I was quite surprised at such bullish news. But bullish news is good at least for most of Asia, we can still expect foreign investment funds to continue to flow into our markets and provide strong support in the long term. The ongoing credit crisis in the US and Europe has put pressure on a decade of sustained growth in global real estate but the inflow of capital to Asia’s real estate market is accelerating, says the report jointly prepared by KPMG, FTSE Group and APREA.

The detailed report may be downloaded from the Asian Public Real Estate Association (APREA) website. Their report aptly named: Investment in Asia Pacific: Migrating capital It starts off by saying that

“Asia as a whole has continued to perform relatively well against the US and European real estate markets and more importantly, continues to attract investment ….. Asian real estate may finally be getting the respect that many say it deserves.”

Which means to say that Asia has never really been an interesting place for real estate investment. The economic heavy weights like the United States and Europe, they are very inwardly looking with respect to assets like real estate investments. If they are to invest, they generally stick to investing within their country, or in neighbouring countries like Canada, South America, Mexico, Argentina, Brazil and for the Europeans, they tend to like to invest within Europe or now its become a trend to invest in real estate in the United Arab Emirites.

 The report then continues with:

“The credit crisis has not slowed the inflow of capital to Asia – quite the opposite. While real estate investment was already growing steadily due to a combination of opportunistic and increasingly longer-term investments, the credit crisis appears to be accelerating this process.”

The credit crisis in question of course refers to the debacle of the US sub-prime mortgage, as well as credit issues with developers in Spain. The opinion here is providing a very interesting point. I really didn’t think that investment funds were that averse to market volatility! Stability is key to long term investments.

A Major Shocker from the report on the 6th page was really phenomenal:

“Returns from real estate securities were exceptional between 2003 and 2006, averaging over 30 percent during the period. Last year saw an abrupt end to these “golden years” with returns dropping dramatically to a tenth of this average. Meanwhile, investment in direct real estate has experienced more steady returns, comfortably averaging double-digits for the past decade. Real estate as an asset class has certainly outshone equities and long-term government bonds over the past decade, providing average returns of between 7-8 percent. The success of real estate may have taken a few by surprise, but it illustrates how important it has become to global capital markets.” 

Although all these bullish news there is bound to be a boiler plate disclaimer somewhere…and I found it.

“Strong real estate fundamentals bode well for most markets, with generally low vacancy rates and healthy pipelines. Global transaction volumes are expected to decrease.”

So although the figures show that there is possibility of strong growth, it is dampened by what is going on in the other parts of the world, the oil price increases, global commodity price inflation and the credit situation in the US. This is not unexpected, and many investors would have considered the situation and analysed it and how it would affect their position and hedge against their exposure.