Singapore and Hong Kong are Asia’s most attractive markets for real estate investment, said property investment house Pacific Star Group.
Pacific Star ranked 11 markets in Asia based on several factors including economic outlook, expected total returns, projected property vacancy rates, ease of doing business and socio-political stability. It found that Singapore and Hong Kong got the highest aggregate scores.
Some of the other most attractive markets were Beijing, Shanghai, Seoul and Tokyo, while Ho Chi Minh City was one of the markets ranked in the last tier.
Singapore and Hong Kong topped the list due to strong macroeconomic fundamentals, though properties from these markets do not offer the best expected returns in Asia.
The investment house expects that Singapore and Hong Kong office properties will generate a ‘single digit’ total return in the next 12 months.
This is lower compared to the possible yields of other markets. Total returns from Tokyo or Beijing offices could be in the ‘low teens’, while Ho Chi Minh City or Bangkok offices could be in the ‘mid-teens’.
“Less attractive markets may present more opportunities to acquire mispriced assets, hence potentially higher total returns, while excessive competition in attractive markets could translate into potentially lower total returns,” said Pacific Star.
“Ultimately, expected total returns may need adjustments according to perceived risks and the associated premiums required,” it added.
For the residential sector, the investment house expects total returns in Singapore and Hong Kong to be in the ‘low teens’.
Investors worldwide, particularly the wealthy ones from India and China favour the two cities, said Pacific Star.
However, total returns from residential real estate in other cities like Ho Chi Minh City and New Delhi could go beyond 20 percent.