Malaysia does not features in a list of where overseas institutional investors intend to invest in the Asia-Pacific region during the next 12 months.
According to real estate firm Colliers International in its Global Investor Outlook research report, in terms of a portfolio strategy most investors looking at Asia (56 percent) indicated a requirement to expand their real estate portfolio over the next 12 months, although this is lower than last year’s 74 percent.
Many investors are taking a more cautious approach as China’s economic slowdown has translated into dampened activity in the China property sector despite relaxation of legislation.
A similar decline was observed among Australian and New Zealand investors, with 48 percent expecting to be net buyers in the 12 months compared to 61 percent last year.
Fewer investors planning to take more risk
The number of Asian investors willing to take more risks in the next 12 months has declined to 33 percent from last year’s 58 percent. This has partly been due to investors’ preference to wait for a clearer direction on where the economy is headed, Colliers noted.
A key concern mentioned by an US-based private equity fund is currency volatility when investing in markets like India and China, which could significantly impact investment returns on exit.
Not surprisingly, economic growth and sovereign/political risks were mentioned as the crucial market factors that will likely affect the global property outlook in the next 12 months.
Although overwhelmingly positive about the market, Australian and New Zealand investors are rather risk averse. Very few of them (35 percent) are prepared to take on higher levels of risk to achieve higher returns. In that respect, they are among the most risk averse investors globally.
Japan and Australia are overseas investors’ top markets
Australia and Japan are global investors’ preferred destinations in Asia-Pacific in the next 12 months. While the Australian market is traditionally dominated by domestic investors, a third of the total is currently from offshore. China is now the largest offshore investor in Australian commercial property.
When taking into account capital coming from outside Asia-Pacific only, Japan (a primary target for 59 percent of offshore investors with an Asia-Pacific focus) leapfrogged Australia (53 percent), with this duo being followed by Hong Kong (33 percent), China (31 percent) and Singapore (30 percent).
On the other hand, South Korea, New Zealand, Taiwan and India were quoted more frequently as secondary targets by this group of investors.
Tokyo and Sydney head-to-head
Given these country preferences, it does not come as a surprise that Tokyo (33 percent) and Sydney (29 percent) are overseas investors’ preferred cities in Asia-Pacific during the next 12 months, followed by Melbourne (23 percent).
This is consistent with global capital flows data year-to-date, where Tokyo and Sydney are two of the three Asia Pacific cites in the top ten of the most popular markets for cross-border investors, in seventh and fifth place respectively. Interestingly, they’re both preceded by Shanghai in third place.
Most of these cities also feature in Asia-Pacific investors’ primary targets list: globally, Asian investors favour Singapore (41 percent) over Tokyo (38 percent), followed by Sydney (31 percent) and Melbourne (28 percent).
According to a Hong Kong-based private equity fund, Japan is one of the domestic markets they will be looking into as the country offers high liquidity, recording a high volume of deals involving office assets over the year. Other markets favored by Asian capital in the survey include first-tier cities in China (e.g. Beijing, Shanghai) and Hong Kong.
In addition to Sydney and Melbourne, Australian and New Zealand investors will stick to their domestic market and target primarily Brisbane and Auckland.
