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Asset Management / Wealth Management
Asian real estate shows signs of resurgence
Growing Asian wealth, asset diversification are driving demand in the region
Bayani S Cruz 1 May 2017

Real estate is one asset class that has been generating universal appeal among Asian and global investors.

Robert Scholten, Singapore-based managing director and head of real estate finance, Asia-Pacific, at ING Bank, expects a revival of interest this year on Asian real estate among European and US investors. He believes the trend will continue beyond 2017, citing the growing wealth in the region and investors’ need for diversification among factors driving demand.

“Rapid wealth accumulation in Asia, coupled with the requirement of diversifying the risk of asset under management, has led to an acceleration of investment in commercial real estate by Asian sovereign wealth funds, insurance companies, selected pension funds and high-net-worth individuals in overseas markets such as Europe, the US and Australia,” says Scholten.

“In fact this trend is nothing new; US, Canadian and European investors have already been investing in Asia-Pacific for the same reasons for more than 15 years,” he adds.

The trend goes both ways. Asian investors have been steadily investing in European real estate. Likewise, US and European investors are scouring the region for potential investments in real estate.

Just recently, 30 real estate professionals representing various Dutch asset managers, law firms and institutional investors, visited Hong Kong as part of an investment tour of key Asian markets.

“They were here to see new investment opportunities as well as study the connectivity between the Asian and European markets,” says Scholten.

Part of the group’s itinerary was a presentation on the connectivity of real estate markets between Asia-Pacific and Europe. “We are now seeing more international players (asset managers and institutional investors) increasing their attention on Asia and Australia, which is very interesting,” Scholten says in an interview with The Asset.

This is a reversal of the trend following the global financial crisis when many global asset managers and institutional investors pulled back from Asia. This is a positive development for the Asian real estate market, which is seeing a revival of interest from European and US investors.

“For example, Blackstone is reported to be possibly setting up a new Asia-focused real estate fund and they will need to deploy that somewhere. While this is not an entirely new move, it is reinforcing a trend that we have seen in recent years. We are seeing more investments in Korea, Japan, Australia and continued demand for China,” Scholten says.

Data from Jone Lang Lasalle indicate that in the fourth quarter of 1996, global transaction volumes are just 2% below the same period in 2015 at US$206 billion. This brings full year 2016 volumes to US$661 billion, a 6% decline on year earlier’s US$704 billion. Asia-Pacific was the only region to see an increase in transactional activity, rising by 5%. The Americas and Europe both felt the effects of political turbulence, falling 9% and 8% respectively.

Data from Colliers International also indicate that since the global financial crisis, aggregate outflows of capital from Asia to property markets in the rest of the world have risen sharply to reach US$58.9 billion in 2016, while inflows are under 30% of this level.

 

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