Research - MAY 9, 2017

Asia Pacific property funds record second-best performance in 10 years

by Released

Asia Pacific nonlisted real estate funds returned 10.6 percent over the past year, their second-best performance since 2007, despite a slight decrease from 12.1 percent in 2015, according to the ANREV Annual Index.

Core funds, following an upward trend since 2010, saw a small drop in returns to 13.1 percent compared with 15.7 percent in 2015. Their performance was primarily driven by capital growth, which stood at 8.4 percent in 2016 compared with the 10.8 percent recorded in 2015. However, in comparison to other fund types, core funds showed a strong performance overall in 2016.

Value added funds significantly improved, recording returns of 10.1 percent – up from 3.5 percent in 2015. Meanwhile, opportunity funds produced returns of 0.4 percent in 2016 in contrast to 5.5 percent the previous year.

On a country basis, Australian funds returned 13.5 percent in 2016 compared with 17 percent the previous year, and were the best performers within the single-country funds category. The main driver of performance in Australia was the capital growth component, which was 8.6 percent in 2016 compared with 12.1 percent in 2015. The total gross asset value of Australian funds continued to increase to $55 billion, up from $48.4 billion in 2015.

Regarding the rest of Asia, China single-country funds returned 0 percent in 2016, after negative returns the previous year. Japan funds experienced a drop, recording a 13 percent return compared with 21.5 percent in 2015. However, this was in part due to the number of Japanese funds included in the index decreasing significantly to five because of the liquidation of several funds.

In a global context, the Asia Pacific region outperformed the United States and Europe on total annual returns, according to the latest Global Real Estate Fund Index (GREFI). Funds in the region returned 10.6 percent compared with 8.49 percent in the United States and 6.54 percent in Europe.

“Nonlisted real estate funds in the region continued their strong performance in 2016, albeit slightly down on the year before,” says Amélie Delaunay, director of research and professional standards at ANREV. “It was the first year Asia Pacific outperformed the United States and Europe in terms of annual return and was the only region in 2016 to see an increase in capital raising activity. These returns shore up Asia Pacific’s position within a diversified investor real estate portfolio.”

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