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Credit crunch is hitting Asia real estate

A survey suggests that financial chaos from the US is affecting real estate investment in Asia, though investors are still keen to access the region for the growth and diversification it offers.

The credit crunch is impacting on the Asia real estate market because of more limited availability of debt and the potential re-pricing of assets, according to a survey.

However, the Asia investment intentions survey carried out by the European Association for Investors in Non-listed Real Estate Vehicles (INREV) and the Asian Real Estate Association also said the effects of the credit crunch were expected to be less than in Europe and the US. Further, the financial crisis might actually turn out to be a positive thing for Asia because some respondents thought this could mean more capital would be directed towards Asian real estate that was originally allocated to other markets.

The joint study was based on 65 responses including 30 fund managers, 21 institutional investors and 14 fund of funds managers. Most – nearly three quarters – were headquartered in Europe with an additional 17 percent based in the US and 12 percent in Asia.

Investors indicated a considerable preference for core funds with 40 percent saying that was their preferred strategy, the remainder being split evenly between value-added and opportunity fund strategies. However, anecdotal market evidence seems to indicate that investors are generally more focused on value-added and opportunity funds, which is supported by the “general character of Asia as a region of emerging markets,” said Nick Loup, co-director of the Asian Real Estate Association.

INREV said a large number of European investors were keen to access Asia's growth opportunities as well as recognising the diversification benefits of a global approach of their real estate strategy.

 “The investors that responded to the survey are clearly focused on non-listed funds, considering that these account for 85 percent of their holdings in Asia, with access to expert management being the main reason for investing in these funds,” said INREV chief executive Lisette van Doorn. “However, at the same time lack of transparency and current market conditions are hampering investment in Asian non-listed real estate funds,” she added.