Asia Pacific listed real estate companies, along with global real estate companies, had a difficult May, with the markets providing negative returns of 9.2 percent and 4.5 percent, respectively, according to SNL Financial, with regional returns denominated back to US dollars and country returns in local currency.
From the Current Issue
Open-ended quantitative easing. Zero lower bound. Nominal GDP targeting. Skyrocketing excess bank reserves. Monetary gnomes expressing grave concerns regarding inflation — but that they want more, not less. The world of central banking has changed more since 2008 — and maybe in just the past year or so — than in the previous 30 years, at least in terms of tools and policies.
The real estate secondary market is growing up fast. A few years ago, real estate secondaries were perceived almost exclusively as the meeting place of distressed, liquidity-challenged sellers and opportunistic buyers. That is no longer the case.
While China continues to fuel global growth by adding about 2 billion square metres of new buildings per year — the equivalent of building a second China in the next 20 years — Beijing recorded one of the blackest days in its history on 12 January 2013. Pollution indicators went off the charts with readings of more than 750 on that day, while the entire month averaged 190.
The lending environment across the Asia Pacific region remains relatively positive, with improvement seen in most markets during the past year. Access to debt has improved in a number of markets, and lending margins have for the most part sharpened. Banks continue to demonstrate an appetite for providing senior debt against quality assets, although with conservative loan to values (less than 60 percent) on typical three- to five-year terms.
Real estate markets may be reaching a transitional moment. Invesco Real Estate expects improving real estate market fundamentals to emerge in many markets worldwide over the coming years. Should this happen, there would likely be a transition from real estate total returns driven by yield compression, due to the weight of capital flows, to total returns driven by growth in operating income.
In May, I had the opportunity to attend the Myanmar Urban Development Conference in Yangon, Myanmar. As head of our Asia Pacific operations I follow new developments in Asia, and this conference attracted my attention from several important angles. The conference was organised by Sphere Conferences, a subsidiary of Singapore Press Holdings, the largest publishing and media company in Singapore and one of the largest in Asia.
Fundraising activity dropped sharply during the first quarter of 2013 compared with the high volume posted during last year’s fourth quarter. During the first three months of the year, 21 real estate funds announced final closings, with an aggregate equity haul of US$7.6 billion, according to the latest issue of Institutional Real Estate FundTracker.
Allocations to Japan’s equity market are at their highest since May 2006, with a “net 31 percent of global asset allocators overweight to Japanese equities,” according to the May 2013 BofA Merrill Lynch Global Fund Manager Survey. This is due in large part to a ¥10.3 trillion (US$106 billion) stimulus package passed by Prime Minister Shinzo Abe to revive Japan’s stagnant economy, and property stock investors are noticing the change (see “The music makers”).