|
Published: Saturday, 10 September, 2005, 08:54 AM Doha Time
HONG KONG: Global property investors are starting to make big allocations to
Asia to cash in on fast economic growth and urbanisation, but many are
struggling to find the right buildings because of intense competition.
European and US pension funds and insurance firms will probably put more
money into specialised property funds to tap into local knowledge and spread
risk, rather than buy directly, speakers told a conference in Hong Kong on
Wednesday.
Japan, for example, is the preferred market for many investors because of
its cheap loans and $700bn stock of high-grade buildings - about the same as
the rest of Asia and Australia put together.
But for insurance firms such as Britain’s Prudential, which decides against
heavy borrowing to boost returns, outbidding local institutions and Japan’s
new real estate investment trusts (REITs) is almost impossible if it wants
to maintain 7-8% returns.
“It makes your head hurt to work out deals that stack up in Japan,” said Ben
Sanderson, head of research at Prudential Property Investment Management.
“Asia is not screamingly cheap.”
South Korea is one of the top picks for Sanderson, who is responsible for
strategy for Prudential’s £1.5bn ($2.76bn) allocation to Asia and analyst
for its £15bn investment in British property.
Seoul offices still offer yields of 8-9%, despite a flow of domestic and
foreign capital into property in the last couple of years that has raised
prices.
Reflecting a growing enthusiasm for Asian property, Youguo Liang, managing
director at US firm Prudential Real Estate Investors, said his model global
portfolio would have a 25% weighting for Asia, with 35% each for North
America and Europe and 5% for Latin America.
He said Asia’s emerging REIT markets now offered institutional investors an
easy way to offload buildings, but a lack of property indices and poor
market data increased risk.
If Youguo had $5bn to invest in Asia, he said he would put $2bn into Japan,
$1bn in China, half abn for each of Hong Kong, South Korea and India and
half abn into Singapore and Malaysia together.
“Asia has the highest growth of any region. In China 20mn people are being
urbanised every year,” Youguo said, which would mean a population the size
of Australia migrates annually to cities.
“They need houses, factories, retail facilities, hotels, office buildings,”
he said.
China’s residential property market has boomed in the last couple of years,
so much so that the government has introduced a series of cooling measures
to try to prevent a crash, including interest rate rises and a capital gains
tax aimed at speculators.
Sales of luxury apartments in Shanghai have slowed dramatically since the
beginning of May, but Timothy Bellman, head of Asia strategy at ING Real
Estate, said this was an ideal time for foreign investors.
Many Chinese developers are looking for new investors because of a clampdown
on bank lending for the construction industry.
“The cooling of the residential market means China is somewhere investors
can prepare to capture the next wave,” he said.
Bellman predicted the rise over the next few years of specialised private
equity funds that might concentrate on specific property types in a
particular country. Institutions looking for diversity would put their money
into several funds.
Private equity funds set up in Asia since the 1997-98 Asian economic crisis
so far have tended to be pan-Asian and opportunistic - looking to pick up
cheap property assets from failed companies.
“You have to have in excess of $1bn in equity to justify a direct investment
programme that is pan-regional,” Bellman said. “On the whole for smaller
investors, private equity funds will be the preferred option.” – Reuters
http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=52109&version=1&template_id=48&parent_id=28
|
|
