Friday Asia Digest: Asian Money Escapes to Sydney – USA Tops Global Real-Estate Markets

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Sydney and Melbourne, Australia’s main cities, made international headlines this week, with the impending release of a report by Price Waterhouse Coopers, detailing Asia-Pacific’s preferred real-estate investment destinations for 2013. Sydney (pictured at right) made fourth place, a drop from third last year, and Melbourne slipped from ninth to tenth place on the list – but with both cities still firmly poised as preferred destinations for Asian money. Topping the list were Jakarta in Indonesia, Singapore, and Shanghai in China.

Australia has received about half the real estate capital invested by funds in Asia this year, with 65.3 billion USD’s worth of commercial property sales in Asia. Australia was hailed as liquid, transparent with high-quality assets and long-term price stability – although affordability , yield and the strong Australian dollar, as well as rules preventing non-residents buying established Australian homes and requiring temporary residents, such as students, to sell their houses or apartments when leaving the country, would all serve as headwinds for unchecked growth, Australia’s federal government hopes.

Investors from China, Hong Kong, South Korea and Singapore are snapping up real estate in many of Sydney’s most desirable locations. Similarly, Asian investors are swooping on top-end residential property in other states as well. They are among the top buyers of new development properties across Australia’s major cities, with families taking advantage of what they see as relatively cheap real estate prices compared to those in some of the larger urban Asian centres.

Asian companies are also entering the market with developers making major plays in the apartment sector. Foreign developers have grabbed 30 per cent of the Australian apartment market to date. In Sydney, researchers say about 90 per cent of a brand new 700 unit in a giant Central development Macquarie University have been acquired by Asian buyers. A buyer from Hong Kong has also paid $10 million for a penthouse in a $440 Bondi Beach apartment complex in Sydney. Asian interests now account for more than 90 per cent of all apartments proposed or developed by foreign companies in Australia – Chinese have been the largest source of offshore buyers of residential property for at least the past five years, according to agents, with the bulk of apartment purchases between $500,000-$700,000.

Post GFC, Pre “Fiscal Cliff” USA Tops Global Investment Radars

But if Australia is Asia-Pacific region’s preferred property market for this coming year, it seems that the world still hasn’t had nearly enough of the USA’s distressed, flipping, short-selling, now slightly recovering property market – fiscal cliffs, QEs, Obama’s re-election and general economic doom prophecies haven’t dampened investor’s appetite for undervalued US property – or so claims Colliers’ “Global Investment Sentiment Survey”, recently published. Respondents included a broad cross of major institutional and private investors all around the world, including Canada, Latin America, Asia-Pacific, Europe and the Middle-East. A widening lack of quality stock and the diminished availability of finance were quoted as the most major obstacles.

More Global Investors World-Wide

Other illuminating facts highlighted by the report included the fact that larger numbers, now approximately 25% of all real estate investors surveyed, are taking their ventures overseas, with those in the US, Asia and Latin America most likely to do so. “Safe” and “Prime” locations have been flagged as the preferred destinations for foreign funds venturing into the US property market – with a strong preference by global investors for the office sector, as opposed to residential properties, has also been noted – including industrial and retail assets, in particular shopping centres.

Jones Lang LaSalle, in a separate report, underpinned this view, mentioning that in South-East Asia as well, the office and retail sectors should generally deliver higher returns than the residential sector, which is likely to see continued policy restrictions in various markets.

Global Gossip

* The policy restrictions mentioned above, now entering their second and third year in Singapore and Hong-Kong, are still having unpredictable effects. While in past months, reports and backlash from developers have emerged claiming that strict residential property market policies implemented in Hong-Kong are driving investors to industrial and commercial properties – this week’s news seem to indicate the real-estate starved market is stubbornly deflecting these residential losses to other areas again. Investors looking for new places to park their cash in Hong-Kong are driving up prices for parking  spaces, which are nearing historic highs, egged by “carpark speculators”, fetching anywhere from 1 to 3 million Hong Kong dollars (127,000-387,000 USD) – not far off the record average 660,000 Hong Kong dollars in the fourth quarter of 1997, shortly before the city’s property market collapsed.

* The property market in Myanmar (pictured right), covered in previous digests and finally escaping from years of sanctions that largely locked it out of the global economy, has global hotel chains including the Mariott and Starwood expressing interest in new developments in the country, while Hong Kong-based luxury chain Shangri-La is working on a pair of 21-story residential towers for serviced apartments set to open in mid-2013. Yoma Strategic Holdings, whose backers include U.S.-based investment management firm Capital Group, said Monday it was planning a two-million square-foot, mixed-use development in downtown Yangon with two grade-A office towers, a five-star hotel and condominium, a mall, and other properties. The project, with an estimated cost of $330 million to $350 million, is one of at least three other towers proposed in the city, including a $60 million, 34-story apartment building and a $100 million 38-story office building. Friday Asia Digest The president of one of Myanmar’s largest local banks recently unveiled plans for a mixed-use satellite city outside of Mandalay, Myanmar’s second-largest city, that could cost as much as $2 billion if completed. Private-equity funds are kicking in millions of dollars to finish real-estate investments that started but never finished during a short-lived economic opening in the 1990s.

* The Philippines, also fiercely struggling to become a fully pledged global economy in spite of ever-widening wealth gaps and starvation, highlighting rampant corruption in the country, is taking on yet another fight in the war for regulation and risk-minimization in its financial system – banks in the Philippines will soon have to report their real-estate loans in relation to their capital, as in other developed countries – for the country’s central bank, the “Bangko Sentral ng Pilipinas “(BSP) to be able to get a better idea of their exposure to the industry.  A cap on the real estate loans in relation to total capital will not be imposed — at least not yet. However, the central bank is “just very watchful,” especially as the real estate industry was ground zero during the 1997 Asian financial crisis and the outbreak of the GFC in 2008.

(Partial list of sources – “The Herald Sun“, “The Daily Telegraph“, “Property Magazine, Europe“, “Live Trading News”, “The Wall Street Journal“, “Business World Online”, Philippines, “Reuters“, “Property Report“, “The Daily Star”, Lebanon)

(Pic 1 – Sydney from Watson Bay / “mdalmud“, Pic 2 – Temple in Myanmar / eGuide Travel)

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About Author

Ziv Magen (G+) is an Australian, and has been living alternately in Japan and Australia for the past decade. "Born and bred" an IT project manager, he has made the transition to full-time real-estate investing several years ago, and subsequently opened a buyers' and proxy agency - assisting others in remotely capitalising on Asia's booming property market.

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