Why European, Asian investors are favouring real estate

Real estate is one asset class that has been generating universal appeal among Asian and European investors. That is, Asian investors have been steadily investing in European real estate while European (as well as US) investors are also investing in Asian real estate.


Just last week a team of approximately 30 real estate professionals representing various Dutch asset managers, law firms and institutional investors, visited Hong Kong as part of an investment tour of key Asian markets.


"They were here to see new investment opportunities as well as study the connectivity between the Asian and European markets," says Robert Scholten, Singapore-based managing director and head of real estate finance, Asia-Pacific, at ING Bank, who was also visiting Hong Kong.


Part of the group's itinerary was a presentation on the connectivity of real estate markets between Asia and Europe as well as with Australia and Europe.


"We are now seeing more international players (asset managers and institutional investors) increasing their attention on Asia and Australia, which is very interesting. We are seeing a number of asset managers who are beefing up their presence here in Asia. They seem to be getting more active in focusing on the Asian and Australian markets," Scholten says in an interview with The Asset.


This is a reversal of the trend following the global financial crisis when many global asset managers and institutional investors pulled back from investing in Asia. This is a positive development for the Asian real estate market which is seeking a resurgence on inflows from Europe and US investors.


"For example, Blackstone is reported to be possibly setting up a new Asia-focused real estate fund and they will need to deploy that somewhere. While this is not an entirely new move, it is reinforcing a trend that we have seen in recent years. We are seeing more investments in Korea, Japan, Australia and continued demand for China," Scholten says.


Data from Jone Lang Lasalle (JLL) indicate that fourth quarter of 1996 global transactional volumes are just 2% below the same period in 2015 at US$206 billion. This brings full year 2016 volumes to US$661 billion, a 6% decline on 2015's US$704 billion. Asia-Pacific was the only region to see an increase in transactional activity, rising by 5%. The Americas and Europe both felt the effects of political turbulence, falling 9% and 8% respectively.


Data from Colliers International also indicate that since the global financial crisis, aggregate outflows of capital from Asia to property markets in the rest of the world have risen sharply to reach US$58.9 billion in 2016, while inflows have stagnated at under 30% of this level.


Scholten, however, sees renewed interest in Asian property by European and US investors in 2017.


"Rapid wealth accumulation in Asia coupled with the requirement of diversifying the risk of asset under management has led to an acceleration of investment in commercial real estate by Asian sovereign wealth funds, insurance companies, selected pension funds and HNWIs in overseas markets such as Europe, US and Australia."


"In fact this trend is nothing new; similar US, Canadian and European investors have already been investing in Asia-Pacific for the same reason for more than 15 years," Scholten says.