Big institutional investors buying up regional properties

Big institutional investors have been actively buying up properties across the region.

Property investments by pension, insurance and sovereign wealth funds have doubled over the last two years.

And some of these investments have spilled over into the Singapore property market.

Property sales for investment purposes hit S$31.45 billion in Singapore last year.

These include purchases of government land, strata-titled commercial properties and acquiring units in Singapore’s Real Estate Investment Trusts or Reits, according to a report by property consultants CBRE.

Investor sentiment in Singapore was positive throughout 2012 especially at the end of the year. But market experts at CBRE say 2013 will see an even sunnier investment climate.

Like Singapore, Japan, Hong Kong and Australia have also benefited from investments by the large institutions.

They include investments from insurance funds from China and Taiwan, which was recently allowed to invest in overseas properties.

This also caused regional property markets to propel higher, prompting several rounds of property cooling measures by countries like Singapore and China.

Mr Greg Penn, Managing Director of Capital Markets (Asia), CBRE, said: “The reaction so far has been more so on the fundamentals of the property market, which is much more powerful than that that is regulated. If you take HK as an example, if you look at the simple supply and demand equation, it is certainly undersupplied in almost every sector.”

Some experts say these cash-rich institutional investors are turning to properties because it offers potentially high returns.

This is also to offset the low returns that they are getting from their bond investments and bank deposits.

Mr Nick Crockett, Executive Director of CBRE Capital Advisors, Asia Pacific, said: “One of the major things we have seen with investors in Asia Pacific particularly in the last 12 months is because, especially those that haven’t been large investors in the real estate, and are looking to increase their allocation, and they are under pressure to move that money.

“More and more we have clients coming to us saying we want to look at a particular market, we have a certain allocation and we need to spend it by such and such a time. And that may be three or six months away.”

But other experts say rising property prices are unsustainable.

Mr Roy Ling, Managing Director of RL Capital Management, said: “Typically when you have an increasing upbeat economy with increasing asset prices, that is okay. When you have a downbeat economy with declining prices, that is also termed okay. But we are seeing an economy that is not so good, but asset prices keep increasing and that is what constitutes a bubble. ”

While buying physical properties usually require a longer investment horizon of 10 to 15 years, some fund managers recommend investing in property-related stocks or IPOs instead.

Source : Channel NewsAsia – 7 Mar 2013

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