Institutional investors to acquire more Asian commercial properties

KUALA LUMPUR: Institutional investors are expected to pump more money into commercial real estate across Asia as  the global economic landscape improves, prompting the anticipation that commercial property transaction volume  in the region will rise by up to 50% this year.

In a research note, real estate consultancy Jones Lang Lasalle (JLL) said Asian private equity, sovereign  wealth, and pension funds besides insurers could continue acquiring prime assets which offered stable rental  income.

"There will be more portfolio and enbloc deals in the second half of 2010 as investor confidence bounces back.  However, further interest rate hikes that are expected across the region may have a negative impact on buying  sentiment.

"Overall commercial investment volumes are expected to increase by 30% to 50% this year," JLL said.

The combined impact of improving business confidence, besides better employment and credit conditions has  created a conducive property investment market in the Asia Pacific.

According to JLL, the spotlight has fallen, mainly, on land and residential properties in Singapore, Hong Kong  and China. Commercial property transactions rose 15% in the first quarter of 2010, compared to the 43% expansion  in the similar period a year earlier.

In China, foreign funds such as Morgan Stanley, Macquarie Group, and Goldman Sachs were selectively selling  their Chinese property holdings in the past year, capatalising on a rebound in prices, especially, in the  residential market. Meanwhile, mainland Chinese and local investors continue to show interest in Hong Kong.

Policymakers in China are embarking on serious measures to curb a potential real estate bubble in the major  emerging economy. Home prices in  China have gone up so much with no sign of easing anytime soon, making  property prices less affordable for the  general public.

This has led the central government to initiate tighter credit policies and more tax levies to deter speculators  from driving property prices higher. According to the National Bureau of Statistics, China’s urban property    prices rose 11.7% in March, the biggest annual gain since July 2005.

Lawmakers have indicated that second-home buyers seeking credit must fork out at least a 50% downpayment, up    from the previous 40%.

Real estate developers were ordered not to take pre-payments from buyers for uncompleted residential units  without official approval.

Lawmakers are also deliberating on the idea of forbidding insurers to park their money in residential and commercial properties, and undertake property development.

The Australian commercial property market had also remained robust in the first quarter of 2010, registering  strong demand from both domestic and Asian investors.

JLL said the withdrawal from direct overseas markets by some Australian investors was likely to leave only about  half a dozen Australian investors with an overseas platform.

"Australia’s superannuation funds could start to look at the global REIT (real estate investment trust) sector,"  JLL said.

The real estate market in Australia was recently dragged into the spotlight after lawmakers initiated measures  to curb property ownership by foreigners, blamed for pushing up real estate prices there.
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