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FTSE and Aprea create Asian real estate indices

A report released by the two parties, plus KPMG, projects that returns from Asian real estate investments will remain higher than the global average.
Global index provider FTSE Group and the Asian Public Real Estate Association (Aprea) have formed a partnership to develop new indices for Asia-PacificÆs real estate sector.

Aprea, the regionÆs leading real estate industry body, joins the European Public Real Estate Association (Epra) and the National Association of Real Estate Investment Trusts (Nareit) which have already chosen to partner with FTSE as their preferred index provider.

With many Asian countries introducing or set to introduce Reits, FTSE and Aprea will be positioned to anticipate and deliver new real estate indices for the Asia-Pacific region while ensuring existing indices remain relevant to investor needs.

FTSE expects the new indices to be finalised by the end of this year.

Aprea and FTSE will consult with their members and potential users of indices in the Asia-Pacific region. This will ensure that the new indices will capture all the market requirements and become the benchmark for performance measurement of listed real estate companies in the region. The new indices will be composed of qualifying listed real estate vehicles, both real estate investment trusts (Reits) and non-Reits.

The new indices are expected to boost the liquidity of Asia-Pacific real estate investments.

ôIt will give more visibility to Asian real estate markets, thereby enhancing the region's access to global capital,ö says Aprea CEO Peter Mitchell.

Meanwhile, a report released by FTSE, Aprea and KPMG notes that the credit crisis in the US and Europe has put pressure on the decade of sustained growth in global real estate.

Amid that backdrop, however, the inflow of capital to AsiaÆs real estate market is accelerating largely due to a prolonged period of steady growth powered by a combination of opportunistic and increasingly longer-term investments, the report says.

The report, titled ôReal Estate Investment in Asia-Pacific: Migrating capitalö, gives an optimistic outlook for Asia in 2008, where returns are projected to remain higher than the global average for the coming year and are backed by strong market fundamentals and even stronger economic growth.

The report recognises that the slowdown in the US and European markets is unlikely to cause an immediate negative impact on Asia in 2008 although banks will tighten credit policies thus limiting financing options for real estate investments.

ôDespite the current tightening of credit from banks, the deals will continue to happen, but they may take longer, the price may cost more and lead to a temporary slowing of the supply cycle,ö says Andrew Weir, partner-in-charge for property and infrastructure for KPMG in China and Asia-Pacific. ôHowever, the current sub-prime fall out elsewhere may well act as a catalyst for the inevitable further development of Asia-Pacific as a centre of property and investment management.ö

A key observation of the report shows real estate funds remain the dominant source of capital for real estate investments in Asia into 2008. The proliferation of single-market high-return funds such as those based on China and Vietnam continue to service the needs of the short-term speculative investor. But long-term funds are generally taking a ôwait and seeö approach following the dampened sentiment in US markets.

Despite the strides in AsiaÆs real estate markets, the establishment of a liquid property derivatives market isnÆt likely to take place soon, according to FTSE.

ôIt will take more time for Asia to fully develop property derivatives,ö says Fran Thompson, director of FTSE Asia-Pacific.

Thomson notes, however, that the flow and quality of data and information in markets around Asia is improving and that, in turn, will enable the development of a property derivatives market.

Aprea expects many Reits in Asia to continue to deliver good returns for the remainder of the year, but notes that the potential for new Reit listings is being affected by the dull market sentiment.

ôThere is no doubt that market sentiment in Asia has been affected by the US credit crisis, and there is uncertainty about when a rebound will occur,ö Mitchell says. ôHowever, over the longer-term, outlook should remain positive in the region, with Reits generally being good defensive stocks and inflation hedges.ö

ApreaÆs projections show that AsiaÆs Reit market could exceed $100 billion in capitalisation by 2010.
¬ Haymarket Media Limited. All rights reserved.
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