Visitors to and denizens of Asia are often impressed at the pace of economic and property development, but also the contrasts between one nation or region and the next, or even from one kilometre to the next.
In the past few years, more Asian institutional investors — especially pension funds — have started to include real estate in their investment portfolios for the first time. What is behind this phenomenon, and how is it changing the investment landscape of the Asia Pacific real estate market?
We’ve all seen where the actions of banking systems of developed nations such as the United States can lead — straight into 2008’s global financial crisis.
Billions of dollars are pouring into Southeast Asian countries for infrastructure development, while Southeast Asian companies with strong balance sheets flex their muscles by investing in infrastructure outside their borders.
For a year now, the real estate market has been growing in Indonesia. Many publicly-listed real estate companies have experienced high growth, and 2012 may be viewed as a seller’s market. This is because the low interest rate environment allowed many people and companies to purchase housing or apartments from the primary or secondary market.
The past few months have seen a flood of research reports predicting slower growth in China. At the same time, well-known China perma-bears changed their views and prognosticated that despite economic trouble China will survive and may even continue prospering. Some of the numbers were puzzling, and I wanted to sort out what consequences these scenarios may have for real estate investment opportunities in China and a possible flight of Chinese capital into foreign real estate markets.
China’s Ping An Insurance Group has acquired the iconic Lloyd’s Building in the City of London submarket for £260 million (US$403 million) from a German closed-end fund managed by Commerz Real, which purchased the building in 2005 for £231 million (US$358 million).
During second quarter 2013, investment managers launched 35 new real estate funds, a drop of six funds from the 40 that began marketing in first quarter 2013, according to Institutional Real Estate FundTracker. It seems the rollercoaster ride of fund launchings is still a ride that investors and managers cannot get off. However, this low amount is not quite as drastic as the drop in new funds recorded in fourth quarter 2012 when only 29 funds entered the market.
Asia pacific listed real estate companies, along with global real estate companies, rebounded in July after a difficult second quarter, with the markets providing positive total returns of 1.2 percent and 2.1 percent, respectively, according to SNL Financial, with regional returns denominated back to US dollars and country returns in local currency.