8 November 2012
Asian investors, while on a cautious note are still positive in their outlook with regards to the property market in the next twelve months, according to the latest results from Colliers International’s Global Investor Sentiment Survey, conducted in October 2012. A majority of those surveyed (79%) maintains a high preference to invest in their home markets – Asia.
Sixty eight percent of Asian investors believed that market conditions would improve in the next 5 years while only a small percentage (11.7%) felt that investment conditions would decline.
Moreover, a vast majority (70%) of Asian investors are likely to expand their property portfolio and increase their level of investment. Compared to 65% in 2011, this jives with the overall more positive sentiment among Asian investors.
"Many would automatically assume that the positive sentiment reflects an improving economy, however, there are in actual fact many foreseeable explanations,” said Piers Brunner, Chief Executive Officer of Colliers International, Asia. “With growing inflationary pressure amid the third round of quantitative easing (QE3), investors realise that their cash is steadily losing value. The anticipated increase of market liquidity also means an easier access to credit in 2013. Coupled with a clearer direction of government policies with most governmental elections of various countries completed this year, investors are further exacerbated to execute their investment plans.”
Compared to the survey in 2011, economic uncertainty was the top concern that prevented Asian investors from expanding their portfolio. This year, two more factors have surfaced from the survey - the ability to raise new equities, followed by the supply of “for sale” property.
Simon Lo, Executive Director, Research and Advisory, Asia at Colliers International felt that investors are expecting improvements next year having gone through some tough economic challenges in 2012. These investors appear to have more concerns about whether they are able to raise capital and find quality investment opportunities amid strong competition during inflationary times.
According to the survey results, Asian investors have set their sights for an aggressive return. 41% of Asian investors are expecting over 20% IRR, compared to 10-15% expected by investors in Pacific, Middle East and North African and less than 10% by the investors in U.S., Canada and Western Europe.
In terms of top destination choice for their property investments in Asia, Shanghai is a clear winner. “The Shanghai property market is still the number one favourite among end-users, a natural progression when it comes to Asian investor’s pick,” said Lina Wong, Managing Director of East and Southwest China at Colliers International.
Hong Kong, Singapore, Tokyo and Beijing all rolled in after Shanghai as the Asian investors’ favourite locations to invest in the future.
Hong Kong, a well-known gateway to China has long benefitted from the cushion which China provided in recent years. With competition closing in, Hong Kong has been trying to reinvent itself in order to stay ahead of competition. Sharing his insights, Antonio Wu, Executive Director of Investment Services, Asia said, “Even with its volatile legacy, Hong Kong stands to gain from new demand from China with its expanding role as a major offshore RMB trading centre making it an attractive market when it comes to property investments. On a bolder note, one might even say it is the dramatic price changes that makes Hong Kong a top pick when it comes to destination for investment in the region.”
In Southeast Asia, Dennis Yeo, Managing Director, Singapore said the country’s cyclical characteristic acts as a magnet to investors looking for flight to quality. Currently and for the better of 2012, there is a price gap between sellers and buyers. The tipping point for more transactions may be towards the later part of 2013 and 2014, when the economy continues to slow, demand weakens and supply comes on stream on completion of sites released in 2011 and 2012.
In Tokyo, the high yield spread in the market remains a major attraction to Asian investors while Beijing market’s attractiveness lies in its robust demand as well as healthy occupancy rates.