Asian real estate investors are venturing beyond regional markets to OECD countries and other areas in the West, according to a recent study by Colliers International.
Outbound real estate investment from Asia has climbed from $1 billion in the early 2000’s to more than $30 billion in 2013. This is a result of a surge in global liquidity, as well as several other “pull” and “push” factors, according to CEO, Asia at Colliers International Piers Brunner.
Pull factors include the higher yields available in foreign markets, as well as strong economic growth potential and first world country real estate environments. Meanwhile, governments in Mainland China, Hong Kong and Singapore are pushing investors in an effort to slow local real estate markets by loosening overseas investment restrictions.
According to John Marasco, Colliers International’s Managing Director of Capital Markets and Investment Services in Australia, the Chinese investors are contributing greatly to the Australian real estate market.
“Chinese buyers alone are currently spending around $5.9 billion a year on Australian property (both residential and commercial),” he said. “The strong performance of Australia’s property markets suggest this demand will continue to grow across a range of assets.”
Director of Capital Markets and Investment Services, Asia, Terence Tang added: “We believe the emerging trend will see more outbound investors taking on additional risks in non-traditional property sectors, such as hotels, and to commit to value-adding schemes, including conversion and development opportunities, in the secondary locations of gateway cities, where prices are more attractive than in traditional core locations.”
Eastspring Investments, an asset management firm based in Indonesia, recently drew upon its Asia investment experience to launch its institutional business in Jakarta.
CEO Riki Frindos stated: “The launch of Eastspring Investments’ institutional business is in line with our commitment to make our deep investment knowledge available to institutions and retail customers alike in Indonesia.”
“Eastspring Investments Indonesia offers a wide variety of investment capabilities across a range of asset classes, with a primary focus on Indonesia’s equity and bond markets,” he added.
While launching its business, the Indonesian firm hosted a seminar entitled “Facing the Challenges of a Graying Asia,” with guest speakers including global strategist Robert Rountree and University of Indonesia Professor Suahasil Nazara.
During his presentation Rountree explained: “An aging population is a phenomenon not limited to developed nations. The challenge of preparing for an aging population in developing nations is increasing, while the birth rates in Asia have fallen well below birth rates in Europe and the U.S.”
He went on the explain that the region’s aging population will have an impact on the dependency ratio, government spending on health care and pension, taxes, work forces and investment capital for developing markets.
Japan has been instituting several new economic initiatives, known as Abenomics, to boost growth in the region. According to several investment trust managers, these efforts are proving effective.
Bailie Gifford Japan investment trust manager Sarah Whitley said:
“Abenomics is a wide-ranging programme to revitalise the Japanese economy and raise its growth rate in the long term, as well as provide short-term stimulus. During the past year the yen has weakened significantly, allowing Japanese manufacturing to be re-priced into world markets, company sentiment has improved tremendously and there are encouraging signs that growth is spreading into the broad domestic economy.”
Aberdeen Japan investment trust manager Kwok Chern-Yeh added that while some are concerned, Japan’s new sales tax may not have a negative impact on the situation.
“The consumption tax hike is a crucial step towards fiscal consolidation – raising the national sales tax from 5 to 8 per cent will help address the nation’s ballooning public debt,” he said. “One worry in the short term is that discretionary spending will fall after the tax has been implemented, although the government is hoping to cushion the short-term impact with a ¥5.5 trillion stimulus package. If Abenomics works and the economy grows then consumers will spend more as the economy rises anyway.”
This year’s top spot for real estate investment in Asia-Pacific was claimed by Tokyo following the Japanese government’s economic reforms. Followed by Shanghai and Jakarta, according to the Urban Land Institute and Price Waterhouse Cooper, Tokyo has been described as a “magnet” for investors. Last year, the city was listed as number 13 in the same report.
The economic turn appears to be a result of Prime Minster Shinzo Abe’s efforts to end a significant deflationary spiral. His reforms, or “Abenomics,” have already had a significant impact on the economy. According to the report, 2013 saw Tokyo amass significant transaction volume, and sales of office, warehouse and retail space have climbed 85% during the first half of the year.
The report quotes a source as stating: “We’re very bullish on Tokyo, particularly around refurbishing existing assets- focusing on energy and sustainability and repositioning from a B- to an A- grade.”
According to a new study, Asian institutional investors plan to invest more than $150 billion in global real estate over the next five years. Firms will focus on cities such as Dubai, London, Sydney and New York. The research, conducted by CBRE, revealed that Asian investors currently control a fifth of global institutional capital.
