Asia's outbound
property investments – where the smart money is heading
BY MARKETWIRE
April 16, 2014
HONG
KONG, China – Better returns, less regulation and more diversification
are the key drivers among Asian investors when they buy overseas
property, according to speakers at a panel discussion during the
recent Colliers International Asia Real Estate Investment Forum in
Hong Kong.
They referred to the "three waves" of Asian investors who have entered
the global arena: (1) long-term institutional ones seeking bond-like
yields, (2) high-net-worth individuals with a shorter time horizon and
willingness to take higher risks, and (3) developers pursuing
short-term trading opportunities and willing to take higher risks.
Goodwin Gaw, Founder and Managing Principal, Gaw Capital Partners,
explained that stable yields in certain overseas markets, greater
liquidity in China, a desire to diversify, and the Chinese
government's encouragement of overseas investments were all adding
momentum.
Meanwhile, the panel members observed that investors may face risks if
they build large projects in North American cities that already have
sizeable Chinese communities. "You're going to create mini-Chinatowns
in those cities, and there may be a backlash," Gaw warned.
London remains alluring
Asian investors are attracted to the UK because its tax regime is
easier to understand and the small spread between borrowing and yield.
Also, the similar legal system makes it especially suitable for Hong
Kong investors.
London property prices didn't decline during the last financial
crisis, although they might in the future. Robert T. Lie, Managing
Director, Real Estate Group, CITIC Capital, cautioned that the city's
economy is for a large part based on the financial industry, like Hong
Kong's, and property there is expensive. "Asian investors need to
understand the changes taking place in London and what it will be like
in the future. Otherwise, they might lose out if their timing is
wrong," he added.
Speakers emphasised that Asian investors must take time to understand
the characteristics of any market they intend to enter, although one
speaker declared that China's top developers are already smart in
their approach.
Prospects for US property
The panel members opined that the cumbersome US regulatory environment
could be advantageous to investors, because it mitigates supply risk.
Yet they should remain cautious while quantitative easing is being
unwound, because it could cause further volatility in the market.