Funds waiting to grab cheap Asian properties

Source : Business Times - 22 Nov 2008

They are raising funds for direct property investments in the region as values slide

AS property values in Asia slide, hedge funds, private equity funds and pension funds are waiting in the wings to swoop in on good buys, according to KPMG’s global head of real estate, Jonathan Thompson.

‘We’re aware that some (hedge funds and private equity funds) have been raising money for distressed situations,’ Mr Thompson told BT.

Investors have been on the lookout. Just last month, Merrill Lynch completed fundraising for its Asian Real Estate Opportunity Fund, collecting some US$2.65 billion to invest in real estate assets and companies.

Reuters also reported on Wednesday that AMP Capital Investors is trying to raise up to S$2.9 billion for direct property investments in Asia. The Australian fund manager hopes to purchase Japanese shopping malls at a bargain as falling sales hit retailers and credit tightening squeezes landlords. Industrial buildings and offices beyond the main financial district in Singapore are other potential targets.

Pension funds are also showing more interest in Asian real estate, said Mr Thompson. According to him, these investors are drawn to growing economies with a structural shortage of properties. The economies would also have to be politically stable, with transparent and sound regulatory systems.

‘(Singapore and Australia) are the easiest countries to invest in,’ he said. But he added that China will attract considerable attention.

Across Asia, Mr Thompson believed that ‘the fundamentals for real estate are better than they are in Europe or America’. But because of the global economic slowdown and tighter credit, property values in Asia will continue to fall.

Savills Singapore predicted in a report on Thursday that prices for high-end and super-luxury private homes could drop more than 20 per cent in the next five quarters.

The property consultant also estimated that Grade A office rents could ease 5 to 10 per cent in Q4 this year and a another 15 to 20 per cent next year.