Asian investors lead global property market recovery

Asia-Pacific transaction volumes up 40% in first half of 2010 despite economic uncertainties elsewhere.

Property transaction volumes in Asia Pacific for the first half of 2010 totaled USD 38.8 billion compared to USD 27.7 billion in the first half of 2009. Whilst worries about a double dip in the USA and Europe may affect market sentiment in Asia, the reality is that Asian buyers who have ready available cash and low debt are likely to continue supporting the direct investment real estate markets in Asia Pacific, according to a research report from Jones Lang LaSalle.

The world-wide economic outlook and growth prospects have differed widely between the regions in the past 18 months. With the IMF expressing concerns that capital flows from low-growth areas such as the EU could have a destabilising effect as they flow in to high-growth regions, particularly in Asia. Whilst this may be an issue for one or two specific countries, in general the region has witnessed that global funds have actually been net sellers of Asian real estate, much of which has been acquired by Asian buyers.

Global funds have been selectively selling their real estate in the Asia Pacific region, reflecting problems for their funds back home rather than causing any particular performance issues within the Asian markets. Property developers as well as unlisted owners have also been net sellers and interestingly, it appears that the counter-parties to these deals are cash-rich Asian buyers, comprising private individuals as well as corporations and institutions.

Dr. Megan Walters, head of Research for Asia Pacific Capital Markets comments, “Despite economic uncertainty elsewhere, it is expected that Asia will continue to see good rates of growth in the market based on strong domestic demand and low levels of debt. Office capital values have been supported by the growth of rental values, with stabilising or compressing yields experienced in most markets.”

Stuart Crow, head of Asia Pacific Capital markets says, “With a number of significant transactions expected this quarter, it certainly feels like market fundamentals are improving in the region. Clients continue to favour the core markets of Hong Kong, Singapore, Sydney/Melbourne and Tokyo and are largely focused on well-leased core or value added opportunities.”

Governments in emerging economies are moving away from stimulus towards a tightening in monetary policy and with good sustained tenant demand stemming from solid economic growth, it is expected that there will be an upturn in investor activity during the second half of this year. As a mixed picture is prevailing in Japan, the US and the Euro zone, the outlook for Asian real estate remains positive. Based on domestic demand, it appears that Asian investors are buying up Asian real estate as the global funds exit.