Still, these investors can expect numerous challenges due to low global interest rates and weak stock market performance. Investors are also struggling to expand their portfolios within the Asian Pacific region as a result of a lack of overseas investment experience, regulatory restrictions, limited investable stock and aggressive pricing.
CBRE’s Chris Ludeman explained: “Asian institutional investors are already beginning to acquire assets overseas, with core assets in gateway cities being the most sought after asset class.”
“While investors that have already had exposure in global markets will continue to acquire new assets, the next few years will see a number of new entrants to leading global real estate markets such as London and New York,” he added. “Japanese institutions, which to date have largely been absent from the global scene, as well as Taiwanese and Chinese insurance companies will be the first groups to emerge.”
Southeast Asia has been upping its investment into New Zealand, with an FDI that grew to 4.4 billion NZ dollars, up from 2.8 billion last year.
According to Statistics New Zealand, this growth is mainly a result of FDI from Singapore.
Jason Attewell, balance of payments manager, explained: “In the latest year, Singapore replaced Japan as the fourth-largest inward investor to New Zealand.”
Still, Australia remains the country with the greatest direct investment in New Zealand. With stocks valued at 63.3 billion NZ dollars, Australia is followed by the United States and Britain. New Zealand’s outward direct investment has been decreasing, however.
“Over the last five years, the value of New Zealand’s portfolio investment has increased by almost a third, whereas direct investment into overseas subsidiaries still sits at a very similar level,” Attewell said.
New Zealand’s total investment abroad is largely put into Australia, with stocks of 48.2 billion NZ dollars.
According to anonymous sources, three former managing directors of Goldman Sachs’ Japan business are planning to launch a multi-strategy hedge fund in Asia next year.
Koji Gotoda and Takayuki Kasama’s fund, called Golvis Investment Pte, will invest in asset classes with an initial focus on Japan. According to one of the sources, hedge funds that focus on Japan generally trade stocks. Therefore, the new team of former GS employees with the ability to invest in multiple asset classes will stand out.
Peter Douglas of GFIA Pte explained: “The pedigree of the principals will guarantee they at least get a good hearing from prospective allocators. After many years of slow death or exile for the Japanese hedge fund industry, it does feel as if the industry, like the country, could be on the verge of a renaissance.”
According to Bloomberg News, Gotoda will present his plans at the annual Goldman Sachs Asia Hedge Fund Symposium in Tokyo.
AudienceScience, a digital marketing technology company, is expanding its investment in Asia Pacific with a new data center in Hong Kong and two new offices in Hong Kong and Singapore. The company also has a presence in Tokyo.
AudienceScience’s Mark Connolly said: “AudienceScience has been in APAC since 2010 and has seen significant evolution in the digital advertising market. RTB is currently missing in APAC, but AudeinceScience clients are the most advanced in the region and continue to lead the adoption of more efficient and effective buying methods. With our recent technology investments, AudienceScience is positioned to continue providing industry-leading technology to its APAC clients.”
AudienceSciende CEO Like Peralta added: “APAC is a critical market for our clients and for AudienceScience. With more advertisers recognizing the value and importance of APAC, AudienceScience is dedicated to providing technology on par with that available to European and North American advertisers. We will continue to invest in the technology and staff needed to ensure that our clients receive world-class product and services across the globe.”
BASF, the German chemicals conglomerate, recently announced its plans to expand significantly in the Asia Pacific region in hopes of capitalizing on one of the world’s fastest-growing markets.
“We intend to invest $13 billion together with our partners to further develop our local production footprint in Asia Pacific,” the company said in a statement.
BASF executive Martin Brudermuller added: “in the next decade, Asia Pacific will face huge challenges while remaining the fastest growing market for the chemical industry.”
The company plans to create 9,000 new jobs in the region, as well as to produce 75% of its products for Asia locally, all by 2020. BASF’s research and development branch is growing rapidly, and around 3,500 jobs are already in the making. The company added that it will be establishing additional research facilities for electronic and battery materials, agriculture, catalysts, mining, water treatment, polymers and minerals.
The 16th annual Credit Suisse Asian Investment Conference was recently held in Hong Kong. The event featured speeches from leading investors and entrepreneurs, and provided a forum for debate and discussion on the global economy and investment insights.
Many attendees emphasized the significance of the Asia-Pacific region, which continues to provide investment opportunities as local industries develop. Popular topics included key trends such as emerging markets investing, online opportunities in China, and developments in the Eurozone.
Chief Executive Officer of BlackRock Laurence Fink discussed four “megatrends” at the AIC: