reporter2
08-03-13, 18:00
http://www.businesstimes.com.sg/archive/saturday/specials/property/more-funds-investing-property-markets-cbre-20130307
Published March 07, 2013
More funds investing in property markets: CBRE
This is the result of higher allocation by SWFs, and yield diversification
By Teh Hooi Ling
THERE will be a rise in funds going into direct property markets globally, said officials from CBRE Group, one of the world's largest real estate services firms. This stems from increased allocation by sovereign wealth funds (SWFs), deregulations in regional countries' insurance industry, and the demand for yield diversification away from the home market.
"In certain markets, we are going to see compression of yield due to the sheer weight of the capital moving into the markets," Greg Penn, CBRE's managing director, Capital Markets, Asia, said at a press conference to share the group's insights on cross-border fund activity for 2013.
"There is a lot more confidence among institutional investors in coming into the market, and collectively there is more capital pursuing core assets," he said.
Globally, more institutional funds - the likes of pensions, insurance and SWFs - are increasing their allocations to real estate for long-term stable income.
For example, Malaysia's Employees Provident Fund is set to increase overseas asset holdings from 13.4 per cent in 2011 to 30 per cent by 2017. In Australia, according to a survey conducted by Australian Institute of Superannuation Trustees, superannuation funds' allocation to offshore property will gradually increase from 2.3 per cent in 2011 to 3.2 per cent in 2013.
Meanwhile, Norwegian Government Pension Fund Global, one of the world's largest SWFs, in February made its maiden investment outside Europe. It paid US$600 million for a portfolio of five Grade A offices in New York, Washington and Boston.
"When the needle (of allocation for real estate) of the SWFs moves, it means billions of dollars are coming to the core property market," said Mr Penn.
Meanwhile, relaxation of rules in the insurance industry in countries like Taiwan and China will also open up another tap of funds going into real estate.
In October last year, the China Insurance Regulatory Commission allowed insurance funds to invest in stabilised commercial properties in the gateway cities of 45 designated overseas countries. In Taiwan, discussion is ongoing to allow domestic insurance companies to invest in real estate offshore so as to alleviate some of the pressures on the domestic market. Yields in Taipei real estate are among the lowest in the world.
Capital is criss-crossing the globe more than before. While Canadian and European pension funds and insurance funds as well as Middle East SWFs are looking to increase their allocations in Asia-Pacific, funds from this part of the world have been flowing in the opposite direction.
Jonathan Hull, CBRE's managing director for Europe, Middle East and Africa Capital Markets, said that in the last few years, capital from Malaysia, Korea, Hong Kong, China and Singapore has been going into London real estate.
"Of all the transactions which are worth more than £150 million (S$282 million) in London in the recent few years, 80 per cent was foreign capital - capital from the US, Middle East, and Asia. And 42 per cent of that was new capital, investors that haven't been to London before."
After London, investors are now turning their attention to continental Europe - Paris and the main German cities, he said.
In this part of the world, cities which offer the best risk-reward ratios are in Australia and Japan, said Nick Crockett, executive director, Capital Advisors, Asia Pacific. There is also ongoing appetite for logistics assets in Japan, Australia and China. Increased interest is also seen in the Indonesian real estate market.
While the potential flow of funds into real estate is large, Mr Penn said there is no expectation of a rush into the markets. "It will be slow-moving, but it will definitely have an impact on the market."
Asked if there is a bubble forming in real estate markets in this part of the world, Mr Penn said: "Asset bubble is a term that is over-used in the financial sector." Many deals have a loan to value of 50 per cent, some are funded 100 per cent by equity, he noted.
Also in Asia, there is a massive undersupply of housing, and for places that people want to work in. As for Europe, there hasn't been much development in the last five years.
Real estate investment turnover by institutional investors in Asia Pacific amounted to US$7.9 billion last year, down 9.5 per cent from 2011 due to lack of available stocks for core investment and tight yield requirement, according to CBRE.
Published March 07, 2013
More funds investing in property markets: CBRE
This is the result of higher allocation by SWFs, and yield diversification
By Teh Hooi Ling
THERE will be a rise in funds going into direct property markets globally, said officials from CBRE Group, one of the world's largest real estate services firms. This stems from increased allocation by sovereign wealth funds (SWFs), deregulations in regional countries' insurance industry, and the demand for yield diversification away from the home market.
"In certain markets, we are going to see compression of yield due to the sheer weight of the capital moving into the markets," Greg Penn, CBRE's managing director, Capital Markets, Asia, said at a press conference to share the group's insights on cross-border fund activity for 2013.
"There is a lot more confidence among institutional investors in coming into the market, and collectively there is more capital pursuing core assets," he said.
Globally, more institutional funds - the likes of pensions, insurance and SWFs - are increasing their allocations to real estate for long-term stable income.
For example, Malaysia's Employees Provident Fund is set to increase overseas asset holdings from 13.4 per cent in 2011 to 30 per cent by 2017. In Australia, according to a survey conducted by Australian Institute of Superannuation Trustees, superannuation funds' allocation to offshore property will gradually increase from 2.3 per cent in 2011 to 3.2 per cent in 2013.
Meanwhile, Norwegian Government Pension Fund Global, one of the world's largest SWFs, in February made its maiden investment outside Europe. It paid US$600 million for a portfolio of five Grade A offices in New York, Washington and Boston.
"When the needle (of allocation for real estate) of the SWFs moves, it means billions of dollars are coming to the core property market," said Mr Penn.
Meanwhile, relaxation of rules in the insurance industry in countries like Taiwan and China will also open up another tap of funds going into real estate.
In October last year, the China Insurance Regulatory Commission allowed insurance funds to invest in stabilised commercial properties in the gateway cities of 45 designated overseas countries. In Taiwan, discussion is ongoing to allow domestic insurance companies to invest in real estate offshore so as to alleviate some of the pressures on the domestic market. Yields in Taipei real estate are among the lowest in the world.
Capital is criss-crossing the globe more than before. While Canadian and European pension funds and insurance funds as well as Middle East SWFs are looking to increase their allocations in Asia-Pacific, funds from this part of the world have been flowing in the opposite direction.
Jonathan Hull, CBRE's managing director for Europe, Middle East and Africa Capital Markets, said that in the last few years, capital from Malaysia, Korea, Hong Kong, China and Singapore has been going into London real estate.
"Of all the transactions which are worth more than £150 million (S$282 million) in London in the recent few years, 80 per cent was foreign capital - capital from the US, Middle East, and Asia. And 42 per cent of that was new capital, investors that haven't been to London before."
After London, investors are now turning their attention to continental Europe - Paris and the main German cities, he said.
In this part of the world, cities which offer the best risk-reward ratios are in Australia and Japan, said Nick Crockett, executive director, Capital Advisors, Asia Pacific. There is also ongoing appetite for logistics assets in Japan, Australia and China. Increased interest is also seen in the Indonesian real estate market.
While the potential flow of funds into real estate is large, Mr Penn said there is no expectation of a rush into the markets. "It will be slow-moving, but it will definitely have an impact on the market."
Asked if there is a bubble forming in real estate markets in this part of the world, Mr Penn said: "Asset bubble is a term that is over-used in the financial sector." Many deals have a loan to value of 50 per cent, some are funded 100 per cent by equity, he noted.
Also in Asia, there is a massive undersupply of housing, and for places that people want to work in. As for Europe, there hasn't been much development in the last five years.
Real estate investment turnover by institutional investors in Asia Pacific amounted to US$7.9 billion last year, down 9.5 per cent from 2011 due to lack of available stocks for core investment and tight yield requirement, according to CBRE.