By THE STAR
PROPERTY investment activities in the Asia-Pacific are expected to remain fairly robust this year, given the solid economic and property sector fundamentals in the region.
According to the latest DTZ Research’s Money Into Property report, investment activities in the region showed that domestic transactions still dominated the market, accounting for 72% of the purchases.
Buoyant market returns and a positive economic outlook have also resulted in a rise in foreign investment in real estate in the region.
Last year, foreign transactions made up 28% of the purchases compared with only 10% in 2005.
Among the active foreign players, US investors still accounted for the largest group in the region with 10% of total activities.
Japanese and Australian investors followed with US$3.4bil and US$1.7bil respectively. (After being absent for the past few years, Japanese investors re-entered the international market last year.)
The office sector is still the main target for investors with US$25bil in transactions. In terms of lot size, large transactions worth over US$200mil accounted for more than 40% of the total transactions in the region for the past two years.
DTZ’s Investor Intention Survey showed that instead of the traditional office and residential sectors, retail and industrial would be the focus for investors this year.
This is especially in China and India, as investors look for opportunities created by strong economic growth and rapid urbanisation in those countries.
In the residential sector, the double-digit population growth expected in the region in the next 20 years would create a high demand for housing.
While local investors have become more discerning and sophisticated, foreign investors have also benefited from the introduction of favourable regulations for foreign direct investment and positive structural changes.
Although many economists think that appreciation in housing prices in the region has reached a “bubble”, DTZ Research said only China, India and New Zealand experienced real annual price rises of more than 8% in the past five years.
In the same period, the real rate of housing price appreciation averaged only 4.5% in the other parts of Asia-Pacific.
In the commercial sector, total commercial real estate stock reached US$9.4 trillion, overtaking Europe for the first time. China accounted for 44% of the total stock, followed by Japan and India with 22% and 15% respectively. In terms of invested commercial stock, Japan maintained its leading position, accounting for almost half of the invested stock.
Looking at market maturity, Australia, Hong Kong and Singapore ranked the highest with owner occupation ratios at around 30%, largely in line with other advanced markets in the US and Britain.
Japan, New Zealand and South Korea are next with occupation ratios from 45% to 71%, while other countries in the region have estimated ratios of 70% or higher – an indicator that opaque market conditions still exist in those countries.
Public markets are developing at a healthy pace across Asia-Pacific with quoted property companies showing 11% growth in net asset value.
Hong Kong, with a long history of having its real estate made available as an investment vehicle to investors, has the largest market capitalisation for quoted property companies worth a total US$190bil.
Meanwhile, the net asset values of real estate investment trusts (REITs) in the region grew at a record 24% last year to reach a market capitalisation of US$150bil – a return to the 1997 pre-Asian crisis level.
Australia led the REIT market with US$80bil in market capitalisation, followed by Japan and Singapore with US$41bil and US$13bil respectively.
Most REITs in the region, with the exception of New Zealand, Taiwan and South Korea, were traded at a premium to their net asset value, showing investors’ confidence in the REIT sector.