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Asia Pacific investors are confident of higher returns, according to a new sentiment survey by Jones Lang LaSalle
SYDNEY, 15 NOVEMBER 2010 – Sydney and Tokyo top the list in Asia as the most popular cities for investment, according to a new investor sentiment survey from Jones Lang LaSalle.
The cities were nominated by 48% of surveyed investors when asked where their new investment activities would principally be located. Overall, an overwhelming 76% of investors expect to be net buyers to the Asia Pacific region in the next 12 months.
Managing Director, Investments and Advisory in Australia for Jones Lang LaSalle, John Talbot, said, "We are not surprised that Sydney tops the list for investor interest. We have seen strong investor interest in the Australian market this year and while Sydney has been popular with investors, Melbourne also remains high on the list for offshore and domestic investors. "Jones Lang LaSalle expects increased interest in the Australian market in 2011 and that is demonstrated by the overwhelming 76% of investors who said they expect to be net buyers in the Asia Pacific region over the next 12 months. "However, the biggest single issue that remains is the lack of product in the market for buyers.” Director of International Investments, Simon Storry said Australia’s ranking in half-yearly Global Capital Flows research confirmed Australia remained a destination of choice for foreign investment, with cross-border investment in Australia increasing more than five-fold in 1H 2010 at $US 1.8b compared with $US 319m in 1H 2009.
“We expect Australia to continue to be on the radar of foreign investors. Commercial real estate in Australia has offered solid and stable returns and an attractive environment for investors seeking stability in their globally diverse portfolios.
“The robust and improving Australian economy continues to outperform major world economies. With a large endowment of natural resources, a large and highly sophisticated professional services sector and a strong and well regulated banking sector, Australia is well positioned to continue to capitalise on strong long-term growth coming out of the Asia Pacific region.” Speaking of the Asia Pacific region, Mr Talbot said confidence continued to return, and transaction volumes were on the increase. “Deals across the region are becoming larger and more frequent as banks and investors alike compete for relatively few investment grade assets. During the most recent quarter, Jones Lang LaSalle has recorded a 14% increase in transaction volumes in the Asia Pacific region, driven by activity in Australia, Singapore and Hong Kong.”
While investors seem fairly evenly distributed across the risk curve, one noticeable point in the research stands out: investors in Europe, the Middle East and Africa have a clear preference for core assets and prefer developed economies, reflecting their funds’ income return hurdles and structures.
By contrast, US based investors have a preference for ‘core plus’ and opportunistic assets in developing and emerging economies. Asia-based investors are mostly evenly divided between the four investment categories, with opportunistic assets being the least popular at 15%.
Investors expressed confidence returns would continue, with 11% of respondents indicating they expected returns to rise sharply and 63% expected returns to rise slightly. Interestingly, those who thought returns would be lower over the next 12 months, still expressed an interest to be a net investor, perhaps reflecting long-term confidence.
The outlook for the next 12 months is for the market to remain broadly balanced or to have an excess of buyers over sellers. Of those surveyed, 43% believe it will be a balanced market, while 39% indicated there would be more buyers than sellers, reflecting a cautious optimism in the Asia Pacific real estate market that is consistent with the respondents outlook that investment returns would be slightly higher over the next 12 months.
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