Asia Pacific real estate investors will be motivated by fundamental investment objectives, including seeking favorable yield spreads and adopting higher risk/return strategies, according to CBRE’s Asia Pacific Investor Intentions Survey 2017.
CBRE’s latest report—which analyzes the outlook and appetite of the region’s real estate investors—reveals that while Asia Pacific investors are less willing to invest more in real estate compared to last year, they do have a stronger appetite for higher risk assets due to the potential return.
According to CBRE, 37% of respondents identify ‘chasing yield spread’ as the main motivation for investing in real estate, compared to 15% in 2016. Without the tailwind of further cap rate compression, the emphasis on capital appreciation has weakened.
Global and regional economic worries are still the key concern for overall investors but worries have eased compared to last year’s survey—only 25% in 2017 to 2016’s 46%.
“There is an increase in the number of investors motivated by geographical diversification, which is mainly driven by international and Asian investors. Asian investors have low allocations to overseas real estate, prompting them to diversify their portfolios,” said Robert Fong, Director of Research, CBRE Asia Pacific.
Australia, Japan and China retain their status as the top three preferred cross-border investment destinations. Australia was the top choice for the second consecutive year as investors continue to be lured by its attractive risk/return profile and substantial liquidity. Interest in Japan faded amid worries that fundamentals might be peaking along with weaker economic growth. In China, investors’ interest is driven by strong economic fundamentals and the opportunity to purchase undervalued assets, however, current market conditions pose a challenge when seeking a positive yield spread.
Elsewhere, interest in Vietnam rose significantly on the back of the country’s strong macro fundamentals and higher initial yields. However, investible stock remains limited, and the typical method of entry relies on forming joint-ventures with domestic developers.