in Singapore, Michael Smith, head of Asia real estate at Goldman Sachs, told delegates despite Asia's robust economic fundamentals, the "contagion effect" of the liquidity crisis in the US and Europe will "depress" its property markets.

Markets in Asia are already feeling a credit squeeze as Western lenders have retreated, while local banks are not always able to supply the demand for debt.

Local institutions in Singapore, for example, have regulatory caps on how much they can lend and Smith suspects many may have reached their limits.

Meanwhile, David Jacobs, chairman for Asia Pacific at law firm Baker & McKenzie asked a panel of Asian property companies and investors whether the industry was moving into a "post-golden age".

Justin Chiu, executive director at Cheung Kong Holdings, admitted Asia has been affected by the credit crunch, but he did not believe this would necessarily cause a drastic change to the region's positive outlook. Instead, Chiu said it could be a good learning experience for some of the rapidly expanding markets that could otherwise overheat.

However, Stephen Riady, president of the Lippo Group, said rising inflation was more of a concern than the credit crisis.

Yu Lai Boon, chief investment officer at sovereign wealth fund Dubai World, agreed, saying rising inflation could increase political risk in some countries and this would have to be priced into investments.

The point was also made by Asieh Mansour, chief economist and strategist at RREEF, who gave a separate talk on the prospects for the global economy and real estate fundamentals.

But Mansour went on to say that Asia should continue to outperform the developed Western real estate markets.