China is the most preferred property investment destination for Asian buyers and investors, according to the Colliers International 2015 Global Investment Sentiment Report.
Some 41 percent of Asian investors indicated they plan to invest in China over the next 12 months. A property company based in the U.K, told Colliers: “It is a no brainer for us to enter the China market now and position for the long-term growth, if the current adjustment is to last only over the short term”.
Singapore and Hong Kong are again in the top three with 36 percent and 33 percent of Asian respondents respectively preferring these locations due to their solid property market fundamentals.
Similar to last year, CBD offices, particularly new developments, were the most popular investments among Asian investors, with 61 percent of respondents indicating that they intend to target this sector within the next 12 months.
Residential was named by 42 percent of respondents as the second most sought-after sector due to the sustained demand to upgrade existing stock and the positive demographics in the region.
The majority of respondents (71 percent) said that they are likely to use debt to leverage their
exposure in future investments, down from 79 percent last year. According to Colliers International this figure still remains high despite the fact that 63 percent anticipate an increase in the cost of debt over the next 12 months.
A private equity fund explicitly stated that the entire investment market in Asia remains flush with capital and is still chasing limited assets. This is driving investment yields down.
Most Asian investors (58 percent) indicated that they were likely to take on more risk over the next 12 months in order to achieve superior returns. Similar to last year, almost half (49 percent) of the respondents are targeting IRRs above 15 percent, with a smaller percentage, 11 percent, targeting IRRs in excess of 20 percent.
A private equity firm, based in the U.S., expressed the opinion that opportunistic investments with 20 percent-plus returns are increasingly difficult to find amid a lack of distressed sales in the current low interest rate environment.
Most Asian investors (66 percent) concurred that good investments exist in the market but areincreasingly difficult to find. A Singapore-based private investor explained that there are no desperate sellers in the market place and there is simply a mismatch between buyers and sellers in terms of price expectations. However, a property company based in the U.K. expressed that it might be difficult to source good deals in cyclical markets such as Hong Kong and Singapore, but there are still a lot of interesting opportunities available in the region, such as mainland China.
The Colliers International 2015 Global Investor Sentiment Report shows international property investors anticipate an increase in investment volumes across markets over the next 12 months, despite a mixed bag of economic performance worldwide.
The survey results suggest that a significant proportion of investors expect higher risk markets to maintain existing levels of investment rather than to experience further significant inflows or outflows.
More than 600 global investors, from sovereign wealth to private equity firms across the United States, Canada, Latin America, Asia, Australasia, Europe and the Middle East, provided their outlook at a global and regional level for 2015 and beyond.
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.
