2014-11-03

Singapore is the Top Investor from Asia Investing in Australia, Mainland China and the United Kingdom

The latest Global Investor Sentiment Survey for 2015 by Colliers International revealed that, of the largest sources of global capital, investors from Asia exhibit a stronger inclination towards investing outside their region for 2015. 

According to the Survey’s findings, cross-border capital flows to the most liquid markets. 

Mr Terence Tang (鄧文傑), Managing Director of Capital Markets & Investment Services | Asia, says, “For Asian investors, market liquidity remains a concern when making investment decisions; this is particularly so, after seeing a fall in the sale transaction volume in individual markets across Asia in the past 12 months.  Other top factors influencing decisions are property fundamentals, economic growth in the region and the yield levels.”

56 per cent of the Asian investors surveyed singled out the United Kingdom as their key outbound investment destination in Europe for 2015, while 40 per cent of them indicated the United States as their preferred investment destination when the focus shifted to the Americas.

Mr Tang adds, “Despite being seen actively investing in the regions outside Asia, Asian investors’ appetite for investments in the Asian markets is still healthy.  In fact, Mainland China sits at the top as an Asian investment destination, with 41 per cent of the Asian investors indicating that they are planning to invest there over the next 12 months.  Due to the strong property market fundamentals, both Singapore and Hong Kong are being favoured by Asian investors, garnering 36 per cent and 33 per cent votes, respectively.  Japan is also identified as another popular investment destination at 21 per cent.”

Looking closer at home in Singapore, government policies to cool the real estate markets in recent years prompted Singapore investors  to venture overseas – in search for better yields and diversification.

From October 2013-2014, the top three outbound investment destinations for Singapore investors were London, Sydney and Tokyo. 

Mr Tang comments, “The results are not surprising, as most Singapore investors tend to be more risk averse when investing overseas.  Although they seek relatively higher returns, Singapore investors also prefer investments providing them with stable income; therefore, they prefer to invest in mature markets that offer the risk/return profile investments that they are unable to get back home.”

He continues, “Consequently, in addition to REITs and funds investing in stable-income assets in these markets, we also see traditional developers acquire commercial buildings and hotels that provide secured recurring income.  Only some investors will undertake development opportunities, such as Oxley in London and Keppel Land in New York, but they will partner a local developer to do so.”

With all the interest in investing overseas, Singapore has, in fact, emerged as the top Asian country investing in Australia, Mainland China and the United Kingdom, which are favoured by investors worldwide.
Mr Tang adds, “Nonetheless, Singapore remains an attractive investment destination for both local and global investors, particularly those who can take a longer-term view of the market.  Unlike the uncertain times in the past, listed property companies now have stronger balance sheets and more healthy debt levels than before. 

Office properties will continue to be a popular asset class, as the sector is experiencing a steady rental recovery.  Government Land Sales sites, particularly mixed-use development sites, will also find favour with investors.  Meanwhile, the luxury residential segment is another asset class to watch for in 2015, due to a possible narrowing of price gap expectations between sellers and buyers.”

Key themes from the Global Survey:

  • 67 per cent of the investors surveyed are looking to expand their portfolios and increase investments.  
  • Investors worldwide are building on the greater risk appetite that they adopted in 2014.  59 per cent of the respondents indicated that they are likely to take on additional risks in the next 12 months, with 58 per cent looking for internal rates of return in excess of 11 per cent.  Low interest rates worldwide continue to drive the global investors’ ‘search for yield’ across all asset classes.  
  • Capital remains primarily domestic, with 74 per cent of the global investors indicating they will continue to invest only in their region in the next 12 months.  
  • Globally, investors are targeting “safe haven” cities; particularly so for new institutional market entrants such as Asian insurance companies and pension funds.  International sovereign wealth funds with previous direct cross-border property investment are increasingly looking beyond core markets to regional and second-tier cities, where higher yields are on offer, often with little increased risk. 
  • 78 per cent of the global investors surveyed said they are likely to use debt in future investments, with US investors showing the greatest debt appetite at 87 per cent, followed by Pacific investors at 81 per cent.  Western European (excluding UK) showed the least appetite at 59 per cent.  
  • For the third consecutive year, central business district office property remains the most popular direct investment sector with 46 per cent of the global investors surveyed voting for it.  The other popular sectors are residential investments at 37 per cent, and industrial and logistics at 35 per cent.  Nonetheless, it is noted that the industrial sector still remains the preferred choice for US investors, as well as the second pick for Australian and New Zealand investors.

Other Key Findings in Relation to Asian Real Estate Investors:

  • Asian investors remain confident when allocating capital to the region, as they continue to be attracted by sound property fundamentals and long-term economic growth in Asia. 39 per cent of the Asian investors surveyed believe that there will be an improvement in investment conditions over the next 12 months. 
  • Going forward, 73 per cent of the Asian investors believe that investment volumes will further increase in 2015. 
  • 74 per cent of them indicated that they plan to expand their real estate portfolio over the next 6 months. 
  • 58 per cent of the Asian investors expressed that they are likely to take on more risk over the next 12 months, in order to achieve superior returns. 
  • 71 per cent of the respondents from Asia said that they are likely to use debt to leverage their exposure in future investments.   
  • CBD offices, particularly new developments are the most popular investments among Asian investors, with 61 per cent indicating that they intend to target this sector in the next 12 months.  Residential properties are mentioned by 42 per cent of the respondents as the second most sought-after asset class due to the sustained demand to upgrade existing stock and the positive demographics in the region.  Development opportunities are indicated by 39 per cent of the respondents; and this sector has become increasingly popular in traditional markets, where investment returns have been severely compressed. 
  • 66 per cent of the Asian investors concurred that good investments exist in the market but are increasingly difficult to find.  
  • There is a consensus among Asian investors that the overall volume of investment sales in Asia will see a much stronger growth in 2015 if more investment opportunities are offered at more realistic prices, and if some of the restrictive measures ease off.

The Global Investor Sentiment Survey 2015 canvasses opinions globally from major investors across a broad spectrum ranging from institutions to private equity.  More than 620 investors from Asia, Australia and New Zealand, Canada, Europe, Latin America, the United States, as well as the Middle East and Africa, participated in the Survey; of which the representative sample size for Asia is 51.  The global data compilation aims to provide insights into the direction of the investment markets for the next 12 months.

For more details on the results of Colliers Internationals’ Global Investors Sentiment Survey, please click here.