Survey Shows Institutional Investors Allured by Asian Real Estate

(March 30, 2011) — The Asian real estate investment market is poised for strong growth on the heels of improved business sentiment and heightened investor confidence, according to the latest analysis from global property consultants CB Richard Ellis.

The study revealed that Hong Kong — which accounted for $9.3 billion, or 28% of total activity in the region in the second half of 2010 — was the top performer. Following Hong Kong in real estate performance in the second half of last year were Japan, Singapore, and China, which accounted for a total of $20 billion of transactions between July and December 2010, or 56% of the total regional volume. While investment activity in the area declined slightly in the fourth quarter, the Asian real estate investment market ended last year with total transaction volume reaching $62 billion, representing a 59% year-on-year increase.

The property consultancy noted that the future of the market is optimistic, expecting continued real estate investment and portfolio expansion from Asian pension funds, sovereign wealth funds, and real estate investment trusts (REITs) across Asia’s mature and emerging markets.

Seth Hurwitz, a research consultant at Cambridge Associates, noted that the key investment question for Japanese equities following the crisis was whether they were now more attractively valued or whether the fundamentals had changed enough to make them less attractive. Hurwitz said: “We had been slightly positive on Japan and are now more neutral, although we believe a small tactical bet is justifiable.” But he told aiCIO that “We do think currency hedging is a bigger issue now given everything that’s going on with the Japanese yen and the potential for significant yen depreciation as a result of the costs of reconstruction,” noting that the crisis has increased the fiscal pressures that Japan has faced for years. As for whether the crisis in Japan would impact the region, Hurwitz said “I don’t think that what is happening in Japan affects the longer term Asian growth story,” adding that growth is supported by a growing middle class and infrastructure spending.