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KUALA LUMPUR: Asia-Pacific’s growth in real estate investments is expected to continue for the remainder of the year due to sound domestic demand by occupiers and investors, a relatively strong corporate/household sector and high savings rates.
According to Jones Lang LaSalle’s August issue of its Asia Pacific Capital Markets Bulletin, investment volumes are up 11.1% year-on-year (y-o-y) at US$19 billion (RM56.8 billion) with domestic deals chalking up US$11.2 billion alone. Cross-border Asia money accounted for US$4.5 billion while inter-regional funds made up the total at US$3.3 billion. Total investment volume is still targeted to reach US$100 billion by end-2011.
“Investors who are interested in diversification of their portfolios are likely to be attracted to real estate in the region, based on cash flow from rent with the potential to keep pace with inflation. We have seen a series of institutional investors increase their allocations to real estate, sustaining market volumes,” head of Asia-Pacific capital markets Stuart Crow said in a recent statement.
Commenting on the regional outlook, head of capital markets research in Asia-Pacific, Dr Megan Walters, said in the long term, occupier demand for Asia-Pacific real estate will endure based on population growth driving economic growth and urbanisation and this provides an attractive stable income stream from rent for investors.
China recorded the largest volume of transactions in the region in 2Q11, a shade over US$5 billion. Historically, Japan has usually been the biggest market, but for the first time China exceeded Japan in 4Q10. Japan returned to the top spot in 1Q11.
In the long term, China’s role as the world’s second-largest economy is likely to see the country become the biggest real estate investment market. Notwithstanding a swift and total recovery of the real estate markets in Japan, the rate of new building development in China, the continued rate of absorption of prime Grade A stock in Tiers I and II cities and the development of property rights to allow more landlord and tenant relationships, add up to China destined to become the biggest investment market in the Asia-Pacific.
Australia emerged as a top favourite for inter-regional investors, as one of two AAA-rated countries in the Asia-Pacific, and drawn by good fundamentals of transparent real estate markets and economic links to the rest of Asia. Several sizeable deals with buyers from Canada, Switzerland, the US and global funds pushed the total inter-regional inflow to Australia to US$1.2 billion, a 442.1% increase y-o-y.
“Our team advised on the sale of 50% of Northland Shopping Centre in Melbourne which was sold to the Canada Pension Plan Investment Board for US$484 million at a yield of 6.3% in May this year. This illustrated the level of interest by international investors in Australia, attracted by our strong growth prospects amid a global slowdown,” said head of Australia capital markets John Talbot.
