Property investments remain core asset in portfolios of Asia’s wealthy

Property investments remain a core asset in the investment portfolios of Asia’s wealthy individuals.

According to Citibank Singapore, real estate accounts for a third of client portfolios under its management.

These customers typically have net assets of S$1m and above.

Property prices in Asia, particularly Singapore and Hong Kong, have seen a boom in recent years. This is particularly due to low interest rates and volatile markets which lead wealthy individuals to seek refuge in property.

Analysts interviewed said they do not expect a price correction in prime property like those in the core central region. However price growth is still expected to continue to remain flat in 2013.

Citi’s real estate arm in Asia says prices of new residential launches in Singapore’s core central region are likely to be capped at S$3,000 per square foot.

However commercial properties in Singapore, particularly strata-titled offices, are expected to be in high demand.

“There is always a concern that there is so much money and interest rates remain low at least in the next 12 months, which is why we don’t expect a major correction, except that there could be a standoff in terms of volume, and could be a select group of people who are willing to sell off because of personal reasons. That could impact a 5-10 per cent price gap,” said Yvonne Siew, Asia real estate head at Citi Private Bank.

But unlike residential properties, investing in commercial properties could require additional capital to yield better returns.

“These individuals need to make sure that they either have the expertise or can hire the expertise to get the return out of that asset. Otherwise, they are betting on prices going up and as we know, prices don’t always go up,” said Paul Guest, Asian strategist at LaSalle Investment Management.

Like commercial developments owned by property developers and Real Estate Investment Trusts (REITs), analysts say asset enhancements could generate greater returns, keeping yield compression at bay as property prices soar.

Source : Channel NewsAsia – 13 Dec 2012

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