Why Invest in Asian Real Estate?

Investment in Asian real estate is not only a matter of asset diversification but also leverages on the potential of a region that offers significantly faster economic growth compared to developed countries. Some of the world’s largest institutional investors continue to pour into Asia Pacific property assets as they seek to boost income beyond what regional or global bond markets can offer.

Allocations to properties are now pushing past 10 percent amongst the biggest institutions, compared to the past where allocations of 5 to 8 percent were considered aggressive. It is no surprise then that this asset class is now viewed as a mainstream component of an optimum investment portfolio.

Unprecedented Urbanization

Asia is moving into an era of unprecedented urbanization and would have at least 28 megacities (more than 10 million population) by 2030.  By the same time, an estimated 1.8 billion people are expected to move into the middle-class bracket.  This burgeoning domestic spending power in the next decade will undoubtedly fuel immense real estate growth in the region.

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Vast Potential of the Middle-Class Investment Dollars

Despite an uptick in homes on the market and weakening home sales across the region, home ownership remains relatively out of reach for a growing number of middle-class buyers.  The glut of unsold properties means that investment money that should have been in real estate are kept somewhere else or invested in alternatives where the barrier to entry is not that high.

 

There is immense potential to be unlocked from the middle class.  By offering a low price point to invest in property (in the form of fractions), it offers an excellent opportunity to the burgeoning middle-class to invest in this secured asset class that is able to generate stellar investment returns.

Competitive Risk-Adjusted Returns

The region provides a multitude of high-yielding real estate investment, with returns ranging anywhere from 6 to above 10 percent depending on the country, locality, and sector. There is also the potential of currency gains in addition to capital appreciation and gross yields from the investments.

Diversity of Opportunities

Asia Pacific offers opportunities of scale and diversity apart from the traditional office and commercial sectors.  Economic growth and structural changes are also benefitting other sub-sectors such as residential, industrial, retail, hospitality, logistics and land development.

 

This diversity in growth has also improved overall transparency and liquidity, with the industry becoming more professional and the asset class evolving to be more suitable for institutional investors.

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Portfolio Diversification

Not only does the region offer potentially faster economic growth compared to more developed countries, but the real estate markets are also at a different point of pricing and rental cycles as well.  With low and in some cases negative correlation with other major asset classes, diversification into Asian real estate can lower the volatility of a portfolio and provide a higher return per unit of risk.

Inflation Hedging

Besides offering attractive cash-flow income, well-chosen investment properties in the region tend to keep pace with inflation and hold their value due to the positive relationship between GDP growth and demand for real estate.  Economic expansion drives rents higher, which directly translates to higher capital values.  As such, the capital appreciation of real estate provides a natural hedge against inflationary pressures.

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