Not for the first time this year, a recent residential property report suggests that the global real estate recovery is being led by real estate in the Asia Pacific region.
Meanwhile, tough and testing economic conditions in European and US markets mean that the regions are likely to be faced with a slower rate of recovery.
According to the second quarter International Residential Review from estate agents Chesterton Humberts, prime property is at the forefront of any recovery. The report suggests that this could be a direct result of an increase in the number of millionaires emerging from the Asia Pacific region, with many looking to property investment as a vehicle to continue building their wealth.
The number of high net worth individuals located in the Far East has rocketed recently, with 35 per cent, 33 per cent and 31 per cent rises in Singapore, Malaysia and China respectively. It would appear that prime property is once again fulfilling its role during times of economic uncertainty and unpredictable markets as a refuge for investors.
Added to the strengthening of a number of currency markets over the course of the year, many investors have been able to secure bargain real estate
Asian Markets Lead the Way
The report states that a number of Asian markets have been leading the way in terms of price recovery - making up most of the ground lost between 2008 and 2009 - although concerns have been raised about the formation of a bubble.
However, when looking at the prime markets the situation changes.
Whereas buyers at the lower end of the market are typically more constrained financially and are consequently unable or unwilling to commit to a second home overseas, any hesitation on the part of the prime buyer is usually more to do with timing or a shortage of available quality stock in preferred locations. "This latter factor has partially explained some of the strong price recovery in many international prime locations," the report explains. "The desire for lifestyle purchases is as strong as ever and for those with sufficient spare capital to invest or with good access to credit the attraction of a second home is undiminished. Indeed, several wealth surveys undertaken over the past year point to increased appetite for residential property among the global high net worth individual community."
Recent statistics released by PrimeLocation are able to confirm this increase in interest for prime real estate, with searches for high-end property on their website growing by 109 per cent between May 2009 and May 2010.
"Appetite for prime residential property both for lifestyle and investment reasons remains firm although buyers are generally taking longer to commit to purchase decisions than in the pre-recession market," Andrew Hawkins, head of international at Chesterton Humberts, says.
Value for Money
However, despite the relative strength of property markets in the Asia Pacific region, questions have been asked about the value for money which they offer.
Analysis by Fidelity Real Estate Investment Management suggests that investors would be better placed to look at property in Europe if they want to realise a long-term return on investment, with the potential for significant growth better.
The organisation claims that more opportunities can now be found in parts of Europe including the north and west of the region. Stating that, while the long term case for investment in Asia Pacific is undeniable, there are likely to be more entry points in European markets down the line. "The western inspired credit crunch has accelerated a move to Asian Pacific property markets as investors have continued to search for double digit returns," Matthew Richardson, head of research at the firm, said.
"As a result of this weight of money flowing into Asian property, the short-to-medium-term outlook is challenging as lower initial yields now discount very aggressive rental growth assumptions."
"From an investment perspective it makes sense to have a diversified portfolio which includes property
as equities will always be volatile, savings accounts will remain unexciting in a low interest rate environment, while pension prospects continue to diminish with the passage of time. There are still discounts available in many markets, Chesterton Humberts concludes in its report.
- Monday 16 August 2010