Asian property investors most conservative

KUALA LUMPUR: Asian property investors are least likely to take investment risks, according to the annual Global Investor Sentiment Survey conducted by Colliers International.

The global commercial real estate brokerage firm conducted the survey among property investors worldwide, measuring their risk appetite, optimism, key concerns and overall market outlook. This year’s survey was conducted in the first two weeks of August.

“Despite a willingness to buy, investors in Asia are not compelled to move out of the risk curve in order to achieve superior returns,” stated the report.

Investors with the greatest risk appetite come from Canada and the US. About 64% of Canadian respondents and 60% of US respondents said they are more aggressive than six months ago, a stronger shift in risk tolerance than any other region.

Although Asians ranked the lowest in terms of risk appetite, the survey also found that amid economic uncertainties, Asian investors were more likely to target investments that offer higher internal rate of return (IRR).

In the survey, 35% of Asian investors indicated that global and regional economic uncertainties are a major deterrent in their purchasing decision while 31% believed that the main obstacle is the lack of supply of “for sale” property with their target IRR.

“When asked on their target IRR for investment, a vast majority of the Asian respondents (over 75%) indicated that they typically aim for 15% IRR or higher. This is much higher than the average number of investors who concurred to the same IRR target globally,” Piers Brunner, CEO of Colliers International Asia, said in a recent statement.

Brunner added that Asian property investors want to only invest in properties that are able to generate stronger returns and are able to offset any possible negativity.

Furthermore, “Asian investors face more challenges now when it comes to credit accessibility with rising cost of debt and a shrinking loan-to-value (LTV) ratio,” he added.

In the survey, about 69% of Asian investors said they had felt a tightening of credit compared with the previous six months, while 77% believe that the cost of debt has increased and 54% state that the maximum LTV ratio has evidently gone down.

Nevertheless, investors in Asia continue to be optimistic about property investments.

Overall, 65% of the respondents in Asia said they would likely expand their property portfolios in the next six months, preferring office spaces in their own region. It was also indicated a majority of the Asian respondents anticipated a surge in demand for suburban office property over the next 10 years.

They are also confident of the growth in rents and prices.

“Office spaces in Beijing and Shanghai are the Asian investors’ top preferences. This is followed by residential or office property in India, while industrial property in Singapore and China came in third,” said Brunner.

“Despite key concerns in Asia such as global economic uncertainty, Asian investors believe that real estate will continue to be a good hedge against inflation. This is also boosted by the recent surge in commodity prices in terms of construction materials such as steel and cement which have pushed up real estate prices,” explained Simon Lo, Colliers executive director of research and advisory, Asia.

The survey found that 56% of Asian investors believe that real estate rents will exceed the inflation rate over three to five years.


This article appeared on the Property page, The Edge Financial Daily, October 14, 2011.