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Straits Times June 19, 2008
Positive outlook for Asian
property
Inflows from outside region rising as a
result of credit crisis in US and Europe, says report
By Joyce Teo
THE
flow of capital into the Asia-Pacific's real estate market
from outside the region is accelerating, a new report
on property investment has found.
This is the result of the credit crisis in the United
States and Europe, said the report by KPMG, FTSE Group and
Asian Public Real Estate Association (Aprea).
The acceleration is coming off the back of prolonged steady
growth, which has been powered by a combination of
opportunistic and increasingly longer-term investments, it
found.
'With the credit
crisis in the US and Europe, investors are seeing a slowdown
there, so they are looking to Asia for growth,' said
FTSE Group's head of quantitative research (Asia-Pacific), Mr
Jamie Perrett.
Many institutional investors, such as pension funds, are
looking to diversify their portfolios and increase their
property allocations, he told The Straits Times.
Real estate as an
asset class has outshone equities and long-term government
bonds over the past decade, providing average returns of 7 per
cent to 8 per cent, said the report.
And, while returns
on real estate investments are expected to decline in most
countries, returns in the Asia-Pacific are expected to remain
higher than the global average of slightly over 5 per cent for
the coming year, it said.
Market sentiment in Asia has been hit by the credit crunch
and it is unclear when a rebound will occur, but the regional
outlook should remain positive, said Aprea's chief executive
officer, Mr Peter Mitchell.
The interest in investing in Asia remains but there are
signs of a wait-and-see approach, he said. 'We need to take a
longer-term perspective.'
Real estate investment trusts (Reits) are not growth stocks
but good defensive stocks and inflation hedges, said Mr
Mitchell. Projections show Asia's Reit market with a
capitalisation exceeding US$100 billion (S$136.8 billion) by
2010.
'Despite the current tightening of credit from banks, the
deals will continue to take place. But they may take longer,
the price may be higher and it could lead to a temporary
slowing in the supply cycle,' said Mr Andrew Weir, KPMG's
partner in charge of property and infrastructure in China and
the Asia-Pacific, in a statement.
'However, the current sub-prime fallout elsewhere may well
act as a catalyst for the inevitable further development of
the Asia-Pacific as a centre of property and investment
management.'
According to the report, real estate funds remain the
dominant source of capital for property investments in Asia
this year.
Asian real estate, it said, may be experiencing some
short-term pain but will eventually benefit from the credit
crunch.
'In time, the credit crisis will result in Asia being
regarded on a more equal and level-playing field compared to
the more mature but struggling markets of the US and Europe.'
Yesterday, FTSE and Aprea also announced that they signed
an agreement to develop new indexes for the Asia-Pacific real
estate sector.
Said Mr Mitchell: 'It will give more visibility to Asian
real estate markets, thereby enhancing the region's access to
global capital.'
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