Titled "Real Estate Investment in Asia Pacific: Migrating capital", the report takes an objective look at Asia's real estate investment industry in the context of today's global economy. Findings of the report give an optimistic outlook for Asia in 2008 where returns are projected to remain higher than the global average for the coming year and are backed by strong market fundamentals and even stronger economic growth.
The report recognises that the slowdown in the U.S. and European markets is unlikely to cause an immediate negative impact on Asia in 2008 although banks will tighten credit policies thus limiting financing options for real estate investments.
"Despite the current tightening of credit from banks, the deals will continue to happen, but they may take longer, the price may cost more and lead to a temporary slowing of the supply cycle. However, the current sub-prime fall out elsewhere may well act as a catalyst for the inevitable further development of Asia Pacific as a centre of property and investment management," explained Andrew Weir, Partner in Charge, Property and Infrastructure, KPMG in China and Asia Pacific.
A key observation of the report shows real estate funds remain the dominant source of capital for real estate investments in Asia into 2008. The proliferation of single-market high-return funds such as those based on China and Vietnam continue to service the needs of the short-term speculative investor. But long-term funds are generally taking a "wait and see" approach following the dampened sentiment in US markets.
FTSE, the global index provider, looks at the development of Asian real estate markets from a different perspective by examining the slow but steady establishment of a liquid property derivatives market.
"It will take more time for Asia to fully develop property derivatives," said Fran Thompson, Director of FTSE Asia Pacific. "However, the data and information in markets around Asia is improving. As a result, quality indices are being developed for the region which will support the development of a property derivatives market."
APREA, Asia's leading real estate association, projects that many REITs in Asia should continue to deliver good returns for the remainder of the year. However, the potential for new REIT listings is being impacted by the dull market sentiment.
Peter Mitchell, Chief Executive Officer of APREA says "There is no doubt that market sentiment in Asia has been affected by the U.S. credit crisis, and there is uncertainty about when a rebound will occur. However, over the longer-term, outlook should remain positive in the region, with REITs generally being good defensive stocks and inflation hedges. Projections show Asia's REIT market exceeding a market capitalisation of USD 100 billion by 2010." -- www.ftse.com
