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Real Estate Investment outlook for Asia in 2H2012

Property Report
Real Estate Investment outlook for Asia in 2H2012 - Asian property - property investment

Macroeconomic outlook We see the global economic climate for the second half of 2012 as “not pretty” as Europe is headed for a recession, while the United States is facing anemic growth at best, and slowing growth rates in Asia. Nonetheless, Asia remains the bright spot for growth amid the bleak economic backdrop. We view Asia as an extremely heterogeneous market. Asia has approximately 50 countries which are different from each other in terms of stage of development, governance systems, transparency in real estate markets, tax regimes, and official languages used. Given the diversity in Asia, we view Asia as a collection of distinct local markets and broadly classify them into two categories: developed Asia and emerging Asia.

Developed Asia (Singapore, Hong Kong)
Investors within Developed Asia are more focused on Singapore, Hong Kong and Tokyo. As Tokyo attracts mainly local investors and specialized funds, investors tend to be more focused on Singapore and Hong Kong. Singapore and Hong Kong are among the world’s most open and dynamic economies and have both rebounded strongly with robust growth following the downturn in 2009.

Singapore and Hong Kong are island cities with limited land. Due to their space-constrained nature and high external dependency, these two property markets tend to be more cyclical than others in Asia. For example, Singapore and Hong Kong’s real estate market fell 40 to 50 per cent during the crisis in 2008/2009, but has since recovered strongly and has overtaken its 2007 peak and both governments are actively trying to counter further price increases by providing more land for sale.

We believe the most attractive sectors in Singapore and Hong Kong are in office and retail, particularly suited for core/ core-plus investors. In the short term, concerns of an asset bubble means investors must re-focus on core fundamentals when underwriting deals. In the long term, the Asia continues to power global growth amid the challenging global environment. The key is discipline (don’t get caught by the hype, do your due diligence) and having sufficient dry powder to ride out any unexpected events.

“Location, location, location” may be the proverbial saying but in times of uncertainty, it holds very true. Let me focus on some of the drivers for commercial real estate in Singapore.


Disclaimer: The information presented and opinions expressed herein are those of the authors and do not necessarily represent the views of Estates Report and/or its partners.