Deutsche Bank sees opportunity in Southeast Asian property market

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By yingzi / 1 October 2012 / 1 comment

 

 

Deutsche Bank AG (DBK)’s RREEF unit says that investors who’s looking to boost returns by holding riskier assets can look into Southeast Asian (MXSO) properties, cities such as Bangkok, Kuala Lumpur and Jakarta.

Leslie Chua, Head of Research and Strategy in the Asia-Pacific region at RREEF Real Estate (a unit of Deutsche Asset Management (Asia) Ltd) says that retail real estate like supermarkets, convenience stores and logistics facilities that focuses on e-commerce and offer opportunities are the areas to look out for. This goes the for markets in Sydney and Melbourne,due to the lack of supply there.

Holding 3.4 billion Euros ($4.4 billion) in Asian property assets, RREEF suggests investors variegate by boosting investments in different areas such Asian real estate, in order to counter decline in traditional assets like bonds and stocks. Europe’s sovereign debt crisis and global economic slowdown made Southeast Asia an attractive place to invest and spend on for retailers, even more so with the changing lifestyle and growing middle class within.

In an interview, Leslie Chua said, “Investors are caught between a rock and a hard place. They need to be risk averse, but given the volatility in equities and bonds and the types of returns they get, they have to go up the risk curve, which typically means people will move to hard assets like real estate.”

To reduce their economies’ reliance on exports, Southeast Asian governments have bolstered spending on infrastructure and intensified their efforts spur domestic consumption.

Indonesia’s government had set to increase their capital spending by 15 per cent next year. In Malaysia during 2010, Prime Minister Najib Razak  had set aside $444 billion of private-sector led projects for the this decade. Philippine, not wanting to lag behind, President Benigno Aquino had last month asked lawmakers to approve a record 2 trillion-peso ($47 billion) budget for 2013 as he increases expenditure on roads, hospitals and schools.

“If it’s going to be a prolonged recovery in Europe and the U.S., we need to look for markets that can compensate for that,” Chua said. “Clearly Asia offers that. Indonesia, Malaysia and Thailand have got their ship in order and transparency has improved in these markets.”

When it comes to the Singapore office market, the asset manager is “cautiously optimistic” as the supply of new office space are limited, investors cannot expect a full-fledged correction in rents.

Sigrid Zialcita, Managing Director of Cushman & Wakefield Inc. for Asia-Pacific region said on June 29 that for a 15 per cent estimate earlier this year, Singapore office rents had fell as much as 6 per cent this year.

Leslie Chua said that the yield spreads between real estate assets and government bonds are enticing. Ranging from 200 basis points for office markets to 300 basis points above sovereign debt for Singapore office markets. Industrial sector have a spread ranging from 250 basis points to 400 basis points while retail spreads have a lower range of 200 to 400 range points.

“Given where sovereign bond yields are right now, there is a very handsome spread,” Chua said. “Low borrowing costs and stable yields make for a very good form of alternate investment.” Borrowing costs will remain low, he added.

According to the International Monetary Fund in a July 16 report, Five Asian economies — Indonesia, Thailand, Philippines, Malaysia and Vietnam — along with China and India are expected to outpace the rest of the world over the next two years to come. It is foreseen that in 2013, the five countries will grow 6.1 percent, compared with 2.3 percent in the U.S., 1.5 percent in Japan and 0.7 percent in the euro area.

Leslie Chua said, “We are asking investors to seriously look at Southeast Asia; it’s a market that’s been often ignored largely because of a lack of transparency.”

“For a typical investor who is new to this part of the world and who wants to get their feet wet, then Australia, Singapore and Japan are a natural choice,” he added.

With more good news on the Southeast Asian market, it looks like the rise in the figures is bound to happen sooner or later. Join the experts in discussion with respects to real estate properties in Southeast Asia. Right at the place where economy is foreseen to rise, Real Estate Investment World (REIW) China 2013 will be held on the 15-18 April 2013 at The Ritz Carlton Shanghai Pudong, Shanghai China. Sponsorship opportunities are now open for bookings and click to download a copy of the prospectus. Find out how you can profile your corporate brand and showcase your thought expertise with the rest of the real estate owners out there.