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Family offices, HNWIs buy APAC real estate even as funds sell

Some investors are taking advantage of a rush for the exits by real estate funds and REITs.
Family offices, HNWIs buy APAC real estate even as funds sell

Family offices and high net worth investors (HNWIs) are continuing to actively buy APAC real estate in stark contrast with the regions’ real estate funds who are selling assets in large numbers.

The latest survey of investor intentions, CBRE’s Q1 2024 Asia Pacific Cap Rate Survey, published on May 6, found that 33% more private (covering HNWIs, family offices and other investors) investors were net buyers of APAC property than were net sellers. By contrast real estate funds were, in aggregate, net sellers of the sector, by 26%.

Institutional investors were the only other group of net buyers, with 2% .

Besides real estate funds, banks, real estate investment trusts (REITs) and property companies were net sellers over the period (with 19%, 20% and 10%, respectively), while corporations were neutral.

Joe Kwan
Raffles Family Office

“First and foremost, as historical data indicates, real estate remains an effective longer-term inflation hedge. This is especially relevant in a global environment fatigued by prolonged high inflation,” said Joe Kwan, managing partner, at Raffles Family Office in Singapore, which has added significantly to real estate allocations for clients during the latest cycle.

“Whilst real estate incomes are unlikely to fully mitigate the pace and intensity of recent inflation surges, corresponding growth of rental income provides a powerful mitigating impact. In turn, higher rental income and active-management of real estate portfolios will enhance capital values,” he added.

Previous CBRE investor surveys have recorded that high-net worth/ private investors remain active in capitalising on price dislocation to secure the best quality assets, while activity from other types of investors falls.  

“Private investors, family offices and high net worth individuals planned to target prime assets in Tier 1 markets, favouring opportunistic and value-add deals, particularly debt and preferred equity over equity investing,” noted CBRE’s 2024 Asia Pacific Investor Intentions Survey, published in January. 

The survey polled more than 510 investors across the region in November and December.

INDIA APPEAL

The shifting mechanics of investor activity saw Japan replace China as the favoured location for investors in Q1 2024, according to the May CBRE survey, with the country absorbing 30% of total regional volume over the period.

Investor allocations to China fell by 23% compared with the same period one year earlier.

India was investors’ favoured country in Q1, with 70% recording stronger buying intentions and only 10% stronger selling intentions (the equivalent proportions for Japan were 25% and 13%).

Kanu Gupta, a real estate investor, serial entrepreneur and chair of the Singapore chapter of TIGER 21, an international network of 1,300 UHNWIs, together worth an aggregate $150 billion, pointed to the fundamental appeal of India’s real estate market and wider economy.

“The demographics of India – low median age and rapid urbanisation – and the performance of its stock markets in recent years have made it attractive for investment," said Gupta.

Kanu Gupta
TIGER 21

"Despite it being an expensive market on a relative basis, it is fast-growing and underpenetrated from a global allocation perspective.

"Also, significant private market capital, both VC and PE, is flowing to India, as investors believe a significant share of innovation will come from there, particularly in sectors such as AI, enterprise tech, and SAAS,” he said.

In India’s residential sector, he pointed to the greater appeal of the luxury segment, where demand continued to outstrip supply.

“Elsewhere in the residential sector, there is given oversupply and we seem to be at the end of the residential boom there,” he added.

H2 RECOVERY?

The May CBRE report predicted buying activity by real estate funds, banks, REITs and property companies could take a year to recover.  

“While investment remains robust in Japan, India and Singapore, the recovery in other major regional markets is likely to be delayed to late 2024 or early 2025, as investors remain cautious due to the delayed interest rate cuts. The rebound is expected to commence in Korea and the Pacific, followed by Greater China,” the report noted.

Henry Chin
CBRE

“Interest rates in Asia Pacific have likely peaked, and financial pressure is easing,” said Henry Chin, global head of investor thought leadership and head of research, Asia Pacific for CBRE, commenting on the release of the report.

“Investors should target buying opportunities in the second half of 2024 and focus on prime assets," added Greg Hyland, head of capital markets, Asia Pacific for CBRE.

"Motivated sellers will adopt a more flexible stance towards asking prices, helping narrow the gap with buyers."

The survey quizzed 136 CBRE advisors across the region in the first half of April, asking them to report their client activity over the first quarter.

 

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