Graeme Newell is professor of real estate investment at the University of Western Sydney in Australia. He also is currently executive director of the International Real Estate Society. Newell has strong links to the real estate industry, both in Australia and overseas. He recently prepared a major report for the Asia Pacific Real Estate Association (APREA), The Significance of Real Estate in Asian Pension Funds, and presented the findings in September at VIP – Asia Investor Roundtable, a conference jointly sponsored by Institutional Real Estate, Inc. and the Asia Pacific Real Estate Association (APREA). Newell spoke with Dr. Jennifer Molloy, editor of The Letter – Asia Pacific, to discuss the findings.
From the Current Issue
Things are looking good for the Australian property market, and the economy in general. According to a recent podcast presented by CB Richard Ellis, over the last 12 months, Australia has added over 300,000 jobs, which leaves the country with a lowered 5.2 percent unemployment rate – well below other averages around the world.
Asia continued to lead the global economic recovery in 2010, with most regions putting the financial crisis in the rearview mirror. But as any driver who looks out the passenger-side mirror knows, objects are actually closer than they appear. So when it comes to Asian real estate and the global recession, one has to ask: Is the crisis safely behind us, or is it still lurking too close like some tailgating vehicle?
Clearly, the difference in economic environments, monetary and fiscal policies, and the gap in growth rates between the developing and advanced worlds is widening. No doubt, the Chinese, Indian and other developing economies are still export dependent, but what appears to be different now is that the slowdown in the U.S. demand does not seem to produce the negative effect it used to produce just several years ago.
Investment in agriculture is growing rapidly as institutional investors and sovereign wealth funds seek to gain exposure to the rising commodity and land prices as a global food shortage emerges. The amount of arable land available for food production is significantly diminishing, rapid population growth is creating more and more mouths to feed, and the diet of the world’s population is improving as nations become wealthier. Furthermore, the potential to increase food production through improving farming efficiencies is limited. This demand/supply imbalance is creating a global food shortage that is arriving faster than climate change and is creating what has been termed the “other GFC” — the Global Food Crisis.
It is easy to understand why some global investors are not bullish on the prospects for the Japanese economy. The demographics are not positive, politics continue to interfere with an economic reform program and the fiscal situation seems dire, at least on the surface. In the face of all this, can investment value be found in Japanese real estate? We believe it can, but it is achieved by creating value in the property rather than by relying on a market recovery.